Newsletter February 2020

Policymakers are increasingly relying on behavioural interventions with the aim of improving individual decisions. These interventions have become known as “nudges” following the similarly titled book written by Richard Thaler and Cass Sunstein in 2008. Nudging methods are used, for example, to increase the willingness of individuals to pay taxes. But how effective are these measures in reality?

We are currently experiencing the fourth industrial revolution, as the radical breakthrough of artificial intelligence (AI) has taken digitalisation to a new level. Intelligent systems are connecting with each other in real time, they are capable of dealing with everyday situations and even develop creativity. And this is only the beginning. This was the main message of the talk held by Professor Sabina Jeschke, member of the Management Board for Digitalization and Technology at Deutsche Bahn AG, at ZEW Mannheim as part of the event series “First-Hand Information on Economic Policy”.

At its extraordinary general meeting on 5 February 2020, the ZEW Sponsors’ Association, “Förderkreis Wissenschaft und Praxis am Zentrum für Europäische Wirtschaftsforschung e.V.”, decided to change its name. The association, which is dedicated to promoting the dialogue between science and practice, is now called “ZEW – Förderkreis Wissenschaft und Praxis e.V.”.

ZEW Mannheim is pleased to announce the 2020 Competition and Innovation Summer School from 25 to 29 May 2020. 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 with experienced and renowned scholars, as well as other PhD students and postdoctoral researchers in an inspiring environment. Applications from advanced PhD students and postdoctoral 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 15 March 2020.
 

The Integration of Migrants and Attitudes Towards the Welfare State (IMES) Junior Research Group, a joint research group of ZEW Mannheim and the Mannheim Centre for European Social Research (MZES) at the University of Mannheim is pleased to announce an international workshop on immigration, integration and attitudes on 5 and 6 June 2020 in Mannheim. The event will bring together international scholars from different social sciences (political science, sociology, economics) studying the impact of migration in the host countries. Recent empirical and policy-oriented contributions on the integration of immigrants and its effect on the welfare state and attitudes formation are welcome. Please submit an extended abstract (max. 1,000 words; both full papers and preliminary versions are welcome) no later than 15 March 2020 to immigration2020@zew.de.
 

ZEW Mannheim mourns the death of Professor Horst Entorf, who died unexpectedly at the age of 64. Entorf was closely connected to ZEW for many years, supervising the doctoral theses of many researchers at the institute and frequently working on ZEW research projects.

The most recent survey conducted in February (11–19 February 2020) shows the considerable effects the coronavirus epidemic has on growth forecasts for China, with experts expecting real gross domestic product (GDP) to increase by only 5.4 per cent in 2020 and by only 4.2 per cent in the first quarter of this year. The CEP indicator, which is based on the China Economic Panel (CEP) and reflects the economic expectations of international financial market experts for China, rose to a value of 4.4 points in February 2020, thus again finding itself just outside the negative range.

When interpreting this increase, however, it must be noted that the forecast horizon of the CEP indicator is twelve months. The experts surveyed therefore do not expect a noticeable improvement until the beginning of 2021, and this starting from an already quite weak situation of minus 10.9 points. Current point forecasts for Chinese real gross domestic product are much more revealing when it comes to the economic development in the coming months.

To prevent the introduction of national digital taxes and maintain uniform international tax policy standards, the OECD has made proposals for a global corporate tax reform. Besides being highly complex, these proposals entail avoidable costs for businesses and tax authorities, and go well beyond what is necessary to achieve an appropriate tax level for multinational digital companies. According to tax experts of ZEW Mannheim and the University of Mannheim, it would be more advisable to rely on already existing tax systems. In order for market states to generate higher tax revenues from digital transactions, it would be a much simpler and more efficient solution if VAT were systematically levied on digital services, transactions in the sharing economy and non-monetary transactions.

Today’s extraordinary summit marks the start of the paramount phase of negotiations on the EU’s Multiannual Financial Framework (MFF) for 2021–2027. But in light of the course of negotiations to date, there is a risk that concentrating a large part of the budget on truly European tasks will not be possible. A new climate policy rhetoric could be misused for a continuation of large transfers to farmers and regions, even though this relabeling isn’t accompanied by effective ecological conditions. This is the conclusion of a ZEW expertise paper on the MFF negotiations.

The threat posed by cyberattacks rises · Fear of cybercrime slows down innovation activity among businesses · Insufficient qualified personnel to satisfy the high demand for cybersecurity experts · Germany is lagging far behind its international competitors in terms of innovation and cybersecurity
 
The most recent annual report of the Commission of Experts for Research and Innovation (EFI), which was presented to the German Chancellor in Berlin today, focuses on cybersecurity and the effects of cybercrime risks on innovation activities.

The ZEW Indicator of Economic Sentiment for Germany decreased sharply in February, falling 18.0 points to a new reading of 8.7 points. The indicator is thus slightly below its December 2019 level. The assessment of the economic situation in Germany has also worsened compared to the previous month, with the corresponding indicator dropping to a level of minus 15.7 points, 6.2 points lower than in January.

According to estimates, three in ten students in Germany leave university before completing their degree. Compared to graduates, university dropouts are more likely to have both lower incomes and a lower professional status. In addition, university dropouts tend to have a lower overall life satisfaction than graduates. Professionals holding a university degree are also more likely to work more hours per week. These are the results of a study conducted by researchers from ZEW Mannheim, who analysed the medium- and long-term consequences of dropping out of university.

Data play a crucial role in digital markets, including the market for mobile applications. At present, however, app markets are dominated by a few, highly successful and mostly free apps. Apps with high market shares operating in a weak competitive environment are more likely to collect large amounts of privacy-sensitive user data and share them with third parties. This is the result of a joint study conducted by ZEW Mannheim, the University of Zurich and the University of East Anglia.

When asked about incomes in surveys, both women and men tend to report that the woman earns slightly less than the man. In many cases, however, a glance at administrative data on actual incomes does not substantiate these reports. In cases where the woman earns more than her partner, many respondents adjust the woman’s income share in order to comply with the “male breadwinner norm”. Couples are more likely to misreport if the woman is just as or less educated or if she works less hours than the man, but still earns more. These are the findings of a study conducted by ZEW Mannheim together with the University of Basel.

The German enterprise sector continues to invest in innovations. In 2018, for example, the German companies increased their innovation expenditures by 4.1 per cent to 172.6 billion euros compared to the previous year. However, the innovation efforts of companies are currently held back by two major obstacles: First, there is a lack of qualified staff. In 2018, more than one in three companies had to forgo innovation activities, discontinue them prematurely or postpone them due to a shortage of skilled workers. The second major obstacle are missing internal and external sources of financing.

One in four companies reported a lack of internal funding for innovation and one in five are unable to find suitable external funding sources.

Britain’s imminent withdrawal from the EU will mark a historic date for Europe. On this date, a Brexit transition period kicks in, which will last until the end of the year, allowing the UK and the rest of the EU to negotiate their future relations. President of ZEW Mannheim, Professor Achim Wambach, comments on this matter.

As expected, the US Federal Reserve left the target range for the federal funds rate unchanged between 1.5 and 1.75 per cent in its latest decision in January 2020. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter.

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This issue contains a Focus on Europe with the following articles:

Leonie Fischer, Daniel Klein, Christopher Ludwig, Raphael Müller, and Christoph Spengel
Global Corporate Tax Reform to the Worse? Assessing the OECD Proposals

Jens Horbach and Christian Rammer
Labor Shortage and Innovation

Kathrine von Graevenitz and Elisa Rottner
Energy Use Patterns in German Manufacturing Since 2003

Svenja Lorenz, Mona Pfister, and Thomas Zwick
Beware of the Employer: Financial Incentives for Employees May Fail to Prolong Old-Age Employment

Francesco Biancalani, Dirk Czarnitzki, and Massimo Riccaboni
The Italian Startup Act: A Microeconometric Program Evaluation

Adelheid Holl, Bettina Peters, and Christian Rammer
Local Knowledge Spillovers and Innovation Persistence of Firms

Reinhold Kesler, Michael E. Kummer, and Patrick Schulte
Competition and Privacy in Online Markets: Evidence from the Mobile App Industry

Friedrich Heinemann
Ein Budget mit Mehrwert für Europa (A Budget With Added Value for Europe)
Prioritäten für den EU-Finanzrahmen 2021–2027 (Priorities for the 2021–2027 EU Financial Framework)

Irene Bertschek and Rebecca Janßen
Cybersicherheit und Innovationen (Cybersecurity and Innovations)
Ergebnisse einer repräsentativen Umfrage (Results of a Representative Survey)

Julia Heigle and Friedhelm Pfeiffer
Langfristige Wirkungen eines nicht abgeschlossenen Studiums auf individuelle Arbeitsmarktergebnisse und die allgemeine Lebenszufriedenheit (Long-Term Effects of University Dropout on Individual Labour Market Outcomes and General Life Satisfaction)

2020 Data-Report on Innovation Behaviour of Saxony’s Economy

Kopernikus Project “Industrial Processes”: Synchronized and Energy-Adaptive Production Technology for Flexible Alignment of Industrial Processes to a Fluctuating Energy Supply (SynErgie)

Regional Favoritism and Development

Why Do Firms (Not) Bid on Government Tenders?

Speaker: Christian Dustmann (University College London, United Kingdom)
Location of the event: ZEW, Mannheim

Speaker: Cristina Caffara (Charles River Associates, Boston, USA) and Tommase Valletti (Imperial College London, United Kingdom)
Location of the event: ZEW, Mannheim

Speaker: Gregor Jarosch (Princeton University, USA)
Location of the event: ZEW, Mannheim

Speaker: Antonio Bento (University of Southern California, Los Angeles, USA, and National Bureau of Economic Research, Cambridge, USA)
Location of the event: ZEW, Mannheim

Speaker: Elena Krasnokutskaya (Johns Hopkins University, Baltimore, USA)
Location of the event: ZEW, Mannheim

Speaker: Gunn Elisabeth Birkelund (University of Oslo, Norway), Gabriele Doblhammer (University of Rostock), Fabien Postel-Vinay (University College London, United Kingdom), and Uta Schönberg (University College London, United Kingdom)
Location of the event: ZEW, Mannheim

Speaker: Kai Gehring (University of Zurich, Switzerland)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speaker: Barbara Hey (ZEW)
Location of the event: ZEW, Mannheim

Tenure-Track Postdoctoral Researcher (100 %, f/m/d) for the Junior Research Group “Competition and Innovation”

Tenure-Track Postdoctoral Researcher (100 %, f/m/d) for the Research Department “Economics of Innovation and Industrial Dynamics”

Picture Credits: press release from 20.02.2020: iStock.com/MicroStockHub, press release from 20.02.2020: iStock.com/Alija, press release from 19.02.2020: David Ausserhofer, In Memoriam article from 17.02.2020: Jürgen Lecher, Goethe-Universität Frankfurt, press release from 17.02.2020: iStock.com/damircudic, press release from 13.02.2020: iStock.com/ViewApart, press release from 07.02.2020: iStock.com/Anchiy, press release from 04.02.2020: iStock.com/shironosov, press release from 30.01.2020: Anna Logue Fotografie/ZEW, press release from 29.01.2020: Anna Logue Fotografie/ZEW
 
All further pictures: ©ZEW