Newsletter January 2021

China’s importance for the global economy has been growing for years. And it will continue to grow. Since 2020, the country has been a member of the Comprehensive Economic Partnership (RCEP) in the Asia-Pacific region, the largest free trade zone in the world. Due to its great economic weight, the Chinese economy is now not only an important partner for the European Union, but also a competitor. After several years of negotiations, the EU and China have just reached an agreement on investment.

ZEW President Professor Achim Wambach and Dr. Philipp Steinberg, head of economic policy at the German Federal Ministry for Economic Affairs and Energy (BMWi), discussed the agreement and fair competitive conditions for European companies at a #ZEWlive event on Wednesday, 13 January 2021. The event was moderated by Jessica Sturmberg.

SARS-CoV-2 is responsible for the current recession in the global economy. However, there is an information problem underlying the coronavirus pandemic, according to Professor Joshua Gans from the University of Toronto, Canada. He presented this insight along with his book “The Pandemic Information Gap: The Brutal Economics of COVID-19” at the second #ZEWBookTalk on 17 December 2020. In his book, he explains the economic choices that have been made in response to the pandemic and what their motives are. ZEW President Professor Achim Wambach moderated the subsequent discussion with the speaker.

This year, the twelfth conference of the Leibniz Network “Real Estate Markets and Capital Markets” (ReCapNet) took place as an online-only event with guests from all over the world. Between 10 and 19 November 2020, around 100 researchers met to attend the presentations and discussions of twelve selected research papers as well as the keynote address by Professor Edward Glaeser from Harvard University.

Markets do not come out of thin air, they are created by humans to achieve certain aims. How well a market is equipped to achieve these aims depends largely on the rules that apply there. Market design is dedicated to analysing and optimising markets by designing these rules.

The allocation of daycare places, mobile phone frequency auctions, or the distribution of donations – markets are diverse and can be improved by an efficient design of their rules. Market design is dedicated to optimising and analysing markets. In the latest episode of the #ZEWPodcast, Professor Vitali Gretschko talks about where this economic discipline can be applied. He explains what markets and market design are all about and in what way market design could help, for example, in dealing with the COVID-19 crisis.

ZEW Mannheim will hold its nineteenth Conference on the Economics of Information and Communication Technologies (ICT) on 10 and 11 July 2021. The objective of the conference is to discuss recent scientific contributions to the economics of ICT and the economics of ICT industries. Theoretical, empirical and policy-oriented contributions are welcome. Please submit papers as a PDF or MS Word file to ict-conference@zew.de no later than 1 March 2021.
 
Due to the current situation, at this point we cannot finally decide on the format of the conference (face-to-face/digital/hybrid). The decision will be made in due time and be communicated via website. The paper call, submission, and referee process will be held as planned in any case.

In the January 2021 survey (11–20 January 2021), the CEP indicator increased by 23.6 points to a new reading of 54.9 points, thus returning to the very high level seen in November 2020. The CEP indicator, based on the China Economic Panel (CEP) and conducted by ZEW Mannheim in cooperation with Fudan University, Shanghai, reflects the economic expectations of international financial market experts for China on a 12-month basis.

Today, Joe Biden will be sworn in as the new President of the United States. On his first day in office, we will already see some groundbreaking decisions, especially regarding the future course of US climate policy. Professor Sebastian Rausch, head of the Research Department “Environmental and Resource Economics, Environmental Management” at ZEW, comments on this matter.

For low-income households in Germany, the financial damage caused by floods is lower in absolute terms than for wealthier households. However, the former have to spend a larger amount relative to their income to repair the damage. This is the result of a recent study conducted by Dr. Daniel Osberghaus at ZEW.

With the European Commission authorising the merger of the automobile groups Fiat Chrysler Automobiles (FCA) from Italy and France’s Groupe PSA subject to conditions, the mega-merger has now materialised with Stellantis launching its IPO at the beginning of this week. The merged company is currently the sixth largest automotive group in the world. “This merger is not a singular occurrence, but part of a long-term trend of increasing mergers and acquisitions in the automotive industry,” says Professor Achim Wambach, president of ZEW.

The ZEW Indicator of Economic Sentiment for Germany increased in the current January 2021 survey, climbing 6.8 points to a new reading of 61.8 points. The assessment of the economic situation in Germany increased somewhat, and currently stands at minus 66.4 points, 0.1 points higher than in December 2020. “Despite the uncertainty about the further course of the lockdown, the economic outlook for the German economy has improved slightly. The results of the ZEW Financial Market Survey in January show that export expectations in particular have risen significantly,” comments ZEW President Professor Achim Wambach on the current expectations.

Today, the German Bundesrat is expected to pass the amendment to the Act Against Restraints of Competition (GWB). Professor Achim Wambach, president of ZEW Mannheim and member of the Monopolies Commission, comments on this matter.
 

The coronavirus pandemic puts a considerable strain on public finances in Germany. Nevertheless, amid the crisis, a large and stable majority of state parliament members is backing the debt brake: Just over two thirds of the state MPs are in favour of returning to a balanced budget after the coronavirus pandemic. However, more than half of respondents say they are open to reforming the debt brake to allow larger deficits for investment. This is the result of a survey conducted by ZEW and the University of Mannheim among members of all 16 German state parliaments in the period between May and July 2020.

A high number of university students also leads to an increased number of dropouts. The income of persons in Europe who dropped out of university is on average eight per cent higher than that of employees who have never been enrolled in higher education; at the same time, it is 25 per cent lower than the income of people who left university with a degree. The latter also have significantly better employment opportunities than dropouts. This is the result of a study conducted by Dr. Francesco Berlingieri and Theresa Bolz from the Research Department “Labour Markets and Human Resources” at ZEW.

Using data from 18 European countries, the researchers have examined the income and employment situation of people who dropped out of higher education. In some cases, the study has revealed some considerable differences between the various countries.

Germany’s eventful six-month presidency of the Council of the European Union has now concluded with a trade deal with the UK and the prospect of an end to the seven-year negotiations between the EU and China on an investment agreement. Under Germany’s presidency, Europe also saw the adoption of both the COVID-19 recovery plan as well as the multiannual financial framework. The president of ZEW Mannheim, Professor Achim Wambach, comments on this matter.

Expenditure on research and development (R&D) has increased significantly in Germany and China in recent years. The resulting output growth is, however, lower than expected in both countries. “This indicates that research productivity in both economies is too weak,” explains Dr. Philipp Boeing, senior researcher and China expert at ZEW Mannheim. In a ZEW policy brief published today, he and Paul Hünermund, PhD, assistant professor at the Copenhagen Business School, have analysed how investment in R&D is related to research productivity in Germany and China.

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

Philipp Böing and Paul Hünermund
More R&D, Less Growth? China’s Decreasing Research Productivity in International Comparison

Kristof Van Criekingen, Mark Freel, and Dirk Czarnitzki
Open Innovation Deficiency: Evidence on Project Abandonment and Delay

Jost Henrich Heckemeyer, Katharina Nicolay, and Christoph Spengel
What Will the OECD BEPS Indicators Indicate?

Friedrich Heinemann
The Political Economy of Euro Area Sovereign Debt Restructuring

Veronika Lukesch and Thomas Zwick
Outside Options Drive Wage Inequalities in Continuing Jobs: Evidence From a Natural Experiment

Nicole Gürtzgen, Benjamin Lochner, Laura Pohlan, and Gerard J. van den Berg
Does Online Search Improve the Match Quality of New Hires?

Florence Blandinières and Maikel Pellens
Scientist’s Industry Engagement and the Research Agenda: Evidence From Germany

Frank Brückbauer
Do Financial Market Experts Know Their Theory? New Evidence From Survey Data

Olivier Bos and Martin Pollrich
Optimal Auctions with Signaling Bidders

Mareike Seifried, Roman Jurowetzki, and Tobias Kretschmer
Career Paths in Online Labor Markets: Same, Same but Different?

Madeline Werthschulte
‘Pay-Later’ vs. ‘Pay-as-You-Go’: Experimental Evidence on Present-Biased Overconsumption and the Importance of Timing

Maikel Pellens, Bettina Peters, Martin Hud, Christian Rammer, and Georg Licht
Public R&D Investment in Economic Crises

Yiquan Gu, Alexander Rasch, and Tobias Wenzel
Consumer Salience and Quality Provision in (Un)Regulated Public Service Markets

Marius Berger and Hanna Hottenrott
Public Subsidies and the Sources of Venture Capital

Francesco Berlingieri and Theresa Bolz
Earnings of University Dropouts Across Europe

Sarah McNamara
Returns to Higher Education and Dropouts: A Double Machine Learning Approach

Bastian Krieger, Maikel Pellens, Knut Blind, and Torben Schubert
Are Firms Withdrawing From Basic Research? An Analysis of Firm-Level Publication Behaviour in Germany

Nicolas Fugger and Ulrich Laitenberger
Split-Award Auctions and Supply Disruptions

Eduard Brüll and Christina Gathmann
Evolution of the East German Wage Structure

Sebastian Blesse, Friedrich Heinemann, Eckhard Janeba, and Justus Nover
Landtagspolitiker stehen zur Schuldenbremse bei wachsender Unterstützung für Investitionsklausel (State-Level Parliamentarians Stand by Debt Brake Amid Growing Support for Investment Clause)

Verena Dutt, Christoph Spengel, and Heiko Vay
Der EU-Vorschlag zum Country-by-Country Reporting im Internet – Kosten, Nutzen, Konsequenzen (The EU Proposal on Country-by-Country Reporting on the Internet – Costs, Benefits, Consequences)

Florian Buhlmann, Michael Hebsaker, and Sebastian Siegloch
Einführung einer Garantiesicherung (A New “Garantiesicherung”)

A Business-Consumer Imbalance. Analysis of Market Power and Consumption-Specific Price Markups in Germany

Background Report for the OECD Review of Innovation Policy: Germany

Coronavirus Crisis and Taxes in the European Union

How does Digitalization Affect the Tax Sensitivity of Location Decisions in MNEs?

International Trade During a Pandemic: Boon or Bane?

Taxation and Migration: Evidence from Switzerland

The Effects of the National Minimum Wage on Competition

The Foundation of Public Savings Banks in the 19th and Early 20th Century

Updating the List of R&D Invenstive Products/Industries and Knowledge-Intensive Sectors

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: Fuhito Kojima (The University of Tokyo, Japan)
Location of the event: Online via ZOOM

Speaker: Elias Papaioannou (London Business School, United Kingdom)
Location of the event: Online via ZOOM

Location of the event: Online via ZOOM

Speakers: Monika Buetler (University of St. Gallen, Switzerland) and Michael Haliassos (Goethe University Frankfurt)
Location of the event: Online via ZOOM

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

Speaker: Mathias Huebener (German Institute for Economic Research (DIW Berlin))
Location of the event: Online via ZOOM

Speaker: Parag Pathak (Massachusetts Institute of Technology, Cambridge, USA)
Location of the event: Online via ZOOM

Location of the event: Online via ZOOM

Speakers: Michael Whinston (Massachusetts Institute of Technology, Cambridge, USA) and Herbert Hovenkamp (University of Pennsylvania Law School, Philadelphia, USA)
Location of the event: ZEW, Mannheim

Speakers: Miles Corak (The Graduate Center, City University of New York, USA) and Bhashkar Mazumder (Federal Reserve Bank of Chicago, USA)
Location of the event: ZEW, Mannheim

Speaker: Julien Combe (École polytechnique, Palaiseau, France)
Location of the event: Online via ZOOM

Speaker: Gabriel Zucman (University of California, Berkeley, USA)
Location of the event: Via livestream

Picture Credits: press releases of 20.01.2021: Anna Logue Fotografie/ZEW, press releases of 20.01.2021: iStock.com/Marc Bruxelle, press releases of 14.01.2021: Anna Logue Fotografie/ZEW, press release of 05.01.20201: iStock.com/seb_ra, press releases of 30.12.2020: Anna Logue Fotografie/ZEW, press releases of 24.12.2020: Anna Logue Fotografie/ZEW, news of 21.12.2020: Anna Logue Fotografie/ZEW
All further pictures: ©ZEW