Newsletter March 2017

On 16 and 17 March 2017, the Centre for European Economic Research (ZEW) and the University of Mannheim jointly organised the sixth annual conference of the Mannheim Centre for Competition and Innovation (MaCCI). About 100 participants, including many renowned researchers and practitioners, attended the event to discuss cutting-edge and highly relevant research issues with regard to competition and innovation from an economic and legal perspective.

Today, the British government has officially notified the United Kingdom's intention to withdraw from the European Union. Professor Achim Wambach, PhD, President of the Centre for European Economic Research (ZEW), comments on Brexit. "The United Kingdom is the first EU Member State to trigger Article 50 of the Lisbon Treaty and to request its withdrawal from the Union – with all its consequences. The hard work begins now as negotiations are starting."

The "Magic Square" (Magisches Viereck) is a concept many Germans learn about in school. It describes the four cornerstones of Germany's economy, enshrined in the 1967 Act to Promote Economic Stability and Growth: price stability, low unemployment, stable economic growth and balanced trade. While the first three of these cornerstones are easy to grasp, the fourth has proven quite slippery. What counts as balanced trade?

As German politicians gear up for the autumn 2017 federal elections, social justice is the issue of the day. Campaigns are promising education for upward mobility, fair wages, just income redistribution, and an examination of top executive salaries. There have also been calls for changes to Agenda 2010, a programme of fundamental reforms to the German welfare state and the labour market. The ZEW economist Andreas Peichl takes a critical look at perceived inequality in Germany, along with its effects on politics and voter behaviour.

As a result of globalisation and the associated phenomena of migration, climate change, and digitalisation, Europe now stands on the brink of enormous economic and social changes. Professor Lothar Späth, former Minister-President of Baden-Württemberg and one of the early initiators of the Centre for European Economic Research (ZEW), was ahead of his time in anticipating these challenges.

At a memorial event jointly organised by the Baden-Württemberg state government and ZEW in Mannheim on 21 March 2017, ZEW President Professor Achim Wambach, PhD, Minister-President Winfried Kretschmann MdL, and EU Commissioner Günther H. Oettinger discussed Lothar Späth’s intellectual, economic, and political legacy, while noting the lessons it holds for Europe today.

The German Real Estate Finance Index (DIFI) by ZEW and JLL has decreased by 16.4 points in the first quarter of 2017 to a current reading of minus 12 points. Following its fourth decrease in a row, the sentiment indicator for commercial property financing found itself in negative figures for the first time since the fourth quarter of 2012. A decrease was observed not only in the assessment of the situation over the past six months, but also in expectations for the coming six months, with the corresponding balances of positive and negative assessments sinking by 17.7 points to minus 1.3 points and by 14.9 points to minus 22.6 points respectively.

Companies in Germany's cultural and creative industries are seeing opportunities to develop their international operations. While barely a quarter of companies in this sector are pursuing core operations abroad, almost one in every two firms is reliant on further kinds of operations overseas. However, a lack of experience and poor management resources as well as a lack of demand for their products are cited as the most common barriers to entering international markets. These are the results of the most recent monitoring report on the state of the cultural and creative industries in Germany regularly compiled by the Mannheim Centre for European Economic Research (ZEW) and the Fraunhofer Institute for Systems and Innovation Research (ISI) as part of the Federal government's Cultural and Creative Industries Initiative.

On 6 March 2017, the ZEW Supervisory Board met for the first time in 2017. During the meeting, Theresia Bauer, head of the ZEW Supervisory Board and Baden-Württemberg's Minister of Science, Research and the Arts, expressed her congratulations to the ZEW staff and the Executive Directors on behalf of the entire Supervisory Board for the excellent rating the institute received in last year’s evaluation by the Leibniz Association.

The first meeting of 2017 also provided an opportunity to welcome three new members to the Supervisory Board, which are Barbara Sinner-Bartels, Ministerial Director at the Baden-Württemberg Ministry of Finance, Dr. Philipp Steinberg from the Federal Ministry for Economic Affairs and Energy, as well as Hubert Wicker, Ministerial Director at the Baden-Württemberg Ministry of Economic Affairs, Labour and Housing.

Dr. Marco de Pinto was a visiting researcher in ZEW’s Research Department "Labour Markets, Human Resources and Social Policy" on 9 and 10 March 2017. He works as a research assistant at the Institute for Labour Law and Industrial Relations in the European Union (IAAEU) and in the department of Personnel Economics at the University of Trier. His research focuses on labour market economy, personnel and education economics, as well as international trade. During his visit, he worked with ZEW researchers on a joint research project that investigates the consequences of international trade for workers’ careers in local labour markets.

The future viability of Germany’s state pension system is ensured by families with children. In the social security system, however, there is no special allowance for those with children, which means that working parents pay the same pension contributions as those without children. A study conducted by Mannheim’s Centre for European Economic Research (ZEW) on behalf of the Federal Ministry for Economic Affairs and Energy considered the consequences of introducing a child allowance of 7,248 euros per child in the state pension system.

The study estimated the impact on the national budget, income distribution, and the labour market. It found that families with at least one member paying compulsory pension contributions and with allowable children would save on average 594 euros per year under the reform.

The immigration of large numbers of refugees in 2015 has presented Germany with the challenge of integrating newly arriving foreigners. A recent ZEW study examined the integration of a group of refugees participating in the HEIMSTÄRKE football project, which aims to promote integration into German society and the German labour market through sport. The study suggests that participation in the project has positive effects. It also considered the migrants' socio-economic characteristics, the financial costs of their escape, and aspects of their integration into the labour market.

The ZEW study was carried out as part of the 'Real-World Lab Asylum' project in the Rhine-Neckar region.

On 21 March 2017, the government of Baden-Württemberg and the Centre for European Economic Research (ZEW) in Mannheim held a memorial event to pay tribute to the former Minister-President and co-initiator of ZEW, Professor Lothar Späth. With the help of Minister-President of Baden-Württemberg Winfried Kretschmann MdL, EU Commissioner for Budget and Human Resources Günther H. Oettinger, as well as other former colleagues of Späth, the event held at ZEW offered insights into Späth's ideas for an economically powerful and Central European Baden-Württemberg with regard to the current and future development of Europe.

Companies can benefit from actively gathering feedback from social network users by improving and further developing their products and services based on this feedback. Taking a look at the contents of user comments on Facebook shows that negative user comments in particular can positively affect a company's innovation success. These are the findings of a recent study carried out by the Mannheim Centre for European Economic Research (ZEW).

According to the current survey for March (28 February – 16 March 2017), the economic outlook for China has significantly improved by 18.7 points. The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, is currently at 14.5 points (February 2017: minus 4.2 points). This is the first time since July 2016 that the indicator has significantly exceeded the long-term average of 5.1 points. The surveyed experts' assessment of the current situation at 3.3 points was one point lower than the previous month's assessment.

A perceptible drop in the price of residential properties in Germany's major cities would not endanger the country's financial stability in any serious way. This is the finding of a survey carried out among over 200 financial market experts in March 2017 by the Mannheim Centre for European Economic Research (ZEW) as part of the monthly ZEW Financial Market Survey. Nevertheless, the overwhelming majority of the surveyed financial analysts agreed that housing prices in Germany's major cities were currently fundamentally overvalued.

The ZEW Indicator of Economic Sentiment for Germany improved slightly by 2.4 points in March 2017, with the indicator now standing at 12.8 points. The long-term average, which has been calculated since the survey was begun, is 23.9 points. "The fact that the ZEW Indicator of Economic Sentiment only shows a slight upward movement is a reflection of the current uncertainty surrounding future economic development. With regard to the economic situation in Germany, no clear conclusions can be drawn from the most recent economic signals for January 2017.

While industrial production and exports witnessed a positive development, the figures for incoming orders and retail sales were less favourable. The political risks resulting from upcoming elections in a number of EU countries are keeping uncertainty surrounding the German economy at a relatively high level," comments ZEW President Professor Achim Wambach, PhD.

Between 2005 and 2015, public spending on research and development (R&D) in Germany has seen a nominal increase of around 50 per cent. In 2015, federal and state R&D expenditure in the research and business sector amounted to 25.08 billion euros. This increase, however, is not sufficient to meet the target set by the German government, which hoped to see the share of public R&D spending reach 1.15 per cent of the GDP by 2025. These are the findings of a recent study carried out by the Centre for European Economic Research (ZEW) in Mannheim on behalf of the Commission of Experts for Research and Innovation (EFI).

While studies have shown that a moderate level of staff turnover can benefit established companies by contributing to an increase in productivity, this is not the case for more recently established firms. When employees at these younger firms are replaced, this has negative effects on the firms' productivity. This negative effect is particularly marked if the company founders have no experience of managing staff, and also becomes more pronounced the more recently the company was founded.

In terms of the damage done to the productivity of these young firms by staff turnover, it does not make any difference whether the replaced employees left the company of their own accord or whether they were let go by the firm. These are the findings of a recent study carried out by the Centre for European Economic Research (ZEW) in Mannheim.

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Thorsten Doherr
Inventor Mobility Index: A Method to Disambiguate Inventor Careers

Salvador Barrios; Mathias Dolls; Anamaria Maftei; Andreas Peichl; Sara Riscado; Janos Varga; Christian Wittneben
Dynamic Scoring of Tax Reforms in the European Union

Martin Lange; Friedhelm Pfeiffer; Gerard J. van den Berg
Integrating Young Male Refugees: Initial Evidence from an Inclusive Soccer Project

Irene Bertschek; Reinhold Kesler
Let the User Speak: Is Feedback on Facebook a Source of Firms' Innovation?

Maximilian Todtenhaupt; Johannes Voget
International Taxation and Productivity Effects of M&As

This issue includes a focus on innovation, with the overarching topic being that “Almost all innovation indicators of the German Economy are pointing upwards”.

Sandra Gottschalk, Jürgen Egeln, Jan Kinne, Annegret Hauer, Detlef Keese, and Marie Oehme
Die volkswirtschaftliche Bedeutung der Familienunternehmen (The Economic Importance of Family Businesses)
 

Petra Deger, Monika Gonser, Michael Kolb, Svenja Kück, Martin Lange, Georg Mildenberger, Friedhelm Pfeiffer, Katrin Sommerfeld, and Christina West
Integrationspotenziale: Ausgewählte Ergebnisse der Reallabor-Befragungen unter Geflüchteten (Integration Potentials: Selected Results of Interviews with Refugees as Part of the Real-World Lab Project)

Maximilian Joseph Blömer, Florian Buhlmann, Max Löffler, Andreas Peichl, Sebastian Siegloch, and Holger Stichnoth
Kinderfreibeträge in der Sozialversicherung (Child Allowance in Social Insurance)

2017 Data Report on Innovation Behaviour of Saxony‘s Economy

Location of the event: German Institute for Economic Research (DIW) and Humboldt University of Berlin

Speaker: Prof. Dr. Berthold U. Wigger (ZEW)
Location of the event: ZEW, Mannheim

Speaker: Dr. Zwetelina Iliewa (ZEW)
Location of the event: ZEW, Mannheim

Speaker: Prof. Dr. Johannes Becker (University of Münster), Prof. Dr. Joachim Englisch (University of Münster)
Location of the event: ZEW, Mannheim

Speaker: Prof. Nicolas van Zeebroeck, PhD (University of Brussels)
Location of the event: ZEW, Mannheim

Speaker: Prof. Anthony Strittmatter, PhD (University of St. Gallen)
Location of the event: ZEW, Mannheim

Speaker: David Becker (University of Mannheim)
Location of the event: ZEW, Mannheim

Speaker: Jonas von Wangenheim (Humboldt University of Berlin)
Location of the event: ZEW, Mannheim

Speaker: Prof. Dr. Dominika Langenmayr (Catholic University of Eichstätt-Ingolstadt)
Location of the event: ZEW, Mannheim

Speaker: Frederik Eidam (ZEW)
Location of the event: ZEW, Mannheim

Speaker: Mårten Blix, PhD (Research Institute for Industrial Economics, Stockholm)
Location of the event: ZEW, Mannheim

Speaker: Prof. Andrew F. Daughety, PhD (Vanderbilt University, Nashville), Prof. Jennifer F. Reinganum, PhD (Vanderbilt University, Nashville)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speaker: Prof. Dr. Danuta Hübner (Member of the European Parliament and former Commissioner for Regional Policy), Prof. Dr. Niels Thygesen (Chair of the European Fiscal Board), Xavier Debrun, Ph.D. (International Monetary Fund), Prof. Dr. Friedrich Heinemann (ZEW)
Moderation: Maithreyi Seetharaman (economics and business journalist)
Location of the event: Representation of the State of Baden-Württemberg to the European Union, Rue Belliard 60-62, B-1040 Brussels

Professor of Economics, Labour Market Policy (W3)

Professor of Economics, Social Insurance (W3)

Picture Credits: News Article of 29 March 2017: iStock.com/George Clerk, Press Release of 23 March 2017: iStock.com/AleksandarNakic, Press Release of 22 March 2017: iStock.com/LeoPatrizi, Press Release of 21 March 2017: iStock.com/PHOTOMORPHIC PTE. LTD, Press Release of 17 March 2017: iStock.com/martin-dm, Press Release of 28 February 2017: iStock.com/shironosov, Press Release of 23 February 2017: iStock.com/PeopleImages
 
All further pictures: ©ZEW