Newsletter February 2018

Alongside the Brexit negotiations, Brussels and the EU Member States have another important issue on their minds this year, namely the proposal for the next Multiannual Financial Framework (MFF), which is set to be presented by EU Commissioner for Budget and Human Resources Günther Oettinger by the end of May. The MFF will set the volume and areas of expenditure for the EU budget for the next seven years and ideally should be approved before the European elections in 2019. The MFF will reveal the areas in which the EU wishes to focus its attention in the years following 2020.

The energy sector is currently undergoing a transformation. An opening-up of the markets, a mix of different energy sources and new levies have brought about sweeping changes in the sector in recent years. Energy providers are having to break out of old patterns in order to manage the balancing act between guaranteeing supply and ensuring both sustainability and affordability. But to what extent are these developments compatible with national and EU climate targets? How is Germany’s planned energy transition progressing economically, politically and socially? And what challenges does the energy sector still face?

These are just some of the questions addressed by Dr. Rolf Martin Schmitz, CEO of the private energy supplier RWE on 20 February 2018 during the latest event in the series “First-Hand Information on Economic Policy” at the Centre for European Economic Research (ZEW) in Mannheim.

On 16 February 2018, Tingyuen Chen and Irene Yackovlev from the International Monetary Fund (IMF) presented the IMF research paper “Inequality and Poverty across Generations in the European Union” at the Centre for European Economic Research (ZEW) in Mannheim. In their speech, the IMF economists shed light on the effects of unemployment and the long-term consequences of insufficient social protection of young people in Europe.

How can we stop global warming? How can we avoid economic crises? What does the ageing population mean for the global economy? These are just some of the challenges that societies in Europe are facing, and innovative solutions are needed to cope with them. The EU-funded project FRAME (Framework for the Analysis of Research and Adoption Activities and their Macroeconomic Effects) tackles these challenges by deepening our understanding of the determinants of knowledge diffusion. This way FRAME aims to help policymakers find better solutions.

A video provides a clearer idea of how the project frames this complex topic and creates strategies for future policy solutions.

The impending departure of Britain from the EU means a reshuffling of the trade policy cards held by both sides. A range of economic and legal arguments can be made to support alternating views of who will ultimately profit from the Brexit negotiations, and in what form. At the conference “Trade Relations after Brexit: Impetus for the Negotiation Process”, held on 25–26 January 2018 at the Centre for European Economic Research (ZEW) in Mannheim, economists and policymakers debated the most efficient way forward in the Brexit process.

Following an in-depth review, the German Council of Science and Humanities has given its approval to a funding application submitted by the Centre for European Economic Research (ZEW) in Mannheim. ZEW’s goal of establishing itself as a centre of competence for the study of market and institutional design has thus surmounted an important hurdle. In recommending to the Joint Science Conference (GWK) that ZEW receive long-term financing for this research endeavour, the German Council of Science and Humanities paid heed to the opinion of the Leibniz Association, to which ZEW belongs.

The Centre for European Economic Research (ZEW) is pleased to announce the 2018 Competition and Innovation Summer School from 28 May to 1 June 2018. This workshop, which takes place in Ulcinj in Montenegro, offers young researchers in the fields of innovation and competition economics the opportunity to discuss their dissertation projects within a group of experienced and renowned scholars, as well as other PhD students and postdoctoral researchers in an inspiring environment. Applications from advanced PhD students and postdoc researchers are welcome. Please submit an extended abstract of your paper, a letter of reference from your PhD supervisor and your CV to registration@euro-ciss.eu. The deadline for submission is 31 March 2018.

The qualification of its staff is very important to ZEW. Last year, several dissertations were completed at ZEW. We cordially congratulate our successful postdocs! We would like to thank all supervisors, especially the first advisors.

ZEW employee Lucie Berger has successfully completed her training as an office administrator with additional qualifications as a multilingual administrative assistant and project assistant. ZEW congratulates Ms. Berger on completing her training and hopes to support further vocational training programmes recognised by the Chamber of Industry and Commerce in the future.

Professor Andreas Irmen is a visiting researcher in ZEW’s Research Department “Economics of Innovation and Industrial Dynamics” from 1 February to 2 March 2018. He is professor in Macroeconomics and Applied Microeconomics at the Centre for Research in Economics and Management of the University of Luxembourg. His research interests focus on economic growth, the economics of the welfare state, general macroeconomics and industrial economics. During his stay, he will particularly concentrate on the causes and consequences of a tendency in the digital age to replace manpower with machinery. In a ZEW Research Seminar, Andreas Irmen will present his results on the impact of automation investments on the demand for labour.

Current trends suggest that prices for all energy sources will increase within the coming five years. This is the case for prices in Germany, as well as for worldwide energy prices. While prices for electricity, crude oil and natural gas are expected to go up, coal prices should to a large extent remain stable. This is the result of the latest ZEW Energy Market Barometer, a survey carried out by the Centre for European Economic Research (ZEW), Mannheim, among energy market experts.

If the German government wants to massively increase the amount of electric cars on German roads, this will present new challenges for the energy sector. One particular problem are the distribution grids, which are currently ill-prepared for the additional demand that would be generated by an increased number of households with electric cars. This is the central finding of the latest ZEW Energy Market Barometer, a survey carried out by the Centre for European Economic Research (ZEW), Mannheim, among energy market experts.

The ZEW Indicator of Economic Sentiment for Germany recorded a decrease of 2.6 points in February 2018 and currently stands at 17.8 points. The indicator thus still remains slightly below the long-term average of 23.7 points. The assessment of the current economic situation in Germany decreased by 2.9 points, with the corresponding indicator currently standing at 92.3 points.

Firms in Germany’s information economy kicked off 2018 in an extremely positive mood. This positive economic climate is clear from the most recent reading of the ZEW sentiment indicator, which reached a remarkable 70.5 points in the fourth quarter of 2017. This represents an increase in the sentiment indicator of 2.2 points compared to the previous quarter, signalling that a significant majority of companies are satisfied with the current economic situation. This is the finding of a survey conducted among companies in the German information economy by the Centre for European Economic Research (ZEW), Mannheim, in December 2017.

Alongside families, pensioners will benefit the most financially from the planned reforms put forward by Germany’s potential new coalition government, the “Grand Coalition” made up of the CDU, CSU and SPD. If current positive economic trends continue until 2025, the age group to benefit the most from these reforms will be the over-65s, who will be on average 622 euros better off a year per household. Only if nursery school fees are completely scrapped will the 26 to 39 age bracket be better off than pensioners, seeing an increase in their annual household income of 743 euros.

If the economic climate worsens, however, the 48 per cent limit for pensions will become more expensive, leading pensioner households to benefit the most with an additional 1,420 euros a year.

Merely half of the companies in the German information economy (consisting of the ICT sector as well as media and knowledge-intensive service providers) have so far dealt with the need to adapt to the new General Data Protection Regulation (GDPR), which will become binding for all businesses and government bodies operating in the EU in May 2018. Due to its high service intensity, the German information economy is likely to be particularly affected by the GDPR, and is thus increasingly coming under pressure to adapt to this new EU regulation.

This is the result of a representative survey among approximately 700 companies in the German information economy with five or more employees, conducted by the Centre for European Economic Research (ZEW), Mannheim, in December 2017.

In the most recent survey conducted in February (24 January–7 February 2018) expectations for the Chinese economy have improved again, with the CEP indicator climbing to 14.7 points. This corresponds to an increase of 13.6 points compared to January, and an impressive hike of 25.4 points compared to December 2017. According to the CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, a significant improvement in the economic outlook for China has thus taken place since the end of last year.

National governments respond very differently to economic crises in terms of spending on research and development (R&D). This has created an innovation gap between the countries of Europe that is growing ever wider. This is the main finding of a study carried out by the Centre for European Economic Research (ZEW), Mannheim.

German businesses slightly increased their expenditure on innovation in 2016, pushing innovation spending to a new record high. German companies spent a total of 158.8 billion euros on innovation projects, which corresponds to a two per cent increase compared to the previous year (2015: 157.4 billion euros) and represents the highest level ever recorded. In 2017 and 2018, many companies are planning to further intensify their investment in innovation. Both large enterprises and small and medium-sized enterprises (SMEs) increased their expenditure on innovation in 2016.

During the same observation period, however, there was a decrease in the share of the companies carrying out research and development (R&D) projects.

In Germany, public procurement is a successful instrument to speed up the introduction of innovative goods and services in companies. This is the result of a study carried out jointly by the Centre for European Economic Research (ZEW) in Mannheim, KU Leuven and Maastricht University. If tender calls in the public sector are explicitly aimed at the development of new technologies, this can bring about a general increase in the innovation activity of German businesses.

As a result of the increasing digitalisation of the economy, cyber security is becoming more and more important. That is, at least according to 90 per cent of companies based in Baden-Württemberg. The majority of these companies also believe that the importance of cyber security is only going to grow over the coming years. The biggest cyber threat as perceived by firms is the intentional manipulation of their IT infrastructure and data by outsiders. This is the main finding of the newly released Monitoring Report DIGITAL Economy Baden-Württemberg compiled by the Centre for European Economic Research (ZEW), Mannheim, in cooperation with Kantar TNS on behalf of the Ministry of Economic Affairs, Labour and Housing in Baden-Württemberg.

Our publications are available to 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

Michael Hellwig; Dominik Schober; Luis Cabral
Incentive Regulation: Evidence from German Electricity Networks

Bettina Peters; Rebecca Riley; Iulia Siedschlag; Priit Vahter; John McQuinni
Internationalisation, Innovation and Productivity in Services: Evidence from Germany, Ireland and the United Kingdom

Olga Slivkó
“Brain Gain” on Wikipedia: Immigrants Return Knowledge Home

Robert Germeshausen
The European Union Emissions Trading Scheme and Fuel Efficiency of Fossil Fuel Power Plants in Germany

Christian Spindler; Oliver Woll; Dominik Schober
Sharing Is not Caring: Backward Integration of Consumers

Maikel Pellens; Bettina Peters; Martin Hud; Christian Rammer; Georg Licht
Public Investment in R&D in Reaction to Economic Crises – A Longitudinal Study for OECD Countries

Sabine Graumann, Irene Bertschek, Tobias Weber, Martin Ebert, Michael Weinzierl, Jörg Ohnemus, Christian Rammer, Thomas Niebel, Patrick Schulte and Johannes Bersch
Monitoring-Report DIGITAL Economy 2017, Short Version

Martin Brussig, Johannes Kirsch, Bettina Mosler, Friedhelm Pfeiffer, Boris Ivanov, Laura Pohlan, Nils Pagel, Andrea Gabel, Sandra Kotlenga, Barbara Nägele, Henry Puhe and Rita Kleinemeier
Evaluation des Bundesprogramms „Soziale Teilhabe am Arbeitsmarkt“ – 2. Zwischenbericht (Evaluation of the Federal Programme „Social Inclusion in the Labour Market“ – Second Interim Report)

BAK Taxation Index 2018/2019

Comparison of the Change in the Effective Tax Burden of Corporations Across EU Member States Based on a Model-Firm Approach (Tax Analyzer Model)

Direct, Indirect, Psychological, and Macro-Economic Rebound Effects (LICENSE)

Firm Dynamics in the Knowledge Economy – Indicator Study 2019

Innovation Survey 2018 for Berlin

International Tax Competition – Evaluation, Trends and Conclusions for Fiscal Policy Makers

Overview Study on the Regulatory Framework for the Digital Economy in Industrialised, Emerging and Developing Countries

Supporting the Georgian National Communication Commission (GNCC) in Allocating Spectrum Licenses

Speaker: Jaakko Meriläinen (Stockholm University)
Location of the event: ZEW, Mannheim

Speaker: Prof. Dr. Andreas Irmen (University of Luxembourg)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speaker: Gianmarco Daniele (Bocconi University, Milan)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speaker: Dr. Duncan Roth (Institute for Employment Research (IAB), Nuremberg)
Location of the event: ZEW, Mannheim

Location of the event: Institute for Employment Research (IAB), Nuremberg

Speaker: Dr. Jorge Padilla (Compass Lexecon, Chicago)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Postdoctoral Researcher (100%) “Corporate Taxation“ for the Research Department “Corporate Taxation and Public Finance“

Picture Credits: press release of 26 February 2018: iStock.com/TebNad, news article of 23 February 2018: iStock.com/hxdbzxy, press release of 22 February 2018: iStockphoto/alexandr_1958, press release of 14 February 2018: iStock.com/MichaelUtech, press release of 13 February 2018: iStock.com/XXXLarge, press release of 09 February 2018: Monsitj/iStockphoto, press release of 08 February 2018: iStock_shironosov, press release of 07 February 2018: iStock.com/Easyturn, press release of 05 February 2018: iStock.com/XXXLarge
 
All further pictures: ©ZEW