Newsletter July 2016

In a column on VOX, the CEPR's London-based policy portal, ZEW innovation economists Paul Hünermund and Dr. Georg Licht call for a better coordination of national research policies in the EU and a consistent allocation of joint research budgets according to efficiency principles. Currently, policy makers try to strike a balance between promoting top quality research and achieving an even geographic distribution of research funds across Europe. This approach is, however, not consistent with the objective of promoting excellence in research.

The Centre for European Economic Research (ZEW) and the Research Center for Technological Innovation (RCTI) of Tsinghua University jointly organised the first workshop entitled "From Europe to China – Exploring New Frontiers in Economics of Innovation and Entrepreneurship" on June 30 and July 1, 2016, at ZEW. Within the framework of the 2-day workshop, ZEW and RCTI researchers presented their latest findings concerning, among other things, the quality of patents in cross-country comparison and women's entrepreneurship.

The workshop aimed to strengthen the research cooperation between Germany and China in the fields of economics of innovation and entrepreneurship.

In a statement published on the European news platform EurActiv, Professor Friedrich Heinemann, head of the Research Department "Corporate Taxation and Public Finance" at the Mannheim Centre for European Economic Research (ZEW), has spoken in favour of implementing the provisions of the Stability and Growth Pact (SGP) without taking political considerations into account. If this is not done, the EU risks losing all credibility, also in future deficit procedures against possible populist governments.

On the one hand, digitalisation promises levels of growth we can only dream of. On the other hand, it leads to concentrations of market power which need to be kept in check. So do we need "New Rules for a Digital Economy"? This was the central question discussed by renowned representatives of the internet economy, management and research, who attended the ZEW Economic Forum 2016 at the Mannheim Centre for European Economic Research. How does market power in the digital economy and abuses of this power need to be dealt with, and what new challenges do cartel offices subsequently face? The presentations and debates illustrated that the instruments used by competition watchdogs need to be further developed on a national, European and global scale if they are to be able to respond to the speed of the digital economy.
See our video from the ZEW Economic Forum 2016

Numerous alumni of the Centre for European Economic Research (ZEW) have high-level positions in companies, research institutions, ministries and administration. After leaving ZEW, they have stayed connected with the institute and share their experience with current ZEW staff members. This is exactly what the alumni meeting at the 2016 ZEW Economic Forum was about. Three presentations by alumni, which were held under the theme "Professional Experience at ZEW: Reviews and Prospects", looked back on the speakers' time at ZEW and addressed the individual benefits of working at the institute.

Following a temporary high at the end of 2015 and beginning of 2016, the German Real Estate Finance Index (DIFI) has once again reached the levels seen in Autumn 2015. With 8.5 points, however, the index remains 20 points lower than it was this time last year. In the second quarter of 2016, the index fell by 6.7 points. This fall is due not only to less positive judgements of the financial situation in the last six months, but also to increasingly pessimistic estimations of the financial situation for the coming six months. The balance of positive and negative estimates in regard to the development of the financing situation in the German real estate market has fallen by 6.2 points. Despite this, it remains clearly in the positive, with 25.5 points. These are the key findings of the DIFI Report, a quarterly survey on the real estate financing market in Germany carried out by ZEW in cooperation with JLL.

From June 13 to 15, 2016, the Trans-Atlantic Public Economics Seminar (TAPES) was hosted in Mannheim by the Centre for European Economic Research (ZEW). The conference, initiated by one of the most important associations of American economists, the National Bureau of Economic Research (NBER), is one of the largest events held in the field of public finance in the world. Over three days, around 30 participants discussed findings from current research on social insurance programmes.

Dr. Frank Bohn was a visiting researcher in ZEW's Research Department "Corporate Taxation and Public Finance" from July 18 to 22, 2016. He is assistant professor for Political Economy at the Radboud University Nijmegen in the Netherlands. His research interests focus on applied macroeconomics, public choice, public finance, fiscal policy and monetary economics. During his visit at ZEW he worked together with ZEW researchers on his model on voting behaviour and manipulation. He claims that opportunistic politicians make even more election gifts than usual in difficult economic times. This amounts to expansionary fiscal policy, which is, unintentionally, the appropriate policy to pursue during a recession. In addition, Bohn discussed a potential future collaboration on the topic of financial market contagion.

The progressing digitalisation raises the question about the extent to which jobs are technically automatable and therefore replaceable by machines. A new study by the Mannheim Centre for European Economic Research (ZEW) and the University of Utrecht now shows that automation has a positive net effect on labour demand in Europe.

China has revealed itself as the enfant terrible of patent applications. Well known for its leading position in copying foreign products, China has increasingly been filing patents to protect domestic products and established itself as one of the world's leading patent applicants since the turn of the millennium. Researchers from the Centre for European Economic Research (ZEW), Mannheim, and the German Graduate School of Management and Law (GGS), Heilbronn, developed in collaboration a quality index allowing the measurement of patent quality in cross-country comparison. The current study revealed a widening gap between patents from China and high-income countries as well as a decrease in patent quality over time.

Economic sentiment among companies in the German information economy sector is optimistic in the second quarter of 2016. While the companies' business expectations remain equally optimistic as they were in the previous quarter, the current business situation even records a significant improvement. The ZEW Sentiment Indicator has increased once again by 3.2 points, thereby reaching an impressive value of 65.5 points. This suggests that the majority of companies evaluates the business situation positively. The media sector, however, forms the exception. This is the result of a survey among companies in the German information economy conducted by the Centre for European Economic Research (ZEW) in June 2016.

Economic expectations for Central and Eastern Europe including Turkey (CEE region) have slightly decreased in July 2016. In the current survey, the ZEW-Erste Group Bank Economic Sentiment Indicator for the CEE region has dropped by 3.9 points to a level of 11.9 points. The ZEW-Erste Group Bank Economic Sentiment Indicator for Central and Eastern Europe reflects financial market experts’ expectations for the CEE region on a six-month time horizon. The indicator has been compiled on a monthly basis together with further financial market data by the Mannheim Centre for European Economic Research (ZEW) with the support of Erste Group Bank, Vienna, since 2007.

In July, the ZEW-CS Indicator for the economic sentiment in Switzerland has fallen by 13.5 points to a reading of 5.9 points. The Brexit vote is likely to be partly responsible for the decline in Swiss economic sentiment. The ZEW-CS Indicator, however, remains in the positive. The share of financial experts expecting the economic situation to improve still outweighs the share of surveyed experts expecting a decline in the economic situation. The ZEW-CS Indicator reflects the expectations of the surveyed financial market experts regarding the economic development in Switzerland on a six-month time horizon. It is calculated monthly by the Mannheim Centre for European Economic Research (ZEW) in cooperation with Credit Suisse (CS), Zurich.

The ZEW Indicator of Economic Sentiment for Germany decreased sharply in July 2016. The index has decreased by 26.0 points compared to the previous month, now standing at minus 6.8 points (long-term average: 24.3 points). This is the indicator’s lowest reading since November 2012. "The Brexit vote has surprised the majority of financial market experts. Uncertainty about the vote’s consequences for the German economy is largely responsible for the substantial decline in economic sentiment. In particular, concerns about the export prospects and the stability of the European banking and financial system are likely to be a burden on the economic outlook," comments ZEW-President Professor Achim Wambach.

Expectations concerning the economic development in China have again become more pessimistic in the June CEP survey (June 27 – July 6). The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, has dropped by 4.1 points to a current reading of exactly zero points. The indicator thus manoeuvres significantly below the long-term average of six points. However, there is a striking range of upward and downward fluctuation, indicating substantial insecurity concerning the economic development.

The Mannheim Centre for European Economic Research (ZEW) has awarded two young researchers with the Heinz König Young Scholar Award. The winners are Nicholas Patrick Frazier of the Rice University in Houston, Texas, and Jan Tilly of the University of Pennsylvania in Philadelphia.

Professor Achim Wambach, PhD, was inaugurated as the new President of the Mannheim Centre for European Economic Research (ZEW) in a ceremony on July 5, 2016. Wambach had already assumed the position as Director of Science and Research of the institute on April 1, 2016.
See our video from the ZEW Economic Forum 2016

"The process of digitalisation poses a number of challenges to the social market economy in Germany," explains Professor Achim Wambach, President of the Mannheim Centre for European Economic Research (ZEW). In his opening address at the ZEW Economic Forum, which this year addresses the question "New Rules for the Digital Economy?", President Wambach makes it clear just how explosive the issues subsumed under the rather technical term "digital economy" really are.

June 30, 2016, saw the expiry of the deadline imposed by the Federal Constitutional Court on the German Bundestag for the creation of a new statutory basis for the inheritance tax. Following a series of intermediate proposals, it seemed that a compromise had been reached. However, the future of this proposal is yet again under question, as it threatens to be refused by the German Bundesrat. And indeed, even if the Bundesrat agrees to the proposed revisions, the question remains as to whether the current proposal will hold up in the Federal Constitutional Court. This question has been the focus of an analysis carried out by the Mannheim Centre for European Economic Research (ZEW).

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Terry Gregory; Anna Salomons; Ulrich Zierahn
Racing With or Against the Machine? Evidence from Europe

Isabella Schulte; Peter Heindl
Price and Income Elasticities of Residential Energy Demand in Germany

Martin Achtnicht; Daniel Osberghaus
The Demand for Index-Based Flood Insurance in a High-Income Country

Maikel Pellens; Antonio Della Malva
Changing of the Guard: Structural Change and Corporate Science in the Semiconductor Industry

Dirk Foremny; Albert Solé-Ollé
Who's Coming to the Rescue? Revenue-Sharing Slumps and Implicit Bailouts During the Great Recession

Alexander Cordes, Birgit Gehrke, Roman Römisch, Christian Rammer, Paula Schliessler, and Pia Wassmann (2015)
Identifying Revealed Comparative Advantages in an EU Regional Context

Nicola Düll, Irene Bertschek, Bernd Dworschak, Pamela Meil, Thomas Niebel, Jörg Ohnemus, and Helmut Zaiser (2016)
Arbeitsmarkt 2030 Digitalisierung der Arbeitswelt
(Labour Market 2030 - Digitisation of Work)

Sandra Gottschalk, Jürgen Egeln, Frank Herrmann, Silke Hupperts, Karsten Reuss, Mila Köhler, Johannes Bersch, and Simona Christine Wagner (2016)
Evaluation des Förderprogramms "INVEST – Zuschuss für Wagniskapital"
(Evaluation of the Funding Programme "INVEST - Subsidy for Venture Capital")

Rainer Bräutigam, Maria Theresia Evers, and Christoph Spengel (2016)
Vorschlag der Regierungskoalition zur Neuregelung der Erbschaftsteuer auf dem Prüfstand
(Government Plans to Revise Inheritance Tax Under Scrutiny)

Analysis of the Suspension of Electricity Supply Following §19 Abs. 2 StromGVV

Expanding the EFI Indicator System: Public Funding

2016 Indicators for the Chemical Industry

Structure and Volume of the Market for Digital Services with a Focus on Companies from Third Countries

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: University of International Business and Economics, No. 10 Huixindong Street, Chaoyang District, Beijing

Location of the event: Haus der Wirtschaft, Willi-Bleicher-Straße 19, 70174 Stuttgart

Speaker: Prof. Dr. Bernhard Boockmann (IAW Tübingen)
Location of the event: ZEW, Mannheim

Speakers: Prof. Pierre Boyer, PhD (Department of Economics, Ecole Polytechnique), Peter Simon (Member of European Parliament), Prof. Achim Wambach, PhD (ZEW), Prof. Dr. Friedrich Heinemann (ZEW)
Location of the event: Representation of the State of Baden-Württemberg to the European Union, Rue Belliard 60-62, B-1040 Brussels

Researcher (Postdocs) for the Research Department "Environmental and Resource Economics, Environmental Management"

Picture Credits: News Article of July 19, 2016: ©iStock.com/vasiliki, News Article of July 15, 2016: ©iStockphoto.com/SusanneB, News Article of July 7, 2016: ©Thomas Tröster, News Article of July 6, 2016: ©Thomas Tröster, News Article of July 1, 2016: ©ZEW/JLL, Press Release of July 27, 2016: ©iStock.com/anzeletti, Press Release of July 21, 2016: ©iStock.com/ KeithBinns, Press Release of July 20, 2016: ©iStock.com/George Clerk, Press Release of July 13, 2016: ©Thomas Tröster, Press Release of July 6, 2016: ©Thomas Tröster, Press Release of July 5, 2016: ©Thomas Tröster
All further pictures: ©ZEW