Newsletter June 2017

Minority shareholdings were long seen as fairly harmless to industry competition because it does not give these shareholders any formal control of the company. Recently, however, economists have increasingly begun to question this view. ZEW competition economist Sven Heim answers questions on the consequences of minority shareholdings for competition and how the issue should be handled by authorities.

Your Economy, Your Governance, Your Society, Your Environment – these were the topics up for discussion at the Southwest regional qualification round of the Young Economic Summit (YES!), a nationwide competition for high school students. The event, which took place on 23 June 2017, was hosted by the Centre for European Economic Research (ZEW) in Mannheim. The students presented their ideas for how to solve the most pressing global economic issues and had the opportunity to discuss them with experts in the field of economics.

On 8 and 9 June 2017, the CEPR Public Economics Annual Symposium was held at ZEW in Mannheim. The symposium is one of the most important European conferences in the field of public finance. The event was attended by around 30 international researchers who came to discuss their latest research findings on topics such as public procurement, taxation and wealth distribution.

The Mannheim Centre for European Economic Research (ZEW) has become one of the nine founding institutions of the European Network for Economic and Fiscal Policy Research (EconPol for short). As an international and independent network bringing together several hundred researchers, EconPol Europe is establishing a new voice for research in the discussion surrounding the future of economic and fiscal policy in the European Union. Headed by the Munich-based ifo Institute, the founding charter for EconPol Europe was signed on 22 June 2017.
 

The digitalisation of the German economy is starting to gather speed. On average, German companies are currently reaching a digitalisation level of 54 points. This is the finding of the “Monitoring Report DIGITAL Economy 2017 – Compact” produced by the Centre for European Economic Research (ZEW) in Mannheim together with the market research institute Kantar TNS. Professor Irene Bertschek, head of the ZEW Research Department “Information and Communication Technologies” presented the report together with Dr. Sabine Graumann at Kantar TNS at this year’s Digital Summit held by the Federal Ministry for Economic Affairs and Energy in Ludwigshafen.

On 15 and 16 May 2017, the Mannheim Centre for European Economic Research (ZEW) hosted the seventh Conference on the Economics of Innovation and Patenting. The conference was organised in collaboration with the Leibniz ScienceCampus “Mannheim Centre for Competition and Innovation” (MaCCI) and sponsored by the Fritz Thyssen Foundation. Over the course of two conference days, around 100 international researchers discussed recent research findings on various topics, such as patent systems, incentives for R&D, knowledge production and migration.

ZEW researchers Dr. Mathias Dolls, Dr. Phillipp Dörrenberg and Dr. Holger Stichnoth from the Research Group “International Distribution and Redistribution”, as well as ZEW Research Associate Professor Andreas Peichl, were awarded the 2017 Schmölders Prize of the Verein für Socialpolitik (German Economic Assication, VfS). The researchers received the award at the annual conference of the VfS Public Finance Committee on 9 June 2017.

According to the current survey for June (6–21 June 2017), the economic outlook for China has once again improved significantly, rising by 9.8 points compared to the previous month. 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 9.7 points (May 2017: minus 0.1 points), thus once again rising above the long-term average of 5.3 points.

Instead of benefiting economic growth in the US, Donald Trump' presidency rather seems to have a positive impact on growth in the European Union. This is the result of a special question which formed part of the ZEW Financial Market Survey; the survey is conducted regularly by the Mannheim Centre for European Economic Research (ZEW). According to the results, 32 per cent of the respondents expect Trump’s presidency to have a positive impact on the economic growth in the EU.

With his party “La République En Marche!”, French President Emmanuel Macron secured the parliament’s backing, emerging as a clear winner in the French parliamentary elections. Professor Achim Wambach, President of the Centre for European Economic Research (ZEW) in Mannheim, comments: “Thanks to the overwhelming success in the French parliamentary elections, President Emmanuel Macron and his party ‘La République En Marche!’ now have a decisive majority in the legislative French National Assembly. This majority is crucial for Macron’s economic policy plans, and he will now be able to use this strong backing to push through his political agenda.

Economic recovery must be the priority of the French government.”

The Federal Reserve has raised the Federal Funds Rate for the second time this year, increasing the interest rate level to a range between 1.0 and 1.25 per cent. The Fed is also planning to initiate a gradual reduction of its $4.5 trillion balance sheet before the end of the year. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW) in Mannheim, offers his view on the Fed’s actions: “The Federal Reserve interest rate hike was without alternative.”

The ZEW Indicator of Economic Sentiment for Germany dropped by 2.0 points in June 2017 and now stands at 18.6 points. The indicator thus still remains below the long-term average of 23.9 points. By contrast, the assessment of the current economic situation in Germany improved once again in June. The indicator climbed by 4.1 points to 88.0 points. This is the highest level since July 2011. Despite a slight drop in expectations, the prospects for the economic growth in Germany in the coming six months remain rather positive.

“The prospects for the German economy remain favourable. This is not least due to the positive GDP growth in the European Union in the first quarter of 2017. 70.8 per cent of the financial market experts expect the current situation to remain as favourable as it is at the moment, and 23.9 per cent even expect it to improve in the coming six months,” comments ZEW President Professor Achim Wambach.
 

As part of digital transformation, firms are integrating their value chains using technology. However, only one third of firms in the German business economy are digitally connected with their private customers. It is far more common for firms to connect with their corporate clients and suppliers. These are the findings of the “Monitoring Report DIGITAL Economy 2017 – Compact”, compiled by the Mannheim Centre for European Economic Research (ZEW) in collaboration with Kantar TNS, on behalf of the Federal Ministry for Economic Affairs and Energy.

As expected, the European Central Bank (ECB) has announced to make no changes to its key interest rates and bond-buying programme. In its latest decision, the ECB has, however, taken into account the persistently high growth rates in the eurozone as well as the increased inflation rate. ECB President Mario Draghi expects the economic growth prospects in the eurozone to improve even further. Dr. Michael Schröder comments on the ECB’s decision: “With the ECB sticking to its ultra-loose monetary policy, there is no sign of a change of strategy at the moment. As usual, Mario Draghi justifies the decision by pointing to the ECB’s smoking gun, core inflation, which, after recent downward revisions, remains far below the two-per-cent target of the ECB.”

Neither the financial crisis of 2008 nor the ensuing economic crisis have had a noticeable impact on the distribution of income and wealth in Germany. Though income inequality did dip slightly and the poverty risk rose over the course of the crisis, these were only minimal changes. The effects of the financial crisis on the distribution of wealth were also marginal, with wealth in Germany remaining overall relatively unevenly distributed. These are the results of a study carried out by the Mannheim Centre for European Economic Research (ZEW) together with the Institute for Applied Economic Research (IAW), Tübingen, and the University of Tübingen.

The study was conducted as part of the report on the Analysis of the Distribution of Income and Wealth (AVEV) produced on behalf of the German Federal Ministry of Labour and Social Affairs.

US President Donald Trump has decided to withdraw from the formally binding Paris climate agreement, which was signed by 195 countries at the United Nations Climate Change Conference in December 2015. The declared goal of the agreement is to limit global warming in the long term. ZEW President Professor Achim Wambach, comments:“The Paris agreement marked the first time the international community succeeded in calling for and making public the central players’ concrete plans for reducing their impact on the global climate.

The greater the risk aversion of employees, the less likely they are to change jobs in the first years of their professional careers. Yet, risk-averse young professionals tend to have only moderate wage gains in their early careers compared to more risk-tolerant employees who decide to change jobs in the beginning of their professional lives more often. These are the findings of a study conducted by the Mannheim Centre for European Economic Research (ZEW). The study analyses whether risk attitudes of young professionals have any influence on the number of job changes and the subsequent wage development.

In the fiscal year of 2016, the Mannheim Centre for European Economic Research (ZEW) proved it has a competitive edge. Despite the strong national and international competition for third-party funding, the proportion of ZEW funding originating from third-party sources remained on a high, steady level in 2016 at 44 per cent (2015: 46 per cent). 19 per cent of the institute’s financial resources were obtained from research projects for the European Union.

Thanks to the successful handover of the ZEW Presidency and the excellent evaluation the institute received from the Leibniz Association in the year of its 25th anniversary, ZEW was able to strengthen its already prominent position as one of the leading economic research institutes in Europe. The founding of the new Research Group “Market Design” demonstrates the traditionally innovative character of ZEW, one of the institute’s distinguishing features.

Our publications are available for download in PDF format. PDF files can be viewed using for example the Acrobat Reader, which you can download for free at https://acrobat. adobe. com/us/en/acrobat/pdf-reader. html

This issue contains the M&A Report focusing on "German M&A Market Starts off Strong in 2017".

Marc-Daniel Moessinger and Mustafa Yeter
Mayoral Candidate Characteristics in the State of Baden-Wuerttemberg

Sabine Graumann, Irene Bertschek, Tobias Weber, Martin Ebert and Jörg Ohnemus
Monitoring Report Wirtschaft DIGITAL 2017 - Kompakt (Monitoring Report DIGITAL Economy 2017 – Compact)

Rainer Bräutigam, Thomas Schwab, Christoph Spengel and Kathrin Stutzenberger
Die Entwicklung der Vermögensteuer im internationalen Vergleich (Development of Wealth Taxes in International Comparison)

Michael Schröder
Konjunkturindikatoren für China (Leading Economic Indexes for China)

Incentivising Investment in the Digitalisation of SMEs

Speaker: Prof. Dr. Christoph Spengel (ZEW)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Picture Credits: press article of 26 June 2017: iStock.com/olya_steckel, news article of 22 June 2017: iStockphoto.com/artJazz, press article of 18 June 2017: iStock.com/Agnieszka Gaul, news article of 14 June 2017: BMWI, press article of 6 June 2017: iStock.com/Slonov
 
All further pictures: ©ZEW