Newsletter August 2016

Numerous scientists from the Centre for European Economic Research (ZEW) presented their research results at the 31th Annual Congress of the European Economic Association (EEA) in Geneva, which was held from August 22-26, 2016. In addition to the presentations, ZEW also participated as EEA-ESEM 2016 exhibitor, hosting an own information stand at the congress. The 69th Annual European Meeting of the Econometric Society (ESEM) ran in parallel with the Annual Congress of the EEA.

On June 23, 2016, the British voted to depart from the European Union. Some 70 per cent of voters took to the polls, passing the referendum with a 51.9 per cent majority. Article 50 of the Treaty on European Union, which governs departure, foresees a two-year negotiation period that can be extended if necessary. However, both the UK and the EU are not interested in drawing out negotiations, for uncertainty about the outcomes is harmful to both sides.

The crowds are large, the lecture halls are full to bursting, and yet in 2015, many university places remained unfilled at German universities. Getting hold of an attractive university place therefore is fraught with hurdles for many applicants. Dr. Vitali Gretschko, head of the ZEW Research Group "Market Design", explains how the allocation of university places in Germany could be made more systematic whilst also being better adapted to individual universities and applicants.

The Centre for European Economic Research (ZEW) is pleased to announce a workshop for data users of ZEW’s Research Data Centre (FDZ) on November 16 and 17, 2016, in Mannheim. The aim of the workshop is to give researchers the opportunity to present and discuss studies conducted using ZEW survey data. Recent or ongoing studies concerning econometric and policy-oriented topics on any aspect of entrepreneurship, firm dynamics and in particular, innovation activities, are welcomed. Interested researchers are invited to submit a one-page presentation proposal. Please send your submission to Sandra Gottschalk (gottschalk@zew.de) no later than September 30, 2016.

Olga Malkova, PhD, was a visiting researcher in ZEW's Research Department "Labour Markets, Human Resources and Social Policy" and ZEW's Research Group International "Distribution and Redistribution" from May 17 to August 8, 2016. Malkova is an assistant professor for Economics at the University of Kentucky in Lexington, USA. Her research interest lies in the fields of labour economics and economic demography, where she focuses on the effect of social programmes on childbearing, childrens outcomes, employment and health. Her three-month residential fellowship at ZEW was part of the Heinz König Young Scholar Award, which she received in 2014. During her stay, she worked on a project evaluating the effect of pension tax reductions in Russia on old-age employment and health outcomes. She presented results from her research on family planning programmes and their effects on poverty in a ZEW Research Seminar.

Economic expectations for Central and Eastern Europe including Turkey (CEE region) have slightly improved again in August 2016. In the current survey, the ZEW-Erste Group Bank Economic Sentiment Indicator for the CEE region has increased by 3.5 points to a level of 15.4 points, after a decrease of similar magnitude in July 2016. 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 August 2016, the ZEW-CS Indicator for the economic sentiment in Switzerland has once again experienced a decrease. With a drop by 8.7 points to a reading of minus 2.8 points, the indicator continues the downward trend already seen in the previous month. When it comes to the current economic situation, however, the surveyed experts recorded an upward trend, with the relevant indicator rising from 0.0 points in July 2016 to a current reading of 11.3 points. 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 increased in August 2016. The index gained 7.3 points compared to the previous month, now standing at 0.5 points (long-term average: 24.2 points). "The ZEW Indicator of Economic Sentiment has partly recovered from the Brexit shock. Political risks within and outside the European Union, however, continue to inhibit a more optimistic economic outlook for Germany. Furthermore, uncertainty about the resilience of the EU banking sector persists," comments ZEW President Professor Achim Wambach.

The digital revolution is gradually encroaching on all economic sectors, including the electricity industry. The "Act on the Digitisation of the Energy Transition" shows just how high this development ranks on the German political agenda. The digitisation process in the German and French electricity industry is, however, still too slow-paced. This is one of the key findings of the ZEW Energy Market Barometer, a survey among approximately 200 energy market experts conducted biannually by the Mannheim Centre for European Economic Research (ZEW).

Prices for almost all energy sources are expected to increase within the coming five years. This is the case for prices in Germany, as well as for worldwide energy prices. Electricity, crude oil and natural gas seem set to become more expensive. When it comes to coal, however, experts are divided between predictions of price stability and price increases. These are the findings of the latest ZEW Energy Market Barometer, a biannual survey carried out by the Mannheim Centre for European Economic Research (ZEW) amongst approximately 200 energy market experts.

European banks lack sufficient capital to offset the losses expected in the case of another financial crisis. Quite how big losses are depends, however, on the stress level to which banks are subject. A recent study carried out by Sascha Steffen (Centre for European Economic Research (ZEW) and University of Mannheim) together with Viral Acharya (New York University Stern School of Business) and Diane Pierret (University of Lausanne) has considered results from the latest round of stress tests carried out for European banks. The study shows that the measured capital shortfalls differ to the extent of billions according to the stress scenario and the stress test methodology used.

In particular, substantial differences are seen for banks in France, the United Kingdom, in Germany, Spain, and Italy.

The last few years have seen the development of a market for paid, online labour. Crowdsourced labour allows businesses to allocate small tasks (so-called microtasks) efficiently to external workers via online platforms. In view of controversy surrounding this new online division of labour, the socio-economic backgrounds and motives of crowdworkers in Germany have been investigated in a study carried out by the Centre for European Economic Research (ZEW) on behalf of the Federal Ministry of Labour and Social Affairs (BMAS). The results show that crowdworking is currently only a marginal form of employment. More than 50 per cent of the respondents claimed to devote only up to an hour each week to crowdwork.

The recent survey carried out in July (18–27/07/2016) indicates a recovery in expectations for the Chinese economy. The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, has increased to a current total of 6.6 points. The indicator previously totalled 0 points. As has been the case over the past four months, the indicator continues to fluctuate within a relatively narrow range around a long-term average of 6.0 points. The surveyed experts subsequently expect to see growth of a similar amplitude to that seen in previous years.

For 2016, experts expect the Chinese gross domestic product (GDP) to be subject to an annual growth of 6.6 per cent. Growth of 6.5 per cent is forecast for 2017.

The trend toward ever larger transactions, seen in the global market for mergers and acquisitions (M&A) since 2014, continues. Whilst the number of transactions has fallen to its lowest level in twelve years, the volume of individual transactions continues to increase. This is the result of recent calculations by the Centre for European Economic Research (ZEW) based on the Zephyr database of Bureau van Dijk (BvD).

The European banking sector requires a comprehensive recapitalisation of its banks in order to withstand another potential crisis. Those banks in need of recapitalisation are not only from peripheral countries of the eurozone such as Italy and Spain, but also from countries such as Germany and France. If the market index were to drop by 40 per cent over a six-month period, the estimated capital shortfalls of European banks would amount to up to €882 billion. Banks are likely to require public backstops in such a scenario.

With a venture capital totalling 29 million euros, the funding programme "INVEST – Subsidy for Venture Capital" launched by the Federal Ministry for Economic Affairs and Energy (BMWi) is by all means a success story. Since the programme's launch in May 2013, a total of 1,253 business angels have provided 536 young innovative businesses with venture capital of around 104 million euros. The main advantages of the programme are its orientation to markets and its clear focus on business angels and young businesses. These are the findings of a report conducted by the Centre for European Economic Research (ZEW) on behalf of the Federal Ministry for Economic Affairs and Energy (BMWi).

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Roman Sittl; Arne Jonas Warnke
Competitive Balance and Assortative Matching in the German Bundesliga

Irene Bertschek; Wolfgang Briglauer; Kai Hüschelrath; Benedikt Kauf; Thomas Niebel
The Economic Impacts of Telecommunications Networks and Broadband Internet: A Survey

Niklas Dürr; Kai Hüschelrath
Deregulation and the Determinants of Network Access: Evidence from the German Interurban Bus Industry

Niklas Dürr; Kai Hüschelrath
Deregulation and the Determinants of Entry: Evidence from the German Interurban Bus Industry

Irene Bertschek; Wolfgang Briglauer; Kai Hüschelrath; Benedikt Kauf; Thomas Niebel
Die Bedeutung von OTT-Diensten für die Telekommunikationsregulierung
(The Importance of OTT Services in Telecommunications Regulation)

Marianne Saam, Steffen Viete and Stefan Schiel (2016)
Digitalisierung im Mittelstand: Status Quo, aktuelle Entwicklungen und Herausforderungen (Digitalisation in the SME Sector: Status Quo, Current Developments, and Challenges)

Analysis of Economic Data for the Duster ICT, Media, Cultural Economy

The Economic Importance of Family Enterprises 2016

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speaker: Simon Lapointe (Université de Fribourg)
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

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speakers: Dr. Thilo Klein (OECD)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speakers: Francesc Ortega (Queens College, CUNY), Ewen Macleod (UNHCR and University of Oxford)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

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

Speaker: Prof. Dr. Markus K. Brunnermeier (Edwards S. Sanford Professor of Economics and Director of the Bendheim Center for Finance at Princeton University)
Location of the event: ZEW, Mannheim

Speakers: László Andor (former EU Commissioner for Employment and Social Affairs, currently Mercator Senior Fellow at Hertie School of Governance), Torsten Arnswald (Federal Ministry of Finance, Germany), Fabien Dell (EU Commission, Cabinet of Commissioner Pierre Moscovici), Dr. Mathias Dolls (ZEW), Moderation: Maithreyi Seetharaman
Location of the event: Representation of the State of Baden-Württemberg to the European Union, Rue Belliard 60-62, B-1040 Brussels

Speaker: Prof. Dr. Christoph M. Schmidt (Chairman of the German Council of Economic Experts and President of RWI - Leibniz Institute for Economic Research)
Veranstaltungsort: ZEW, Mannheim

Picture Credits: News Article of August 29, 2016: ©iStock.com/George Clerk, Press Release of August 18, 2016: ©iStock.com/ KeithBinns,Press Release of August 17, 2016: ©iStock.com/George Clerk, Press Release of August 11, 2016: ©iStockpoto.com/Pali Rao,Press Release of August 10, 2016: ©iStockpoto.com/ kflGALORE, Press Release of August 9, 2016: ©iStockphoto.com/jpique, Press Release of August 4, 2016: ©istock/ktsimage, Press Release of July 29, 2016: ©istockphoto.com/mbbirdy
All further pictures: ©ZEW