Newsletter February 2021

The current annual report from the Commission of Experts for Research and Innovation (EFI) that was delivered virtually to Chancellor Merkel today, analyses the impact of the coronavirus crisis on research and innovation (R&I) activities of companies and comments on the current R&I policies implemented by the government.

How does demographic change affect financial markets and their actors? What are the policy implications of current research findings, and how can research evolve from this? To address these questions, ZEW Mannheim organised the first conference on “Ageing and Financial Markets” from 10 to 12 February 2021 as an online-only event with guests from all over the world.

The health economy is not only of considerable economic importance to Germany. Health services are also an essential part of the provision of public services for its citizens. At the start of 2021, ZEW set up the Project Group “Health Care Markets and Health Policy”. ZEW economist Dr. Simon Reif explains in the following interview what exactly health economics is, where we encounter it in our day-to-day lives and what research questions the project group is pursuing.

Against the backdrop of the pandemic, ZEW Mannheim’s Research Department “Social Policy and Redistribution” organised a workshop that focused on the lessons learned from the COVID-19 crisis and how to respond to it through economic research.

Just in time for the Chinese New Year on 12 February, the Chinese Tencent Research Institute once again published its annual list of the twelve most recommended books for 2021. This time, the list includes the book “Digitaler Wohlstand für alle” (“Digital Prosperity for All”), published by Campus-Verlag and written by ZEW President Professor Achim Wambach together with Handelsblatt journalist Hans Christian Müller. At the beginning of December 2020, the Chinese translation of the book was published by Social Sciences Academic Press in China.

We create chemistry for a sustainable future – this is one of the commitments of BASF SE as it moves towards the energy transition. As an integral part of the chemical industry, the world’s biggest chemical enterprise in terms of turnover is also one of the most energy-intensive companies in the world. As part of the lecture series “First-Hand Information on Economic Policy” on 9 December 2021, Dr. Martin Brudermüller, CEO of BASF SE, and ZEW President Professor Achim Wambach discussed the sustainability strategy of BASF.

The coronavirus pandemic has led to abrupt changes, forcing companies to adapt their established work processes and develop new solutions. Against this background, ZEW Mannheim and the Stifterverband jointly organised an online workshop on the impact of the current crisis on the German innovation system, which took place on 28 January 2021. This event, which was supported by the Federal Ministry of Education and Research (BMBF), provided an opportunity for around 200 representatives from businesses, research and policymaking to engage in intensive exchange.

Germany ended its EU Council presidency by launching fireworks one day earlier than expected: on 30 December, the EU and China agreed to the terms of a Comprehensive Agreement on Investment (CAI), thus concluding seven years of negotiations. However, further steps that involve the US are necessary.

When the coronavirus contact-tracing app was released onto the market, it was considered as one of the most important instruments in the fight against the pandemic. Up until now, these hopes have hardly been fulfilled. The number of app users is simply not high enough to be able to effectively curb the spread of the virus. There are also still significant data privacy concerns from the general public, and both user experience as well as success measurement are in need of improvement. In the most recent #ZEWPodcast episode, Dr. Dominik Rehse, head of the Junior Research Group “Digital Market Design”, talks about the potential and shortcomings of the coronavirus contact-tracing app. He explains why the app is nevertheless a good idea and how it could be improved with the help of a so-called ‘living laboratory’.

With the research award “Future of the Working World”, the Volksbank Weinheim Stiftung and ZEW Mannheim honour outstanding dissertations and master’s theses in the field of economics. This year, the prize has been awarded for the eighth time following the decision of a seven-member jury. The award for the best dissertation went to Dr. Martin Lange. Ralf Landeck received the award for the best master’s thesis in economics.

According to preliminary calculations by the German Federal Statistical Office (Destatis), the coronavirus crisis in 2020 resulted in the government deficit totalling 139.6 billion euros. Professor Friedrich Heinemann, head of ZEW’s Research Department “Corporate Taxation and Public Finance”, comments on this issue.

The third Coronavirus Tax Assistance Act is not ambitious enough to soften the impact of the coronavirus crisis, which is hitting the German economy even harder than the financial crisis. Given the extent of the crisis, measures have turned out to be too cautious and not innovative enough on the whole. Therefore, further measures are appropriate. Christopher Ludwig, researcher in the ZEW’s “Corporate Taxation and Public Finance” Department, made this position clear at an expert hearing on the third Coronavirus Tax Assistance Act at the German Bundestag Finance Committee in Berlin.

Country-by-country reporting (CbCR) is being implemented very heterogeneously by EU Member States and the reporting financial firms. Instead of providing more tax transparency, the reports lack comparability and there are problems with their interpretation. The reason for this are imprecise specifications regarding the calculation and presentation of CbCR data. This is the conclusion of a study by ZEW Mannheim and the University of Mannheim.

The coronavirus pandemic has led to a decline in cancer screenings, in particular during the first wave of the pandemic in spring 2020. This could have a negative impact on overall public health, as late diagnosis can reduce the chances of successful treatment. Fear of contracting COVID-19 seems to be a major reason why patients avoid screening appointments. This finding was confirmed by survey data as well as in a recent analysis of trending Google search terms conducted by economists at ZEW Mannheim.

The “Health Care Markets and Health Policy” Project Group, which took up its work at ZEW Mannheim on 1 January 2021, can chalk up a great success just a few weeks after it was set up. Its funding application for a major research project in the field of health economics was granted by the state of Baden-Württemberg. The ZEW project is one of 17 projects that will be funded as part of the “Forum Gesundheitsstandort Baden-Württemberg” this year and with a total of 51.9 million euros next year.

The ZEW Indicator of Economic Sentiment for Germany increased again considerably in the current February 2021 survey, climbing 9.4 points to a new reading of 71.2 points compared to January. The assessment of the economic situation in Germany worsened slightly, and currently stands at minus 67.2 points, 0.8 points lower than in January. The assessment of the situation has thus remained practically unchanged at the same low level over the past six months.

The risk of becoming a victim of a cyberattack has increased in the past year, according to many companies. Almost one in four companies in the information economy says that this risk has increased since the beginning of 2020. This is the result of a recent survey conducted by ZEW Mannheim among more than 900 companies in the information economy.

Innovation expenditure by German companies rose again in 2019, reaching an all-time high of 176.9 billion euros. More and more companies are showing perseverance when it comes to innovation. Compared to the previous year, the share of companies that are continuously active in research and development increased significantly by eight per cent in 2019. This shows that companies are investing in new technologies, products and processes for the long term. The target figures for 2020, which were submitted midyear, are still relatively stable in light of the pandemic.

The ‘Querdenken’ or ‘Lateral Thinkers’ protests in November 2020 led to a sharp increase in coronavirus infections in Germany. This is shown by a recent study by ZEW Mannheim and the Humboldt University of Berlin, which analyses the impact that the two large ‘Querdenken’ rallies that took place in November 2020 had on the seven-day incidence rate by the end of December.

The shift from working in the office to working from home has been a key component in the fight against the COVID-19 pandemic in Germany. Therefore, the federal and state governments took the decision on 19 January 2021 to lay out plans in which companies have to enable their employees to work from home “wherever possible”. However, the share of employees whose work activities are suitable for working from home remains uncertain. “From the employers’ perspective, there is a very high potential for a shift to working from home within the German information economy,” says Dr. Daniel Erdsiek, researcher in the Research Department “Digital Economy” at ZEW Mannheim.

The US Nasdaq, or Nasdaq OMX Group since 2008, will turn 50 on 8 February 2021. Based in New York City, it has since become the second largest stock exchange in the world. As the first electronic stock exchange, it has attracted especially innovative technology companies. That is why it is often referred to as the technology exchange to this day. Dr. Georg Licht, head of the Research Department “Economics of Innovation and Industrial Dynamics” at ZEW Mannheim, explains the importance of Nasdaq for high-tech companies.

Germany’s Vaccination Summit is taking place today in Berlin. Among the topics on the agenda is the vaccine shortage, which is currently the subject of much discussion. In an article in today’s edition of German business daily “Handelsblatt”, ZEW President Professor Achim Wambach and head of the “Market Design” Research Department, Professor Vitali Gretschko, argue for greater competition to speed up vaccine production.

The COVID-19 crisis has sparked a new debate on the debt brake. Initial proposals from the political arena are aimed at changing the German Basic Law to allow higher borrowing by the public sector. Dr. Sebastian Blesse, researcher in the “Corporate Taxation and Public Finance” Department at ZEW Mannheim, comments on this matter.

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

Florence Blandinières and Daniela Steinbrenner
How Does the Evolution of R&D Tax Incentives Schemes Impact Their Effectiveness? Evidence From a Meta-Analysis

Verena Dutt, Katharina Nicolay, and Christoph Spengel
Reporting Behavior and Transparency in European Banks’ Country-by-Country Reports

Julian Oliver Dörr, Simona Christine Murmann, and Georg Licht
The COVID-19 Insolvency Gap: First-Round Effects of Policy Responses on SMEs

Tobias Riehm, Nicolas Fugger, Philippe Gillen, Vitali Gretschko, and Peter Werner
Social Norms and Market Behavior – Evidence From a Large Population Sample

Tabea Bucher-Koenen, Rob Alessie, Annamaria Lusardi, and Maarten Van Rooij
Fearless Girl: Women’s Financial Literacy and Stock Market Participation

Claire Gavard and Niklas Schoch
Climate Finance and Emission Reductions: What Do the Last Twenty Years Tell Us?

Daniel Klein, Christopher Ludwig, Katharina Nicolay, and Christoph Spengel
Quantifying the OECD BEPS Indicators – an Update to BEPS Action 11

Klaus Gründler and Tommy Krieger
Using Machine Learning for Measuring Democracy: An Update

Dirk Czarnitzki, Wytse Joosten, and Otto Toivanen
International Student Exchange and Academic Performance

Marius Alt and Carlo Gallier
Incentives and Intertemporal Behavioral Spillovers: A Two-Period Experiment on Charitable Giving

Martin Lange and Ole Monscheuer
Spreading the Disease: Protest in Times of Pandemics

Theresa Bührle
Do Tax Loss Restrictions Distort Venture Capital Funding of Start-Ups?

Francesco Clavorà Braulin
The Effects of Personal Information on Competition: Consumer Privacy and Partial Price Discrimination

Christoph Spengel, Frank Schmidt, Jost Henrich Heckemeyer, Katharina Nicolay, Alexandra Bartholmeß, Christopher Ludwig, Daniela Steinbrenner, Peter Buchmann, Theresa Bührle, Verena Dutt, Leonie Fischer, Julia Spix, and Barbara Stage
Effective Tax Levels Using the Devereux/Griffith Methodology – Update 2020

Simon Reif and Sabrina Schubert
Vorsorgelücke während der Coronavirus-Pandemie – Vorsorgeuntersuchungen in der Krise (Screening Gap During the COVID-19 Pandemic – Screening in Crisis)

Tabea Bucher-Koenen and Caroline Knebel
Finanzwissen und Finanzbildung in Deutschland – Was wissen wir eigentlich? (Financial Literacy and Financial Education in Germany – What Do We Actually Know?)

Julian Oliver Dörr, Sandra Gottschalk, Jan Kinne, David Lenz, and Georg Licht
Mittelständische Unternehmen in der Corona-Krise im Spiegel ihrer Webseiten (SMEs in the COVID-19 Crisis as Reflected on Their Websites)

Analyses of the Costs and Benefits of School Closures for the Containment of COVID-19

Implications of the Modified Nexus Approach on Effective Tax Burdens and Tax Planning Strategies of Multinational Enterprises

Presentation of Information in the Context of Retirement Planning

The Role of Occupational Pension Schemes for Income in Old Age – Current Evidence and Databases

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

Speaker: Mark Bils (University of Rochester, New York, USA)
Location of the event: Online

Location of the event: Online

Speaker: Mar Reguant (Northwestern University, Evanston, USA )
Location of the event: Online

Speaker: Enrico Moretti (Haas School of Business at the University of California, Berkeley, USA)
Location of the event: Online

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

Speaker: Herbert Hovenkamp (University of Pennsylvania Law School, Philadelphia, USA)
Location of the event: Online

Speaker: Thomas Lemiuex (Vancouver School of Economics at the University of British Columbia, Canada)
Location of the event: Online

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: Online

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

Speaker: Ioannis Ioannou (London Business School, United Kingdom)
Location of the event: Online

Location of the event: Online

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

Picture Credits: press release of 24.02.2021: Anna Logue Fotografie/ZEW, press release of 22.02.2021: iStock.com/olaser, news article of 19.02.2021: iStock.com/Ca-ssis, news article of 18.02.2021: Social Sciences Academic Press (China), press release of 12.02.2021: Volksbank Weinheim Stiftung/ZEW, news article of 09.02.2021: Anna Logue Fotografie/ZEW, press release of 09.02.2021: iStock.com/PeterHowell, press release of 05.02.2021: Anna Logue Fotografie/ZEW, press release of 01.02.2021: Anna Logue Fotografie/ZEW
All further pictures: ©ZEW