Newsletter November 2020

The coronavirus pandemic has brought on the worst recession in Germany since the Second World War. Many companies have managed to stay afloat during the COVID-19 pandemic thanks to government aid. The pandemic is hitting young, less established companies, such as startups, particularly hard. ZEW economist Jürgen Egeln, deputy head in the Research Department “Economics of Innovation and Industrial Dynamics” at ZEW Mannheim, draws on findings of the IAB/ZEW Start-up Panel to recommend what young companies can do to survive the crisis.

In the spring semester of 2020, ZEW once again offered five summer courses for young researchers, which took place entirely online this year. Over 80 young researchers from ZEW and the University of Mannheim participated in the courses dedicated to current economic issues. The ZEW Summer Courses, financially supported by the state of Baden-Württemberg, are part of a close cooperation with the University of Mannheim as part of the PhD track of the Center for Doctoral Studies in Economics (CDSE).
 
The ZEW Summer Courses are elective block courses aimed at supporting doctoral students with their thesis. As a special feature, these lectures, which are delivered by renowned professors from different universities, are held in July and August during the period between terms in addition to the comprehensive range of courses offered as part of the CDSE PhD track at the University of Mannheim.

The significance of the People’s Republic of China has risen significantly over the past years. China’s engagement in global policy issues – ranging from the international economic system and the economic development of African economies to the challenges associated with environmental and climate protection – plays a crucial role for Germany and Europe. In the #ZEWPodcast “Wirtschaft • Forschung • Debatten”/“Economy • Research • Debates”, ZEW President Professor Achim Wambach provides insight into the influence of the Chinese economic model on the European economy.

He sheds light on how competition with Chinese companies impacts on European firms and the role Chinese state capitalism plays in this context, and offers suggestions on how to regulate trade relations and business activities between Chinese and European firms. While this edition was published in German, there are plans to produce English editions of the podcast as well.

The COVID-19 pandemic requires joint action from the EU Member States – for both health protection and to respond to the crisis with appropriate economic policy measures. The “Next Generation EU” recovery fund and the “Pandemic Emergency Purchase Programme” (PEPP) of the ECB are at the heart of the joint efforts to stabilise the European economy. At the #ZEWlive event on 10 November 2020, Dr. Sylvie Goulard, deputy governor of the Banque de France, and ZEW expert Professor Friedrich Heinemann discussed whether these programmes can help overcome the crisis.

The discussion revealed that while these support programmes are effective in the short term, they are not sufficiently well-targeted to address the long-term causes of weak growth and the lack of resilience. The event was supported by the Brigitte Strube Stiftung.

Some 20 years ago, 3G cellular frequencies were auctioned in Germany for more than 100 billion marks. The auction and the unbelievable sum it raised were novel back then. Since then, broadband frequency auctions have been the norm. As recently as last year, broadband frequencies were auctioned off once again, this time for 5G technology applications.

The coronavirus pandemic has put the economy, society and policymakers under considerable pressure. Against this background, ifo President Professor Clemens Fuest presented his recently published book “Wie wir unsere Wirtschaft retten. Der Weg aus der Corona-Krise” (“How to Save the Economy. The Way Out of the Coronavirus Crisis”) in an online event on 26 October 2020 at ZEW Mannheim – marking the kick-off of the new #ZEWBookTalk series. In the subsequent discussion with ZEW President Professor Achim Wambach, Fuest expressed his criticism of the German government’s current tendency towards interventionist economic policy measures.

The difficulties in overcoming the coronavirus-induced recession lie in the fact that the measures adopted are not well-targeted and that there is not enough economic data on the regional impact of the crisis, he argued.

ZEW Mannheim is pleased to announce that the annual ZEW Public Finance Conference on behavioural public economics will take place in Mannheim on 6 and 7 May 2021.
 
Submissions relating to the focus of this year’s conference are particularly welcome, though we also encourage submissions from all other areas of public economics and political economy. Please submit your paper via the conference management website no later than 19 February 2021. No conference fee will be charged for participants presenting a paper.

The Second Coronavirus Tax Assistance Act (“Zweites Corona-Steuerhilfegesetz”) is not ambitious enough to cushion the effects of the crisis. In the way the measures are currently designed, particularly small companies benefit little from the tax reliefs. Relative to the severity of the crisis, the measures are, overall, too soft and not innovative enough. These are the results of a study conducted by a team of researchers at ZEW Mannheim and the University of Mannheim, which was published in the journal “Der Betrieb”.

“With the Second Coronavirus Tax Assistance Act, legislators will achieve a fast, but rather modest boost,” concludes ZEW Research Associate Professor Christoph Spengel, who holds the Chair of Business Administration and Taxation II at the University of Mannheim. “The measures fall short of what is necessary to address the severity of the crisis. The coronavirus crisis is hitting the German economy harder than the financial crisis did. It would therefore be appropriate to introduce more far-reaching measures.”

Hungary and Poland vetoed the EU’s 1.8 trillion euro budget plan for the years 2021 to 2027. The bone of contention has been a new mechanism under which Member States can lose EU funds for violating the rule of law. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter.

In the November survey (3­–11 November 2020), the CEP indicator recorded a further increase, climbing 5.0 points to a new record high of 55.0 points. The CEP indicator, based on the China Economic Panel (CEP) in cooperation with Fudan University, Shanghai, reflects the economic expectations of international financial market experts for China on a 12-month basis.

Many firms have made progress with regard to the digitalisation of their products and services, their business processes and the way of working over the course of the coronavirus pandemic. Around 40 per cent of companies in the business-related services sector and approximately 25 per cent of businesses in the manufacturing industry stated to have seen a surge in digitalisation. Meanwhile, the turnover of these businesses often remains – sometimes significantly – below pre-crisis levels. These are the results of a representative survey conducted by ZEW Mannheim in September 2020 among approximately 1,400 companies in the information economy and manufacturing industry.

In 2019, the information and communications technology (ICT) sector generated sales of almost 281 billion euros, thus growing for the sixth consecutive year. Gross value added and capital expenditure also reached new record levels: for the first time, the sector generated added value of over 120 billion euros and invested more than 20 billion euros. This is also reflected in the number of employees that are subject to social insurance contributions and self-employed individuals in the ICT sector, which rose to around 1.28 million in 2019. This represents an increase of around 43,000 jobs compared to the previous year.

In 2019, the ICT sector generated around 5.1 per cent of the value added of the entire commercial economy, which is attributable almost exclusively to ICT service providers. Their gross value added has been growing continuously since 2010 and amounted to 107 billion euros in 2019. However, the gross value added of the ICT hardware segment also increased year-on-year from 13 to 14 billion euros.

The German Federal Ministry of Finance’s Working Party on Tax Revenue Estimates has presented its new forecasts to the government authorities at federal, state and municipal levels. The forecasts confirm that tax revenues will fall significantly in the current year and the following years. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter.

The chemical industry can contribute considerably to climate change mitigation and the sustainable transformation of the economy and society through its innovations. This is the result of a study jointly conducted by the Centre for Economic Policy Studies (CWS) at Leibniz University Hannover and ZEW Mannheim, on behalf of the German Chemical Industry Association (VCI).

The ZEW Indicator of Economic Sentiment for Germany has once again taken a sharp decline in the current November 2020 survey, plummeting 17.1 points to a new reading of 39.0 points compared to the previous month. Having achieved a temporary high of 77.4 points in September 2020, expectations have since fallen by 38.4 points. The assessment of the economic situation in Germany has slightly worsened, and currently stands at minus 64.3 points, 4.8 points lower than in October.

Members of state parliaments have faith in adhering to the debt brake in their federal state if they belong to a governing party. Politicians who sit on the opposition benches are much more sceptical about this. Opposition members of parliament who then take office after winning a state election suddenly become a lot more optimistic regarding the feasibility of balancing the domestic budget. On the contrary, pessimism grows amongst members of parliament whose party loses control of government.

These are the insights provided in a new study by ZEW Mannheim in cooperation with the University of Mannheim, which was conducted within the framework of the Collaborative Research Center on The Political Economy of Reform funded by the German Research Foundation.

Joe Biden was elected the 46th president of the United States. Professor Achim Wambach, president of ZEW Mannheim, comments on this matter: “With Joe Biden, the US will have a reliable candidate in the White House, who will return to international agreements. This is a great opportunity for Europe and the European economy.”

Especially for low-wage earners, solo self-employment provides an important alternative to regular employment or unemployment. At the same time, however, this also provides a way for employers to get around having to pay the minimum wage, since the minimum wage does not apply to the self-employed. Solo self-employment has decreased since the introduction of the statutory minimum wage in 2015, even in sectors with a high share of solo self-employed individuals, such as janitorial or repair services.

“Overall, workers have not been increasingly forced into solo self-employment by their employers despite the minimum wage,” concludes Moritz Lubczyk, researcher in the Research Department “Economics of Innovation and Industrial Dynamics” at ZEW Mannheim.

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

Adriano de Leverano
Post COVID EU Recovery: Is There Room to Invest in Healthcare?

Christian Alemán, Christopher Busch, Alexander Ludwig, and Raül Santàeulalia-Llopis
Evaluating the Effectiveness of Policies Against a Pandemic

Michael J. Böhm, Terry Gregory, Pamela Qendrai, and Christian Siegel
Demographic Change and Regional Labour Markets

Maximilian Bach and Mira Fischer
Understanding the Response to High-Stakes Incentives in Primary Education

Daniel Wittenstein
Champions of Digital Transformation? The Dynamic Capabilities of Hidden Champions

Tommy Krieger
Elite Structure and the Provision of Health-Promoting Public Goods

Raphael Müller, Christoph Spengel, and Heiko Vay
On the Determinants and Effects of Corporate Tax Transparency: Review of an Emerging Literature

Sebastian Camarero Garcia and Michelle Hansch
The Effect of Unemployment Insurance Benefits on (Self-) Employment: Two Sides of the Same Coin?

David Gomtsyan and Alexander Tarasov
Exporting Costs and Multi-Product Shipments

Christoph Spengel, Leonie Fischer, and Kathrin Stutzenberger
Breaking Borders? The European Court of Justice and Internal Market

Claire Gavard and Djamel Kirat
Short-Term Impacts of Carbon Offsetting on Emissions Trading Schemes: Empirical Insights from the EU Experience

Friedrich Heinemann, Eckhard Janeba, and Maximilian Todtenhaupt
Incumbency and Expectations of Fiscal Rule Compliance: Evidence from Surveys of German Policy-Makers

Marc Frick and Vera Huwe
Klimapolitik zwischen Markt, Deliberation und Hegemonie – Der Emissionshandel und das Politische (Climate Policy Between Market, Deliberation and Hegemony – Emissions Trading and the Political Sphere)

Carlo Moana Birkholz, Dourine Boumans, Ute Hannich, Friedrich Heinemann, Justus Nover, Ann-Cristin Rathje, Sabine Rumscheidt, and Klaus Wohlrabe
Die Widerstandsfähigkeit der deutschen Wirtschaft in der Corona-Pandemie (The Resilience of the German Economy in the COVID-19 Pancemic)

Irene Bertschek, Thomas Niebel, Christian Rammer, and Mareike Seifried
IKT-Branchenbild (ICT Sector Profile)

Jochen Dehio, Ronald Janßen-Timmen, Uwe Neumann, Michael Rothgang, Christian Warnecke, Verena Eckl, Gero Stenke, Vanessa Behrens, Johannes Bersch, and Christian Rammer
Innovationsbericht Nordrhein-Westfalen (Innovation Report North Rhine-Westphalia)

Birgit Gehrke and Christian Rammer
Innovationsindikatoren Chemie 2020 (Innovation Indicators for the Chemical Industry 2020)

Jürgen Egeln, Lena Füner, Sandra Gottschalk, and Moritz Lubczyk
Junge Unternehmen in der Corona-Krise im Frühjahr 2020 (Start-Ups in the COVID-19 Crisis in Spring 2020)

Contract with the Federal Ministry of Labour and Social Affairs: Scientific Advise and Corresponding Dialog Formats Concerning the Welfare State, the Working Environment, the Social Market Economy and in Addition the Implementation of Corresponding Dialogue Forms

Political Structures Financing in the Member States

Preparing the CIS 2022

Proof of Concept to Determine the Economic Impact of Family Firms in Europe

Restructuring and Extension of a Sample of the KfW Business Survey Panel

In order to support the nationwide containment measures against the coronavirus, ZEW is examining to what extent the events listed here can take place virtually. Individual dates may be postponed. The current status of the events can be found in the ZEW Events Calendar. If you have any questions, please don’t hesitate to contact our event team at event@zew.de.

Speaker: Aline Bütikofer (Norwegian School of Economics (NHH), Bergen, Norway)
Location of the event: Online via ZOOM

Speaker: Roel Beetsma (University of Amsterdam, the Netherlands), Xavier Debrun (National Bank of Belgium), Agnès Bénassy-Quéré (Paris School of Economics, France), Antonia Díaz (Carlos III University of Madrid, Spain), Thomas Westphal (German Federal Ministry of Finance)
Location of the event: Online

Speaker: Atılım Seymen (Deutsche Bundesbank, Frankfurt am Main)
Location of the event: Online via ZOOM

Speaker: Arthur van Benthem (The Wharton School, The University of Pennsylvania, Philadelphia, USA)
Location of the event: Online via ZOOM

Location of the event: Online via ZOOM

Speaker: Grace Nacimiento (GvW Graf von Westphalen Rechtsanwälte Steuerberater Partnerschaft mbB, Hamburg)
Location of the event: Online via ZOOM

Speaker: Andrè Albuquerque Sant’Anna (Universidade Federal Fluminense, Niterói, Brazil)
Location of the event: Online via ZOOM

Speaker: Prof. Joshua Gans (University of Toronto, Canada)
Location of the event: Online

Tenure Track Postdoctoral Researcher (f/m/d) for the Department "Health Economics"

Picture Credits: Press Release of 23.11.2020: iStock.com/francescoridolfi, Press Release of 20.11.2020: Anna Logue Fotografie/ZEW, Press Release of 12.11.2020: Anna Logue Fotografie / ZEW, Press Release of 12.11.2020: iStock.com/Petmal, Press Release of 11.11.2020: Anna Logue Fotografie / ZEW, Press Release of 09.11.2020: iStock.com/AndreyPopov, Press Release of 07.11.2020: Anna Logue Fotografie / ZEW, News article of 04.11.2020: Anna Logue Fotografie / ZEW, Press Release of 02.11.2020: iStock.com/AnnaStills
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