Newsletter December 2021

Dear Readers,
an eventful year is coming to a close. With this e-mail, you are receiving the last issue of the ZEW Newsletter English edition in 2021. We would like to take this opportunity to thank your for your sustained interest in ZEW and hope that you will find interesting news in this last issue for this year. We wish you and your loved ones a pleasant festive season and a prosperous, healthy 2022!
 
Best wishes,
the ZEW Newsletter editorial team
 

What do individuals know about financial issues and how does this influence their savings and consumption decisions? How can financial education support the development of financial knowledge and skills? These and related questions are complex and multifaceted. They were discussed during the inaugural conference of the Mannheim Institute for Financial Education (MIFE), a joint initiative of ZEW Mannheim and the University of Mannheim. The conference took place online on 29 and 30 November 2021 and was followed by an early career workshop on 1 and 2 December 2021.

What impact does digitalisation have on the real estate markets and how can we develop a resilient society? These were two of the key questions addressed at this year’s conference of the Leibniz network “Real Estate Markets and Capital Markets” (ReCapNet) on 18 and 19 November 2021, which was jointly organised by ZEW Mannheim and the KTH Royal Institute of Technology and sponsored by the KTH Digitalization Platform. Around 100 researchers participated in the event either online or on site in Stockholm. It featured presentations and discussions of twelve selected research papers as well as a keynote speech by Professor Markus K. Brunnermeier from Princeton University.

Lockdowns, inflation, and material and supply bottlenecks were major factors that slowed down the economic recovery this year. The German Council of Economic Experts addresses these issues in its annual report 2021/2022. Professor Monika Schnitzer, member of the Council, presented the key statements of the report and discussed them with ZEW President Professor Achim Wambach in an online event at ZEW Mannheim on 9 December 2021. In the report, the Council discusses measures for the transformation of education, digitalisation and sustainability.

Even though the sentiment indicator’s growth is not as strong as in the previous quarter, the German Real Estate Finance Index (DIFI) by ZEW Mannheim and JLL is rising for the sixth time in a row and has reached its highest level since the beginning of 2016. In the fourth quarter of 2021, the DIFI stands at 10.7 points, 5.1 points higher than in the previous quarter. While the assessments of the financing situation have tended to stabilise in the past six months compared to the previous quarter, the experts expect the financing situation to improve in the coming six months.

Economic experts expect the euro area economy to grow more strongly than the German economy. Inflation is also lower in the euro area than in Germany. Overall, however, inflation rates are reaching a new record level. This is the result of the business cycle tableaus by ZEW Mannheim and the German daily newspaper, Börsen-Zeitung.

For the first time, Germany will be governed by a ‘traffic light’ coalition, named after the traditional colours of the parties. Expectations are high, especially with regard to tackling the climate crisis, which resembles a Herculean task. In their coalition agreement, the SPD, the Greens and the FDP show the way towards a transformation that should be at the same time sustainable, socially affordable and cost-efficient – at least that’s what the coalition parties say.

In the 16th episode of the #ZEWPodcast ‘Wirtschaft · Forschung · Debatten’/‘Economy · Research · Debates’, ZEW President Professor Achim Wambach spoke about the climate plans set out in the new coalition agreement. Wambach explains, among other things, how the traffic light parties want to secure the energy supply, why there is still potential for conflict in the expansion of wind power, and what the coalition plans to do with Deutsche Bahn.

Almost the entire German economy has become more digital than it was in 2020, according to the Digitalisation Index 2021, which is calculated on an annual basis as part of the project “Measuring the degree of digitalisation in the German economy”. The project is conducted by a consortium formed by ZEW Mannheim (consortium leader), the Cologne-based German Economic Institute (IW), IW Consult, the Institute for Industrial Management FIR at RWTH Aachen University, and the German Institute for Economic Research (DIW) on behalf of the Federal Ministry for Economic Affairs and Energy.

ZEW Mannheim is pleased to announce a conference on ageing and sustainable finance on 6–8 April 2022. The three-day event provides a stimulating environment for in-depth debates on the effects of demographic change and climate change on financial markets and their various players, on the policy implications of recent research, and on new research questions arising from policy responses. One keynote will be given by Professor Koen Schoors from Ghent University in Belgium. A second keynote is being planned.
 
We invite empirical and theoretical submissions with a microeconomic focus on all aspects related to ageing and sustainable finance. Please submit full papers only to FMconference@zew.de no later than 31 January 2022.

ZEW Mannheim is pleased to announce the 10th Mannheim Conference on Energy and the Environment on 16 and 17 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. We aim for the conference to take place hold the conference on site in Mannheim. If required, we may switch to a hybrid format.
 
The conference will cover a broad range of aspects concerning the relationship between energy use and supply, environmental issues, economic well-being, 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 mcee2022@zew.de no later than 31 January 2022.

The ZEW Sponsors’ Association for Science and Practice again awarded prizes for outstanding academic performances and economic policy advising projects at ZEW Mannheim in 2021/2022. Both prizes, each endowed with 5,000 euros, are an integral part of the academic year at the institute.

The ZEW media design team once again received two awards at the twelfth International Creative Media Award (ICMA). The designers won bronze in the main category “Annual Report” and the Award of Excellence in the sub-category “Infographics” for the ZEW Annual Report 2020. In the year of the pandemic 2020, the ZEW Annual Report, which has a thematic focus on COVID-19, convinced the jury among 406 submissions from 21 countries.

As of July 2022, Professor Nicolas Ziebarth will head the Research Department “Labour Markets and Human Resources” at ZEW Mannheim. The role as research department head is linked to a professorship in the Department of Economics at the University of Mannheim. Ziebarth is an economist at the renowned Cornell University in the US, where he has been studying the interaction of (social) insurance systems with labour markets and population health for more than ten years. His primary research interests are sick pay, reduced earning capacity pension, job security and undeclared work.

By far the most applications for the newly introduced German R&D tax credit have so far been made by companies from the mechanical engineering sector. Within manufacturing, every third applicant for the tax credit was from this sector. Almost all mechanical engineering companies that have filed an application plan to use the additional funds to strengthen their research activities. This is the result of a recent survey among mechanical engineering companies by ZEW Mannheim and the German Mechanical Engineering Industry Association (VDMA).

At the same time, many companies eligible for the R&D tax credit have not yet applied for it or lack information on how the application process works, what effort it entails and whether it is worthwhile, according to the study’s findings. The goal must therefore be to provide more information and to offer businesses assistance in the application and approval process. In addition, it must be defined more precisely for which R&D expenditures the tax credit can be claimed.

The ECB is about to decide on the future of its bond-buying programmes. A new study by ZEW Mannheim with the support of the Brigitte Strube Stiftung examined the government bond purchases in terms of their allocation among eurozone countries over time. The results show that since the beginning of the pandemic the share of purchases of government bonds from Cyprus, Italy, Slovenia, Spain and Ireland under its two purchase programmes, PSPP and PEPP, has significantly exceeded the ECB’s capital key.

The PSPP programme has already been active since 2015, while the PEPP was launched in March 2020 to cushion the effects of the COVID-19 crisis. The deviations of the share of purchases from the ECB capital key, which serves as a benchmark, are smaller this year than in 2020. While Italy’s PEPP shares were still clearly above the national capital key in the first year of the pandemic at 13.1 per cent, they deviated by only 2.5 per cent from January to September 2021.

Citizens’ preference for green electricity tariffs decreases when a wind turbine is built in their immediate vicinity. This is a central result of a study conducted by ZEW Mannheim together with the French university Mines ParisTech and the University of Mannheim.

The plans of the ‘traffic light coalition’, named after the parties’ traditional colours, to increase the minimum wage and introduce a basic child allowance (Kindergrundsicherung) will have a positive financial impact, especially for low-wage earners. Both measures will lead to higher incomes for up to ten million Germans, according to calculations by ZEW Mannheim on behalf of Süddeutsche Zeitung. The calculations are based on the economic model ZEW-EviSTA and data of the Socio-Economic Panel (SOEP).

The ZEW Indicator of Economic Sentiment for Germany decreased in the current December 2021 survey, falling 1.8 points to a new reading of 29.9 points. The assessment of the economic situation in Germany has worsened again in the current survey. The corresponding indicator dropped 19.9 points to a level of minus 7.4 points. This is the first time since June 2021 that the situation indicator has been in negative territory again. Compared to the previous month, the outlook for economic development in the next six months has deteriorated considerably.

About one in four students in Germany drops out of a bachelor’s programme and about one in six drops out of a master’s programme. Although many of those affected start vocational training after dropping out, the time spent at university has negative financial consequences both for the tax authorities and for the dropouts themselves, according to a recent study by ZEW Mannheim. On the one hand, dropping out becomes a negative business for public budgets:

Compared to high school graduates who go straight into vocational training, the government expenditure for dropouts exceeds the expected income from taxes and other levies over the following 40 years of their working lives. On the other hand, dropouts face a negative individual return on education compared to the reference group.

Civic engagement in Germany has played an important role in the integration of migrants since autumn 2015. Migrants living in regions with active volunteer groups have had more frequent contact with Germans, have better German language skills and higher life satisfaction. These are the results of a recent study by ZEW Mannheim.

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

Carlo Moana Birkholz and Friedrich Heinemann
Magnitudes and Capital Key Divergence of the Eurosystem’s PSPP/PEPP Purchases – Update December 2021

Tobias Reischmann, Thilo Klein, and Sven Giegerich
An Iterative Deferred Acceptance Mechanism for Decentralized, Fast and Fair Childcare Assignment

Juan Pablo Atal, Hanming Fang, Martin Karlsson, and Nicolas Ziebarth
Long-Term Health Insurance: Theory Meets Evidence

Matilde Cappelletti and Leonardo Maria Giuffrida
Procuring Survival

Atabek Atayev
Nonlinear Prices, Homogeneous Goods, Search

Atabek Atayev and Maarten Janssen
Information Acquisition and Diffusion in Markets

Atabek Atayev
Truly Costly Search and Word-Of-Mouth Communication

Atabek Atayev
Uncertain Product Availability in Search Markets

Lara Bartels, Martin Kesternich, and Andreas Löschel
The Demand for Voluntary Carbon Sequestration – Experimental Evidence From a Reforestation Project in Germany

Guido Neidhöfer, Matías Ciaschi, Leonardo Gasparini, and Joaquín Serrano
Social Mobility and Economic Development

Tina Koziol and Jesper Riedler
Scaling, Unwinding and Greening QE in a Calibrated Portfolio Balance Model

Martin Larch, Matthias Busse, and László Jankovics
Enforcement of Fiscal Rules: Lessons From the Fiscal Compact

Dirk Czarnitzki and Marek Giebel
Financial Constraints for R&D and Innovation: New Evidence From a Survey Experiment

Catherine Maclean, Stefan Pichler, and Nicolas Ziebarth
Mandated Sick Pay: Coverage, Utilization, and Welfare Effects

Marius Alt, Carlo Gallier, Martin Kesternich, and Bodo Sturm
Ausblick auf die COP26 in Glasgow (Outlook for the COP26 in Glasgow)

Friedhelm Pfeiffer and Holger Stichnoth
Bildungsinvestitionen optimieren (Optimising Investment in Education)

Florian Buhlmann, Sebastian Siegloch, Holger Stichnoth, and Michael Hebsaker
Verteilungswirkungen der Reformpläne im Koalitionsvertrag 2021-2025
Eine Analyse auf Basis des ZEW-EviSTA-Modells und des Sozio-oekonomischen Panels (SOEP)
(Redistributional Effects of the Reform Plans in the Coalition Agreement 2021–2025
An Analysis Based on the ZEW-EviSTA Model and the Socio-Economic Panel (SOEP))
 

Günter Beck, Alfred Dijs, Xavier Jaravel, Sebastian Kessing, and Sebastian Siegloch
Analyse der Verbraucherpreisentwicklung nach Senkung der Mehrwertsteuer (Analysis of Consumer Price Development After VAT Cut)

Irene Bertschek, Thomas Niebel, Christian Rammer, and Mareike Seifried
IKT-Branchenbild. Innovations- und Gründungsgeschehen 2021 (ICT Sector Overview. Innovation and Start-Up Activity 2021)

Josefine Diekhof, Bastian Krieger, Georg Licht, and Christian Rammer
Stand der Messung von Interaktionen zwischen Wissenschaft und Wirtschaft im internationalen Vergleich (Current Status of Interactions Between Science and Businesses in International Comparison)

Is the European Central Bank on Its Way to Being Overloaded?

The Impact of Fiscal Rules on State-Owned Enterprises

Trends in Research and Development Expenditure in Germany from an International Perspective

6-year Postdoc with Tenure Option (f/m/d; 100%) Labour Economics

Picture Credits: press release of 14.12.2021: iStock.com/instamatics, news article of 10.12.2021: JLL and ZEW, press release of 08.12.2021: Kara-stock.adobe.com, press release of 07.12.2021: Adobe Stock 240722478, press release of 06.12.2021: iStock.com/skynesher, news article of 29.11.2021: Anna Logue Fotografie
All further pictures: ©ZEW