Newsletter December 2020

Dear Readers,
A turbulent year that has been dominated by the COVID-19 pandemic is coming to a close. With this e-mail, you are receiving the last issue of the ZEW Newsletter English edition in 2020. We would like to take this opportunity to thank your for your sustained interest in news from ZEW Mannheim and hope that you will find interesting news in this last issue for 2020. We wish you and your loved ones a pleasant festive season and a prosperous, healthy 2021!
 
Best wishes,
The ZEW Newsletter editorial team

One year ago, the first case of COVID-19 was reported in Wuhan. Since then, more than 65 million people worldwide have been infected with the virus, the death toll has passed 1.5 million, and the global economy is experiencing its biggest slump since the end of World War II.

The COVID-19 pandemic has led to one of the most severe recessions of the post-war period, and there is currently no sign of the economic situation returning to normal. Against this background, Professor Lars P. Feld, chairman of the German Council of Economic Experts, presented the key results of the recently published Annual Report 2020/21 on 8 December 2020. In its report entitled “Overcoming the Coronavirus Crisis Together; Strengthening Resilience and Growth”, the council calls on the German government to readjust its economic policy. The virtual event took place as part of the lecture series “First-Hand Information on Economic Policy” at ZEW Mannheim.

ZEW President Professor Achim Wambach moderated the subsequent discussion with the speaker.

Academics and policymakers met virtually to discuss how the EU’s fiscal architecture might be adjusted in the light of the COVID-19 pandemic during a lunchtime seminar on 3 December 2020. The seminar was organised jointly by ZEW Mannheim and the international research network EconPol Europe, moderated by ZEW economist Dr. Zareh Asatryan, deputy head of the “Corporate Taxation and Public Finance” Research Department. Around 120 participants from all over Europe joined the special policy session of the ZEW seminar series.

The German Real Estate Financing Index (DIFI) of ZEW Mannheim and JLL continues to improve in the fourth quarter of 2020. The sentiment indicator climbed 12.5 points to minus 23.5 points, thus almost returning to the level of the first quarter of 2020 (minus 18.5 points). In particular, the assessment of the financing situation of the past six months has resulted in the index almost reaching pre-pandemic levels.

During the coronavirus pandemic, German economic policymakers must not lose sight of two developments: On the one hand, the growth of powerful internet giants through digitalisation, and on the other hand the economic success of China, which rests on the influence of large state-owned corporations. Taking up these developments, Social Sciences Academic Press has now published the book “Digital Prosperity for All” by ZEW President Achim Wambach and Handelsblatt journalist Hans Christian Müller in Chinese.

The awards of the ZEW Sponsors’ Association for Science and Practice are an integral part of the academic year at the institute. The award is granted to honour outstanding scientific performances and economic policy advising projects. The prizes each come with an endowment of 5,000 euros.

Why do company workers publish in scientific journals? What motivates firms to publish papers, what prevents them from doing so? Which role do corporate publications play for the innovation system and innovation policy? These are some of the questions addressed at an online workshop, which was jointly organised by ZEW Mannheim and the Fraunhofer Institute for Systems and Innovation Research (ISI). The workshop, which took place on 24 November 2020, was supported by the Federal Ministry of Education and Research.

The work of the ZEW Media Design Team was again honoured at the eleventh International Creative Media Awards (ICMA): The designers won bronze for the ZEW Annual Report 2019 in the category “Typography, Layout”. This year saw 387 international submissions.

ZEW Mannheim is pleased to announce an international workshop on social mobility and its relationship with economic performance on 22 and 23 March 2021. The event is jointly funded by the international research programme SEEK (Strengthening Efficiency and Competitiveness in the European Knowledge Economies) and the D3.2 grant Evidence-Based Anti-Poverty Policies – Università Cattolica del Sacro Cuore, Milan. Miles Corak (City University of New York) and Bhash Mazumder (Federal Reserve Bank of Chicago) will be the keynote speakers.
 
Contributions that explore the causes and consequences of changes in the intergenerational transmission of economic status are welcome. We also encourage submissions on any topic related to social mobility, the geography of intergenerational mobility and/or mobility in a cross-country perspective. Interested researchers are invited to submit a paper (preliminary versions are welcome) to socialmobility2020@zew.de no later than 10 January 2021.
 
Please note that, while we hope to conduct the workshop in person in Mannheim, due to the ongoing COVID-19 pandemic it might be necessary to convert it into an online-only or hybrid event. This decision will be made by February 2021 at the latest, and authors of accepted papers will be informed when recieving the notification of acceptance.

ZEW Mannheim is pleased to announce the 9th Mannheim Conference on Energy and the Environment on 20 and 21 May 2021. Leading experts as well as researchers at all career levels are invited to present and discuss innovative current research in the fields of energy and environmental economics. The conference will take place in a hybrid format; it will be possible to participate either on site in Mannheim or online.
 
The conference will cover a broad range of aspects concerning the relationship between energy use and supply, environmental issues, economic prosperity, and regulation and policy. Contributions with different methodological backgrounds (theoretical, empirical, and behavioural research) are welcome. Interested researchers are invited to submit preferably an academic paper, or an extended abstract of at least three pages. Submissions should be sent in PDF format to energy2021@zew.de no later than 31 January 2021.

The German digital contact-tracing app “Corona-Warn-App” is designed to facilitate and speed up the tracking of SARS-CoV-2 infections. However, the app does not currently meet this objective. “To have its full impact, the app needs to be more widely used and the user guidance needs to be much more geared towards effectiveness. In addition, the app would have to be continuously improved on the basis of a well-defined performance measurement,” says Dr. Dominik Rehse, head of the Junior Research Group “Digital Market Design” at ZEW Mannheim.

In a recently published ZEW policy brief, he and a researcher from the University of Mannheim recommend setting up a living lab for the contact-tracing app. The lab should serve to systematically test the measures to promote the app’s dissemination, optimise its use and measure its success in order to significantly improve the app.

Today, the EU Commission is set to unveil the Digital Services and Digital Markets Acts in Brussels. Professor Achim Wambach, president of ZEW Mannheim and member of the Monopolies Commission, comments on this matter: “The EU Commission’s efforts to establish new rules that take into account the fast-paced dynamics of digital markets and limit the market power of tech giants in advance is the right approach. In the future, it will be important to prevent individual companies in digital markets from becoming uncontrollably powerful in the first place.

In the December survey (1–9 December 2020), the CEP indicator decreased by 23.7 points to a new reading of 31.3 points. Although this marks a sharp decline, expectations are still at a historically high level. 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.

Thanks to the measures adopted to mitigate the economic effects of the coronavirus, the German economy has largely stabilised. Nevertheless, financial market experts expect the number of company insolvencies and credit defaults to rise in the first half of 2021. Moreover, they assume that the number of so-called zombie companies – i.e. firms that are insolvent but artificially kept alive by loans – is likely to grow. These are the results of a special question featured in the most recent ZEW Financial Market Survey conducted by ZEW Mannheim in December 2020 among 174 financial market experts.

German companies achieved a turnover of more than 7.6 billion euros with world market innovations in artificial intelligence (AI) in 2018. As a result, this form of technology accounts for approximately ten per cent of German turnover of world market innovations, according to a study conducted by ZEW Mannheim on behalf of the Federal Ministry for Economic Affairs and Energy (BMWi). The turnover achieved by these companies does not, in fact, increase as a result of these businesses using artificial intelligence.

However, AI has an evident impact on the return on sales which stands at 6.4 per cent – 1.3 percentage points higher – purely through the use of this technology. Companies that use AI are therefore able to yield profits of around 25 per cent.

The ZEW Indicator of Economic Sentiment for Germany increased in the current December survey, climbing 16.0 points to a new reading of 55.0 points. Economic expectations have thus largely recovered from the sharp decline witnessed in the previous month. The assessment of the economic situation in Germany worsened again, and currently stands at minus 66.5 points, 2.2 points lower than in November. The assessment of the situation thus falls slightly below the September 2020 figure (minus 66.2 points).

The Eurosystem’s bond purchases since the beginning of the COVID-19 pandemic deviate significantly from the ECB’s capital key in terms of their allocation among eurozone countries. Relative to the capital key, Italian government bond purchases deviated by as much as 25 per cent between March and September 2020, while Spain’s share of purchases exceeded its national capital key by eleven per cent, Belgium’s by seven per cent, and Slovenia and France’s by three per cent each. These are the findings of a study on the ECB’s sovereign purchase programmes, conducted by researchers of ZEW Mannheim with the support of the Brigitte Strube Stiftung.

Natural disasters such as floods are becoming increasingly more common as a consequence of climate change. Several federal state governments in Germany have therefore initiated large-scale awareness campaigns in cooperation with the insurance industry. The aim is to make households more aware of this matter so they can cover themselves against damages caused by floods. A study led by Dr. Daniel Osberghaus, researcher in ZEW’s “Environmental and Resource Economics” Department, shows, however, that these campaigns have hardly had an effect on private flood protection or insurance decision-making.

The video communications software provider Zoom has recently published its figures for the third quarter of 2020. ZEW economist Dr. Daniel Erdsiek, researcher in ZEW’s “Digital Economy” Department, comments on this matter.

There are significant differences in the degree of digitalisation in the German economy. This becomes clearly apparent when looking at the different economic sectors, company sizes, groups of federal states as well as types of region. Compared to the rest of the economy, the ICT sector leads the way when it comes to digitalisation – and by a wide margin: With a total of 273.0 index points, the ICT sector is far above the standardised industry average of 100 points. The sector ‘other production industries’ (55.6 index points) shows the worst performance in terms of digitalisation, followed by the tourism industry (64.4 index points) and other manufacturing industries (66.7 index points).

In its meeting yesterday, the German Bundestag’s Budget Committee approved a fund to promote start-ups. Dr. Georg Licht, head of the ZEW Research Department “Economics of Innovation and Industrial Dynamics” at ZEW Mannheim, comments on this matter.

The fourteenth Five-Year Plan (2021–2025) emphasises innovation as the driving force for China’s future economic development with the aim of doubling Chinese GDP and income per capita until 2035. However, a glance at the country’s approaches to implement these economic policy goals reveals a rather mixed picture. On the one hand, China continues to highlight the importance of market-oriented reforms and deregulation; on the other hand, the aim is to achieve economic and technological self-sufficiency under government leadership.

A recent ZEW expert brief explains how previous economic-policy measures have impacted on Chinese innovative and economic output. This expert brief marks the beginning of a series of publications by researcher Philipp Boeing and his team who jointly present their research findings on China’s innovation activity.

Businesses have so far been rather hesitant to introduce digital technologies that reduce energy consumption, although there are many ways to apply these technologies. Only one third of companies in the manufacturing sector and around 20 per cent of companies in the information economy cited energy savings as a reason for implementing digitalisation measures. These are some of the findings of a study on digitalisation and energy efficiency published today, which was conducted by ZEW Mannheim together with IW Consult and the Institute for Industrial Management FIR at RWTH Aachen University on behalf of the Federal Ministry for Economic Affairs and Energy.

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

This issue contains a Focus on M&A with the following articles:

Annika Havlik and Friedrich Heinemann
Magnitudes and Capital Key Divergence of the Eurosystem’s PSPP/PEPP Purchases – Update December 2020

Philipp Böing
Innovative China, R&D Subsidies, Patent Measures, and Productivity

Jan-Christian Fey, Oliver Lerbs, Carolin Schmidt, and Martin Weber
Risk Attitude and Capital Market Participation: Is There a Gender Investment Gap in Germany?

Bernhard Ganglmair, Alexander Kann, and Ilona Tsanko
Markups for Consumers

Jörg Claussen, Pooyan Khashabi, Tobias Kretschmer, and Mareike Seifried
Two to Tango? Psychological Contract Breach in Online Labor Markets

Sümeyra Atmaca, Karolin Kirschenmann, Steven Ongena, and Koen Schoors
Deposit Insurance, Bank Ownership and Depositor Behavior

Dominik Rehse and Felix Tremöhlen
Fostering Participation in Digital Public Health Interventions: The Case of Digital Contact Tracing

Christian Fischer, Alexander Rasch, and Tobias Wenzel
Complex Pricing and Consumer-Side Attention

Gian Caspari
Booster Draft Mechanism for Multi-Object Assignment

Daniel Osberghaus and Christiane Reif
How Do Different Compensation Schemes and Loss Experience Affect Insurance Decisions? Experimental Evidence From Two Independent and Heterogeneous Samples

Florian Baumann and Alexander Rasch
Product Liability and Reasonable Product Use

Vanessa Behrens and Markus Trunschke
Industry 4.0 Related Innovation and Firm Growth

Annika Havlik
Political Budget Cycles in European Public Procurement

Dominik Rehse and Felix Tremöhlen
Ein Reallabor für die Corona-Warn-App (A Living Lab for the Coronavirus Contact-Tracing App)

Peter Drewek
Bildungsdefizite Corona-bedingter Schulschließungen? Eine bildungshistorische Analyse (Educational Deficits of Coronavirus-Related School Closures? A Historical Analysis of Education)

Christian Rammer
Auf Künstliche Intelligenz kommt es an – Beitrag von KI zu Innovation und Performance der deutschen Wirtschaft (Artificial Intelligence Matters – AI’s Contribution to Innovation and Performance in the German Economy)

Georg Licht, Bettina Peters, Christian Rammer, and Steffen Kinkel
Definition von FuE im Maschinenbau vor dem Hintergrund einer Forschungsförderung (Definition of R&D in mechanical engineering and research funding)

Jan Büchel, Vera Demary, Henry Goecke, Christan Rusche, Alexander Burstedde, Barbara Engels, Oliver Koppel, Armin Mertens, Marc Scheufen, Jan Wendt, Johannes Ewald, Vanessa Hünnemeyer, Hanno Kempermann, Karl Lichtblau, Edgar Schmitz, Irene Bertschek, Thomas Niebel, Christian Rammer, Bettina Schuck, Frederick Birtel, Tobias Harland, Jan Hicking, and Lucas Wenger
Digitalisierung der Wirtschaft in Deutschland: Digitalisierungsindex 2020 (Digitalisation Level in the German Economy: Digitalisation Index 2020)

Irene Bertschek, Daniel Erdsiek, Thomas Niebel, Bettina Schuck, Mareike Seifried, Johannes Ewald, Thorsten Lang, Jan Hicking, Lucas Wenger, and Tim Walter
Schwerpunktstudie Digitalisierung und Energieeffizienz – Erkenntnisse aus Forschung und Praxis (Focus Study on Digitalisation and Energy Efficiency – Findings from Research and Practice)

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: Monika Buetler (University of St. Gallen, Switzerland) and Michael Haliassos (Goethe University Frankfurt, Germany)
Location of the event: ZEW, Mannheim

Speaker: Natalia Fabra (Universidad Carlos III de Madrid (UC3M), Spain)
Location of the event: Online via ZOOM

Speaker: Piotr Dworczak (Northwestern University, Evanston, USA)
Location of the event: Online via ZOOM

Picture Credits: news article of 16.12.20: Anna Logue Fotografie/ZEW, press releases 15.12.2020 Anna Logue Fotografie/ZEW, news article of 10.12.2020: JLL and ZEW, press release of 10.12.2020: iStock.com/metamorworks, news article of 09.12.2020: Social Sciences Academic press (China), news article of 08.12.20320: ZEW-Förderkreis, press release of 08.12.2020: iStock.com/instamatics, press release of 02.12.2020: iStock.com/Marc Bruxelle, press release of 30.11.2020: Büchel et al., press release of 27.11.2020: Anna Logue Fotografie/ZEW
All further pictures: ©ZEW