Annual Report 2019

2019 A n n u a l R e p o r t

Presented at the 71st ifo Annual Meeting on June 18, 2020 Published in 2020 for the ifo Institute Poschingerstr. 5, 81679 Munich, Postbox 860460, 81631 Munich, Germany Phone: +49/(0)89/9224-0, Fax: +49/(0)89/985369 Internet: http://www.ifo.de; email: [email protected] ISSN: 2194-928X

Editor: Marga Jennewein Printing: ifo Institute ifo Annual Report 2019

Page

The Goals and Tasks of the ifo Institute ...... 7

Report of the Executive Board ...... 10

Research and Service Departments ifo Center for Public Finance and Political Economy ...... 21 ifo Center for Labor and Demographic Economics ...... 25 ifo Center for the Economics of Education ...... 27 ifo Center for Industrial Organization and New Technologies ...... 37 ifo Center for Energy, Climate, and Resources ...... 48 ifo Center for International Economics ...... 57 ifo Center for Macroeconomics and Surveys ...... 60 ifo Center for International Institutional Comparisons and Migration Research ...... 75 ifo Center of Excellence for Migration and Integration Research – CEMIR ...... 80

Research Group Taxation and Fiscal Policy ...... 81

Library ...... 87

Communications ...... 88

Dresden Branch ...... 97

Munich Society for the Promotion of Economic Research – CESifo GmbH ...... 109

Conferences, Publications, and External Relations of the ifo Institute ...... 114

Personnel, Finances, and Organizational Bodies

Personnel Development ...... 119

Financial Development ...... 125

Organization Chart of the ifo Institute ...... 127

ifo Annual Report 2019 3

The ifo Institute 2019

The Goals and Tasks of the ifo Institute

Information and research: Since its foundation in Jan- In the context of this topic, the ifo Institute deals with uary 1949, ifo has provided both information and re- the following fi ve fi elds of research: search, hence its name ifo = Information and Forschung 1. Economic growth and sustainability (research). Its legal form is that of a registered, nonprof- it association. As a member of the Leibniz Association, 2. Equal opportunities and integration the ifo Institute – formally the Leibniz Institute for Eco- 3. Public tasks, taxation, and political economy nomic Research at the University of Munich e.V. – is an institution that receives public funding from the federal 4. Digitalization of the economy and state governments pursuant to Article 91b of the 5. European integration, globalization, and “third- German Constitution. A cooperation agreement links system competition” ifo closely with University of Munich (LMU), and in 2002 ifo was officially proclaimed an “Institute at the Univer- sity of Munich”. The ifo Institute, CES at the LMU, and CESifo GmbH pool their resources as the CESifo Group to form an The ifo Institute is one of the leading economic re- internationally active research association. The aim search institutes in Europe. Through its fi ve fi elds of is to enrich the public debate on the basis of excellent Enriching the public action – research, the promotion of young research- economic research, to support economic policy deci- debate ers, policy advice, participation in public debates, and sion-making processes with high-quality policy advice, information/services – it helps maintain and increase and to support the public with high-profi le economic sustainable economic prosperity and social participa- information, such as the ifo Business Climate Index. tion under constantly changing conditions. The ifo Institute cooperates closely with the LMU, especially in the promotion of young researchers and through the joint Economics and Business Data Center The ifo Institute works on economically and politically (EBDC). The department heads and the president occu- relevant issues at the highest scientifi c level and with an py nine professorships at the LMU, making up part of international reputation, developing research-based the Department of Economics. recommendations for action for government, business, and society. Economic data and information collected systematically and over long time horizons provide The CESifo Group focuses on the ifo Institute’s national, impetus for political and public debates, which in turn European, and international scientifi c networking and generate new research tasks. In this way, ifo plays an on economic research at the LMU. At the heart of these important part in the development of appropriate eco- activities is its research network, consisting of former nomic policy decisions as a basis for innovation and guest researchers at CES and the ifo Institute. EconPol social development. Europe – The European Network for Economic and Fis- cal Policy Research – is also of central importance for The ifo Institute’s economic policy model is the social European networking. EconPol Europe is a unique net- market economy, i.e., the combination of economic work of policy-oriented university and nonuniversity success with social balance as championed by Ludwig research institutes from various European countries Erhard, who was one of ifo’s founders. The central topic that combine their expertise to build bridges between of research at ifo is the importance of government ac- national and European economic policy debates and tion for maintaining and increasing economic prosperi- contribute to the further development of the European ty, economic stability, and social cohesion. Government Union. action should promote the creation of wealth, support stability and sustainability of economic development, ifo’s eight research centers – Public Finance and Politi- provide social security, and ensure that as many people cal Economy, Labor and Demographic Economics, The as possible are able to take advantage of the opportuni- Economics of Education, Industrial Organization and ties available to them in an open and free society. New Technologies, Energy, Climate, and Resources, International Economics, International Institutional The central topic of research at ifo is the analysis of the Comparisons and Migration Research, and Macroeco- role of government action for sustainably maintaining nomics and Surveys – cover research topics that are and increasing economic prosperity and social cohesion. also highly relevant for policy advice. The ifo Dresden

ifo Annual Report 2019 7 THE GOALS AND TASKS OF THE IFO INSTITUTE

Branch, founded in 1993, works in areas that are of spe- 120 countries as the ifo World Economic Survey (WES) cial interest to the Free State of Saxony, from which it in 2002. Since its launch in 1999 and the upgrade of receives its funding. technical and content aspects in 2019, the Database for Institutional Comparisons in Europe (DICE) has ifo’s junior research staff benefi t tremendously from grown signifi cantly and enriched the range of services network eff ects within the CESifo Group. ifo employs provided by the ifo Institute. more than 40 doctoral students, most of whom participate in the Institute’s graduate program and are also ifo also off ers a broad range of information via the in- members of the Munich Graduate School of Economics ternet, available in German and English, and publishes (MGSE) at LMU. ifo’s doctoral program is particularly several journals and book series. International publica- attractive thanks to the fact that it combines academic tions are becoming increasingly important. research with the Institute’s practical policy orientation. Every year the CESifo organizes a number of international conferences at the ifo Institute, and has become The economic research carried out at the ifo Institute is the second largest economic research network world- subject to the “Rules of good scientifi c practice” draft - wide with over 1,500 researchers in 43 countries. The ed by the German Research Foundation (DFG), as well CESifo Working Papers written by members of this re- as to the gender equality standards, also established search network again took top places among all eco- by the DFG. The ifo Institute is seeking to gradually nomic research institutions in a worldwide comparison address the ongoing underrepresentation of women of downloads from the Social Science Research Net- among its researchers by placing a particular emphasis work website. on supporting young female academics. ifo’s work is characterized by its cooperation with uni- Politics and the general public benefi t from the close versities and renowned researchers in Germany and link between the ifo Institute and the university, as this abroad. Its collaboration with LMU occupies a special link reinforces the Institute’s academic performance, place in ifo’s work. ifo and LMU jointly created the Eco- and fi rst-class research is the foundation for the policy nomics & Business Data Center (EBDC), whose main work that the Institute sees as its core task. As part of task is to supply a continuously updated dataset of its policy advice, ifo produces a large number of expert German companies to feed new areas of research in opinions on current economic policy issues on behalf economics and business administration. The EBDC of public and private clients. ifo was among the insti- provides researchers with corporate data, a combi- tutes to submit a successful bid for the joint economic nation of ifo survey data and other corporate data forecast tender, issued for the fi rst time at a European sources, and is the main contact and coordinator for level in 2007; and bid successfully again in all subse- scientifi c datasets on companies. In December 2013, a quent tenders, most recently in 2018. In the context Research Data Center branch of the Bavarian Federal of international consultancy projects, the ifo Institute Statistics Office was opened in the EBDC. Consequent- also makes its expertise available to the public sector ly, researchers can now access German federal statis- institutions of other countries. tics survey data on the EBDC premises.

In addition to its research and policy advice, the ifo In- The Institute aims to oﬀ er ifo scientists an ideal setup stitute also provides the public with data, information, that is conducive to achieving top results in research and other services. This takes place primarily in con- and policy advice in line with international standards. nection with its project-related and regular surveys To this end, it signed the European Charter for Re- ifo Business of national and international business. Every month, searchers issued by the European Commission, which Climate Index: An the ifo Business Climate Index, an internationally rec- is linked to the Code of Conduct for the Recruitment of internationally ognized indicator of economic development derived Researchers. recognised indicator from the ifo Business Survey, is awaited with great anticipation by the media, investors, and business Cooperation with other partners – in particular the leaders. The Institute began publishing the results of Universities of Augsburg, Dresden, Konstanz, Mün- its quarterly poll of international economic activity in ster, Passau, and Regensburg – enriches the Institute’s

8 ifo Annual Report 2019 THE GOALS AND TASKS OF THE IFO INSTITUTE

work. In addition, the ifo Institute conducts research in collaboration with a great number of economists in Germany and abroad. This has resulted in infor- mal international research networks in the individual ifo departments and for the Institute as a whole, including CIRET (Centre for International Research on Economic Tendency Surveys), the EENEE (European Expert Network of Educational Economists), and EURO- CONSTRUCT.

The ifo Institute cooperates closely with external economists and other established experts to assure the quality of its research. This particularly applies to its 53 research professors and nine research aﬀ iliates, research associates, and senior research associates (as of December 31, 2019) as well as to more than 45 guest professors from all over the world with whom ifo researchers collaborate annually on joint projects.

The Scientiﬁ c Advisory Council and the User Adviso- ry Council are especially important, as they not only advise the Institute on its strategic planning, but also evaluate its performance and help to ensure the scien- tiﬁ c quality of its work. The ifo Institute owes special thanks to the external academics who are actively involved in the CESifo Group, as well as to the members of its advisory boards, which include the Administra- tive Council and the Board of Trustees.

ifo Annual Report 2019 9 Report of the Executive Board

For the ifo Institute, the year 2019 was marked by two orable appointment as a success for the Institute. notable events. First, the evaluation of the Institute To succeed him, the ifo Institute together with LMU by the Senate of the Leibniz Association took place. has announced a professorship for economics that The group of experts visited the ifo Institute on July 1 will be known as the Economics of Globalization. and 2. Their impression of the ifo Institute was a pos- The appointment process is in the fi nal stages; a re- itive one and they endorsed the path ifo has taken. placement is expected to be announced in the fi rst The Executive Board is happy to take on the advice half of 2020. and recommendations received and will incorporate them into the further strategy process. More detailed Below are the key developments of 2019 in research, information on the assessment is provided at the end the support of junior economists, policy advice, and of this chapter. scientifi c service.

Second, the Institute celebrated its 70th anniversary RESEARCH AND THE SUPPORT OF JUNIOR in 2019. A whole host of festivities took place around ECONOMISTS 70 years of social the theme “70th Anniversary of the ifo Institute – 70th market economy, Anniversary of the Social Market Economy.” The high- Publications in international journals that are peer- 70 years of ifo light was the ifo Annual Meeting on June 6, which took reviewed with an external referee process are a key place in the Great Hall of the University of Munich indicator of scientifi c achievement. The year 2019 was (LMU). At the event, the keynote was given by Anne- another outstanding year in terms of the ifo research gret Kramp-Karrenbauer, leader of Germany’s Chris- staff’s output. A total of 68 papers submitted by ifo tian Democratic Union (CDU), addressing the question economists to internationally recognized refereed jour- of “70th Anniversary of the Social Market Economy – nals were accepted for publication; 32 of these were What Will Be the Future of Our Economic Order?” Fur- published in high-ranking category A+ to C journals. In ther details about this event are given in the “Commu- addition, ifo staff presented their research results by nications” chapter. delivering 180 papers at international conferences with a referee system. While there were no personnel changes on the ifo Sci- entifi c Advisory Council in 2019, there is some news Table 1: Publications in Peer-Reviewed Journals, 2012–2018 regarding other ifo organizational bodies. Dr. Peter- 2014 2015 2016 Alexander Wacker was confi rmed as Chairperson of 2012 2013 2017 2018 2019 Articles in peer-reviewed the ifo Administrative Council and of the Board of journals 68 63 57 56 58 74 60 68 Trustees for a further three years. Following the de- of which in categories A+ to B; from 2017 A+ to C 31 32 22 28 22 29 22 32 parture of Milagros Caiña-Andree, BMW AG, two new people were appointed to succeed her: Dr. Annette Niederfranke, Director of the International Labour The following researchers successfully published Organization (ILO) Off ice for Germany, and Jakob von articles in top academic journals in the A+/A categories Weizsäcker, Head of Department 1, Fiscal and Eco- in 2019: nomic Policy Issues at the German Ministry of Finance. – Christian Grimme (with Rüdiger Bachmann, There were also further changes and extensions to Benjamin Born, and Steff en Elstner), “Time-Varying terms of off ice on the Board of Trustees, which now Business Volatility and the Price Setting of Firms,” has 71 members. Dr. Ursula Weidenfeld joined the Journal of Monetary Economics 101, 82–99. User Advisory Council as a freelance journalist. Over- – Marc Piopiunik (with Eric A. Hanushek and Simon views of all the off icial bodies can be found at www. Wiederhold), “The Value of Smarter Teachers: Inter- ifo.de/gremien. national Evidence on Teacher Cognitive Skills and Student Performance,” Journal of Human Resources Since March 2019, Prof. Gabriel Felbermayr – for- 54(4), 857–899. mer Director of the ifo Center for International Economics – has been President of the Institute – Justin Tumlinson (with John Morgan), “Corporate for the World Economy (IfW) in Kiel. The ifo Insti- Provision of Public Goods,” Management Science tute regrets his departure, but also sees this hon- 65(10), 4489–4504.

10 ifo Annual Report 2019 REPORT OF THE EXECUTIVE BOARD

– Panu Poutvaara (with George J. Borjas and Ilpo Table 2: Kauppinen), “Self-Selection of Emigrants: Theory Economics Research Institutes and Economics Schools and Evidence on Stochastic Dominance in Obser- in the RePEc ranking, December 2019 vable and Unobservable Characteristics,” The Eco- Ranking Institution Points nomic Journal 129 (617), 143–171. 1 ECB, Frankfurt/Main 1.57 – Feodora Teti (with Gabriel Felbermayr and Erdal 2 IZA, Bonn 1.70 Yalcin), “Rules of Origin and the Profi tability of Trade 3 ifo Institute, Munich 4.37 Defl ection,” Journal of International Economics 121. 4 DIW, Berlin 4.52 – Yoto V. Yotov (with Scott Baier and Thomas 5 CESifo, Munich 4.80 Zylkin), “On the Widely Diff ering Eff ects of Free Trade 6 LMU, Munich 6.26 Agreements: Lessons from Twenty Articles Years of 7 Deutsche Bundesbank 7.11 Trade Integration,” Journal of International Eco- 8 University of Frankfurt/Main 9.00 nomics 116, 206–226. 9 University of Mannheim 9.13 – Andrea Ariu (with Holger Breinlich, Gregory Corcos, 10 University of Bonn 10.42 and Giordano Mion), “The Interconnections between Services and Goods Trade at the Firm-Level,” Journal Table 3: of International Economics 116, 173–188. Individual Researchers in the RePEc Ranking, December 2019, Germany Two books – Disrupted Economic Relationships and The Ranking Person Points WTO and Economic Development – were published in 5 Ludger Wößmann 7.60 2019 in the CESifo Seminar Series published by MIT Press. This series publishes the research results from 33 Clemens Fuest 37.63 joint projects of CESifo researchers and designated ex- 41 Niklas Potrafke 44.10 ternal economists. The aim is to provide an overview of 48 Andreas Peichl 52.46 the level of research on a wide range of economic topics 79 Panu Poutvaara 93.23 Six of the and thus contribute to the current policy debate. 95 Oliver Falck 110.58 top 100 most cited economists in The publication successes of ifo economists are also 243 Helmut Rainer 253.12 Germany refl ected in the scientifi c rankings of the RePEc net- 881 Karen Pittel 901.48 work (RePEc – Research Papers in Economics). In the RePEc ranking of international scientifi c citations of institutions based in Germany, the Munich economists The ifo Institute’s European position is also strong. This once again ranked highly at the end of 2019: ifo Insti- is demonstrated by the fact that in the RePEc ranking at tute (3rd), CESifo (5th), and the LMU (6th). At the top the end of the year, it ranked 22nd in Europe and 48th are the European Central Bank (based in Frankfurt worldwide among all economic research institutions. am Main) and the network of the IZA – Institut für die ifo economists are also prominently represented in the Zukunft der Arbeit (Bonn), which comprises well over a individual researcher rankings. For example, Ludger thousand researchers from all over the world. Wößmann is ranked 57th and Clemens Fuest 225th in a European comparison. In the corresponding RePEc ranking of scientifi c citations by individual researchers, ifo researchers ranked highly. The ifo Institute’s strong scientifi c achievements are Ludger Wößmann is fi ft h among German economists, also refl ected in its success in the scientifi c competition while ifo President Clemens Fuest is 33rd. In addition, four for research grants. Research funding raised in scien- other ifo department heads placed among the top 100 tifi c competition in 2019 has a double eff ect for the ifo economists (see Table 3) – Niklas Potrafke (41st), Andreas Institute: on the one hand, it increases the scope for re- Peichl (48th), Panu Poutvaara (79th), and Oliver Falck search; on the other hand, it enables fundamental pol- (95th). In the Handelsblatt Ranking 2019, Niklas Potrafke icy-oriented issues to be addressed and thus improves took third place in the category “Top economists – aged the basis for policy advice provided by the ifo Institute. under 40 years in German-speaking countries”. This is illustrated by the following three examples:

ifo Annual Report 2019 11 REPORT OF THE EXECUTIVE BOARD

Since the Federal Republic of Germany was formed, the cember 31, 2019, the ifo Institute employed 44 doctoral Länder have reformed many important aspects of their students, 22 of whom were women. A total of 14 doctor- school systems. Examples include pupils being graded al students completed their doctorates in 2019: Annika in the early years of primary school, grades for behav- Bergbauer, Katharina Candel Haug, Manuela Krause, ior (Kopfnoten), the binding nature of test results that Tobias Lohse, Waldemar Marz, Andreas Mazat, Mathias determine pupils’ choice of secondary school (Über- Mier, Magnus Reif, Alexander Sandkamp, Maximilian Meaningful trittsempfehlung), compulsory religious studies, and Schwefer, Lisa Simon, Thomas Steinwachs, Christoph research on key compulsory MINT subjects as part of the Abitur. In the Weissbart, and Christian Wittneben. social issues “Eff iciency and Equality in Education” project funded by the Leibniz Association, researchers from the ifo The Junior Development Program (JDP), jointly devel- Center for the Economics of Education are investigat- oped by the ifo Institute and the LMU’s Department of ing how these reforms have aff ected the professional Economics, supports the individual professional devel- skills and socio-emotional development of the stu- opment of young academics (postdoctoral level) and dents concerned and their future path. The project is advises on all questions concerning the development being carried out in collaboration with the Berlin Social of a career (national or international). The program Science Center (WZB). combines structured mentoring with a multi-level series of development workshops, seminars, and net- Right-wing populist movements are on the rise in West- working activities. In addition, funds are available for ern democracies. Populists are gaining support in par- research projects. ticular from voters in once booming industrial centers that are now undergoing structural change. The con- The ifo Institute contributes to this program both sequences of rapid and far-reaching change could be through mentoring and by organizing workshops and mitigated through local networks, relationships, and seminars. All postdocs at the ifo Institute can apply to identity (social capital), which create a sense of soli- become a member of the JDP and take part in the of- darity and deprive populists of the springboard they fer. A two-day retreat (Junior Faculty Retreat) was held require. It is also conceivable, however, that close-knit in 2019. In addition, various fi reside chats were orga- networks and associations, such as sports clubs, can nized on topics such as appointment procedures or the be used to channel and fuel populist tendencies. Enti- procurement of third-party funding, in which postdocs tled “Local Social Capital and the Rise of Right-Wing from LMU and ifo were able to exchange ideas with ifo Populism,” a project carried out by the ifo Institute’s alumni and ifo professors. Dresden Branch and funded by Deutsche Forschungs- gemeinschaft (DFG), sets out to examine the relation- Method-oriented in-house training courses held at the ship between social capital and right-wing populism in ifo Institute are off ered for junior researchers and have depth. been expanded in recent years. Courses of this nature held in 2019 included one on machine learning and one Domestic violence is the most common form of vio- on the programming language Python. lence against women and is the main cause of female homicides worldwide. A project funded by the Leib- In addition, CESifo, together with a number of partners, niz Association entitled “The Economics of Violence held the 3rd Doctoral Workshop on the Economics of against Women” addresses the causes of violence Digitization, which took place in Louvain-la-Neuve against women, the question of how wide-reaching (Belgium) in May. The idea behind this format is to bring improvements to the economic and social partici- together doctoral students from all over the world who pation of women over the last century has impacted are researching the economics of digitization with a the situation, and what measures can help mitigate theoretical and empirical focus. Besides promoting or prevent such violence. The project is being carried scientifi c exchange, the event also serves to facilitate out at the ifo Center for Labor and Demographic Eco- networking among the junior researchers. nomics. The Roland Berger Doctoral Scholarship, which is In connection with research, the support of junior sponsored by the Friends of the ifo Institute, was economists is a core task of the ifo Institute. As of De- awarded in 2019. The recipient, Jean-Victor Alipour,

12 ifo Annual Report 2019 REPORT OF THE EXECUTIVE BOARD

will focus on the eff ects of digitization on the labor members of the CESifo Research Network. By the end market in his doctoral studies at the ifo Center for In- of 2019, the network had grown to 1,653 members dustrial Organization and New Technologies. from 43 countries. ifo economists also help to develop junior economists In 2019, several ifo researchers received awards for through courses. In the year under review, ifo econo- their outstanding research achievements, two of which mists held 67 teaching positions and supervised 84 are mentioned here. In May 2019, the Hanns Martin Bachelor’s and Master’s theses, 69 dissertations, and Schleyer Foundation awarded Clemens Fuest the 18 habilitations. 2018 Hanns Martin Schleyer Prize for his “services to strengthening and promoting the foundations of a lib- The Institute’s scientifi c performance is also infl uenced eral community.” by the close involvement of external researchers. In 2019, Kaspar Wüthrich (University of California, San Sebastian Wichert and his coauthors received the 2019 Diego), Michael Weber (University of Chicago), and Ga- Science Award from the German Society for Health briel Felbermayr (Kiel Institute for the World Economy) Economics for the article entitled “Is It Good to Be were recruited as new research professors, with the Too Light? Consequences of Birth Weight Thresholds result that a total of 53 external economists were asso- in Hospital Reimbursement Systems,” which was pub- ciated with the ifo Institute as research professors on lished in the Journal of Health Economics. December 31, 2019. In addition, nine (senior) research associates work together with the Institute. In addition, several other prizes for achievements in research and managing contract studies were awarded A particularly important element of international net- as part of the 70th Annual Meeting. More information working is the promotion of research stays abroad is provided in the section on personnel development. for ifo economists, especially at top universities outside Germany. A total of 30 research stays took place CONTRIBUTIONS TO POLICY ADVICE AND THE at Harvard University, Stanford University, Princeton POLICY DEBATE University, the London School of Economics & Political The ifo Institute is a think tank for economic policy and Science, and the World Bank, among others. uses its research expertise and data to actively participate in the public debate on the best economic policy Each year, CESifo organizes numerous conferences, ideas and concepts. It aims to communicate its theo- Advising on policy workshops, and seminars that are ideal vehicles retical and empirical fi ndings in economics to policy- and informing the for promoting the exchange of ideas between econ- makers and, in turn, derives its research topics from debate omists and helping to expand their networks. Par- the policy debate. In 2019, the ifo Institute was once ticularly noteworthy are the Area Conferences and again heavily involved in policy advice and the policy the CESifo Venice Summer Institute. In total, CESifo debate. organized 23 international economics conferences in the year under review, most of which were held It pursued this goal both via the periodicals of the ifo in the conference rooms of the ifo Institute. The fol- Institute as well as through an abundance of press re- lowing fi ve workshops were held at the CESifo Venice leases, interviews, press articles, and public events. Summer Institute: “The Future of Europe: Structural Among them were the ifo Viewpoints – brief commen- Reforms, Growth, and Globalization”; “Poverty, In- taries on topical issues by Clemens Fuest. Some of the equality, and their Associations with Disasters and topics these addressed in 2019 were: “The Debt Brake Climate Change”; “Gender in the Developed and De- Is the Target of Criticism – But It Guarantees Sustain- veloping World”; “Economics of the Gig Economy;” able Fiscal Policy”; “A Populist versus a Market-Based and “Taxation in the Digital Economy: Theory and Ev- Economic Policy”; and “Germany’s New Industrial idence.” These conferences and workshops primarily Policy.” serve scientifi c exchange between the members of the CESifo Research Network, but at the same time The European Economic Advisory Group at CESifo they off er ifo economists the opportunity to establish (EEAG), a CESifo-backed council of economic ex- contacts and discuss their academic work with the perts on the assessment of economic developments

ifo Annual Report 2019 13 REPORT OF THE EXECUTIVE BOARD

in Europe, published an annual report in February current economic topics, were very well received. 2019 entitled “A Fragmenting Europe in a Changing Hans-Werner Sinn’s Christmas lecture on “How Do We World,” which considers the challenges for the Eu- Save the Climate and How Not to?” also took place as ropean Union. The focus is on its fragmentation and part of the Munich Seminars. tendencies toward disintegration that can arise in multinational, multilingual, and multiethnic inte- In March and October 2019, two further Parliamentary grated economic entities. To understand why this is Breakfasts were held at the Bavarian Representation in the case and what the consequences are, the report Berlin. In the spring, Clemens Fuest, Marcel Thum, and takes an inward look at individual EU member states Joachim Ragnitz joined the members of parliament in and an outward look at where major economic and discussing current challenges in economic and Europe- geopolitical challenges have shaken many European an policy; in the fall, Karen Pittel presented the Flexcap countries. model to further the climate policy debate, while Fuest presented the citizens’ fund concept. The articles published in the periodicals of the ifo In- stitute regularly fi nd their way into the public debate. The ifo Branchen-Dialog (ifo Industry Colloquium), a In the year under review, the publication program series of conferences organized in cooperation with comprised 24 issues of ifo Schnelldienst, twelve issues the Chamber of Commerce and Industry for Munich The publication of ifo Konjunkturperspektiven, six issues of ifo Dresden and Upper Bavaria to analyze current economic devel- program of the ifo berichtet, and four issues each of CESifo Forum, the ifo opments, also continued in 2019. More information is Institute DICE Report, and the ifo World Economic Survey. Twelve available in the chapter on the ifo Center for Industrial ifo research reports, two ifo Dresden studies, and seven Organization and New Technologies. ifo contributions to economic research were published as monographs, and 32 issues were published in the In addition to initiating its own contributions to the pol- ifo Working Papers series. The ifo Institute also issues icy debate, the ifo Institute also provided policy advice the quarterly scientifi c journal CESifo Economic Stud- in the form of numerous commissioned reports. These ies, published by Oxford University Press. In addi- projects are documented in the appropriate sections tion, 598 issues have appeared in the CESifo Working of this annual report. Selected examples of commis- Papers series supervised by CESifo, which publishes sioned reports laying the foundations for policy advice essays by members of the CESifo Research Network. in 2019 are given here: Rounding off the list of publications are 19 issues of the series of EconPol Working Papers, plus ten issues – Framework agreement on conducting economics of EconPol Policy Reports, and nine issues of the Econ- studies (Chamber of Commerce and Industry for Pol Policy Briefs. Munich and Upper Bavaria). Projects that came under this framework contract were: In 2019, events organized by the ifo Institute contin- – Growth markets in Africa for the Bavarian ued to mark high points in the economic policy de- economy bate. The ifo Annual Meeting – which, as in previous years, was held in cooperation with LMU in the univer- – Employment eff ects of reforms to increase the sity’s Great Hall – was dedicated to the 70th anniversa- employment of women and elderly workers ry of the ifo Institute. Addressing the topic of the “70th – ICT in the Greater Munich Area, 2019 Anniversary of the Social Market Economy – What Will Be the Future of Our Economic Order?,” Clemens – Incentives for increasing employment of women Fuest, Annegret Kramp-Karrenbauer, and others pre- – Vehicle construction – How is the value chain sented their ideas for developing the social market changing? economy. More information is available in the “Com- – The New Silk Road – Growth region for the Bavarian munications” chapter. economy The 11 Munich Seminars organized by CESifo together – Eff ects of Potential Currency Confl icts on the Ger- with Süddeutsche Zeitung, in which renowned speak- man and European Economy (German Federal Mi- ers from business, science, and politics talked about nistry for Economic Aff airs and Energy)

14 ifo Annual Report 2019 REPORT OF THE EXECUTIVE BOARD

– Options for Reforming the Basic Security Beneﬁ t its presence. Clemens Fuest still tops the list of econ- System for the Gainfully Employed (German Council omists cited in Germany’s leading media. According to of Economic Experts) Media Tenor, the ifo Institute strengthened its media Strong media presence and is also one of the economic research in- presence – Evaluation of Tax Concessions (German Federal Mi- stitutes most frequently cited at the European level. nistry of Finance)

– Report on the Preparation of an All-German Regional The excellent results achieved by ifo economists in re- Funding Program (Thuringian Ministry of Economy, search and in the public policy debate also led to an ex- Science, and the Digital Society) cellent result in the 2019 FAZ ranking of the most infl u- – Innovations for a Sustainable Land and Energy Ma- ential economists working at universities or research nagement on the Regional Level (German Federal institutes. As Table 4 shows, in addition to ifo President Ministry of Education and Research) Clemens Fuest in second place, the FAZ ranking features a number of other highly rated ifo economists. – Transparency – Tax Secrecy in International Com- parison (Foundation for Family Businesses) – Policy Instruments for a Crisis-Proof European Table 4: Union? (Leibniz Research Alliance) ifo Economists in the FAZ Overall Ranking, 2019 Ranking Name Points The network EconPol Europe – European Network for 2 Clemens Fuest 468 Economic and Fiscal Policy Research Europe, founded in 2017 on behalf of the German Federal Ministry of 20 Ludger Wößmann 97 Finance, is dedicated to the urgent fi nancial and eco- 33 Joachim Ragnitz 68 nomic policy issues of European integration on an in- 44 Andreas Peichl 54 terdisciplinary basis. The network’s mission is to step 57 up the use of current research fi ndings for the further Niklas Potrafke 41 development of European Economic and Monetary 66 Timo Wollmershäuser 33 Union through well-founded contributions. EconPol 95 Klaus Wohlrabe 19 Europe concentrates on four topics that the network believes are currently of particular relevance to Eu- rope: sustainable growth and best practice; reform of EU policies and the EU budget; capital markets and SCIENTIFIC SERVICES fi nancial sector regulation; and governance and mac- The ifo Institute offers a wide range of services to all roeconomic policies in the European Monetary Union. groups in society interested in economic issues. The Under the leadership of the ifo Institute, EconPol con- services include the collection, preparation, and deliv- tinued to pursue its activities in 2019. Events that de- ery of economic data and information, the compilation serve special mention include the EconPol Lab at the of materials for international institutional comparison, CEPS Ideas Lab 2019 event in Brussels, three lunch and the collection and preparation of additional mac- debates with MEPs in Brussels, plus the annual con- roeconomic data. In 2019, the range of services was ex- ference. With the theme of “Europe’s Competitiveness tended to include the following: and the Rise of China,” the conference took place in Brussels in November and attracted strong media and A survey to produce the ifo Education Barometer was public attention. Further information can be found in carried out in 2019 for the sixth year in a row. In the the chapter on the “ifo Center for Macroeconomics and year under review, particular emphasis was placed on Surveys,” which is in charge of the EconPol network. educational inequality. This reveals that the Germans correctly assess the extent of educational inequalities: Media coverage is an important indicator of the rele- the majority do not assume any great diff erence in per- vance of academic papers for politics and society. Ac- formance between the sexes or between urban and cording to analyses by Media Tenor, the ifo Institute rural areas, but they do expect there to be diff erenc- successfully defended its position as the most fre- es according to social and immigration background. quently cited institute in 2019 and even strengthened Accordingly, they see inequality of opportunity as a

ifo Annual Report 2019 15 REPORT OF THE EXECUTIVE BOARD

problem among children that come from diff erent so- the funding decision by the federal government and cial backgrounds or between those with and without a Länder at the Joint Science Conference. The ifo Insti- background of immigration. tute underwent its periodic evaluation on July 1 and 2, 2019. The ifo Hands-On High-Quality Journalism Days series, which was launched in 2015, took place in Janu- The evaluation is designed to independently assess the ary 2019. Fift een students from the German School of development of content and structure over the previ- Journalism and six editors from Bayerischer Rundfunk ous years as well as of plans for the future. External re- attended the event. More information is available in viewers assess the extent to which meaningful work is the “Communications” chapter. being done in science and research, in consultancy and services, and in other specifi c fi elds. In addition, they The ifo Institute also strives to invest in teacher training look at whether the ifo Institute has a convincing con- and further education. To this end, the ifo Hands-On cept that consolidates individual studies and develops Modern Economics Teaching Days training series was them further. Collaborations with universities and oth- launched in 2017. In 2019, the Center for Economics Ed- er institutes are also assessed along with international ucation in Siegen for the fi rst time provided support for orientation and visibility. Ultimately it is about how ifo teaching the contents of this advanced training course, transfers the results achieved to other areas of society, which is conducted in cooperation with the Association how it develops and supports junior researchers, and of Bavarian Business Philologists. A total of 35 business how it promotes gender equality. educators from all over Bavaria took part in the training. Another event takes place annually in cooperation The ifo Institute succeeded in retaining or even exceed- with the Dillingen Academy for Teacher Training and ing the superlative results it achieved in its last periodic Personnel Management (ALP). Since 2018, a coopera- evaluation, which took place in 2012. Special mention tion agreement has stipulated that the ifo Institute will was made of the consistently very good to excellent provide the speakers and the ALP the premises and or- achievements in research, policy advice, and service, ganization for this joint training event entitled “Current as well as of the important role of the CESifo and Econ- Research Issues in Economics.” During this training, 20 Pol networks and the outstanding Institute manage- participants were able to benefi t from the expertise of ment. the ifo economists. Last year also saw some important changes in the ad- Work on building up a family business database, ministrative areas. In January 2019, the central Press, Research into family which was started in 2017 on behalf of the Foundation Publications, Conferences department was renamed businesses for Family Businesses, continued in 2019. The aim is to Communications and Dr. Cornelia Geißler was entrust- develop this database into Germany’s leading, interna- ed with its management. In this newly created posi- tionally renowned data source for scientifi c research tion, she will help to enhance the “ifo” brand with an relating to the activities of family companies. As part integrated communication concept. In August 2019, of this project, the ifo Institute produces the Annual Mr. Thomas Walter succeeded Ms. Dehof as Head of Monitor of the Foundation for Family Businesses every the Finances and Centralized Services department. year. The basis for the 2019 Annual Monitor is a repre- Mr. Kumar Subramani took over as head of IT in 2019. sentative survey conducted from April to July 2019 in One of his current responsibilities is overseeing the which more than 1,400 family businesses participated, establishment of a more process-oriented IT service addressing the question of what the European Union’s management setup. He aims to put a particular focus economic policy should look like in the future. on promoting IT standards and IT services and on better fulfi lling user requirements for quantifi able and reliable services in the future. DEVELOPMENT OF THE IFO INSTITUTE AS AN ORGANIZATION Following the introduction of the GDPR, the ifo Institute As one of the Leibniz Institutes, the ifo Institute is is endeavoring to meet all the requirements to protect evaluated by the Senate of the Leibniz Association the data of its employees and also of external users. every seven years. This evaluation forms the basis for To this end, a new data protection concept has been

16 ifo Annual Report 2019 REPORT OF THE EXECUTIVE BOARD

drawn up, among other measures. IT worked closely national CESifo Research Network. The members of with the legal aff airs off icer to identify and implement the CESifo Research Network are divided into a total specifi c measures that help further establish data proof nine research areas, which are led by international- tection at the ifo Institute. A manual that outlines the ly renowned academics, or Area Directors. A separate concept is available to ifo employees. chapter in this annual report is devoted to the activities of CESifo GmbH. To promote and support project acquisition and pro- cessing, a contract studies service team was estab- In creating ideal conditions for top research, the fur- lished in 2019 to provide administrative support to the ther qualifi cation of researchers is important. This research areas. The team consists of a scientifi c coordi- topic and its development have already been covered nator (50% of their capacity) and three research proj- in connection with research. The training events held ect coordinators (25% each). in house as well as numerous research stays at top Further education American universities in 2019 were particularly pleas- and training for A key project in the year under review was the re- ing. Other highlights included ifo researchers again be- researchers launch of the ifo website. This was preceded by an ing invited to present papers at international, refereed in-depth preparation process that focused on rede- conferences (180), and numerous ifo doctoral students signing the website and, in particular, the ifo Insti- expanding their expertise at summer schools. In addi- tute branding. Based on the fi elds of action derived tion, ifo doctoral students are given the opportunity to from the ifo mission statement, the fi ndings from the attend courses. ifo’s non-scientifi c staff is also offered knowledge-transfer project (funded by the German ongoing training: overall, 243 further training mea- Federal Ministry of Education and Research), and sures were approved in 2019, of which 201 were also several workshops, a clear set of targets was devel- conducted in that year. oped and then implemented. The website is now the hub of ifo communications. ifo and CESifo are now The orientation of the entire ifo Institute organiza- separate entities and maintain separate websites. tion toward excellent performance in all areas of Now, alongside presentation of the internal organi- work is the objective of the ifo management sys- zational structure and the ifo products, topics that tem, which is certified according to DIN ISO 9001 are of strategic value to the ifo Institute are highlight- and the functionality of which is checked annually ed with links to the relevant ifo experts. Overall, the by external auditors. A two-day recertification au- content is presented such that it meets the specifi c dit was carried out in February 2019, for which the requirements of the ifo target groups. The relaunch ifo management system again received very good in April 2019 marked the peak of this project for the marks. Implementation of all projects is supported time being, but it will continue running as an ongoing and tracked by the tools provided. A special feature process of optimizing the website. More information of the certified quality management system is that is provided in the section on the Communications de- it includes the ifo Institute’s gender equality policy partment. and the rules of this policy. Compliance with these rules was examined and confirmed in all external In 2019, the LMU-ifo Economics & Business Data Cen- audits. In the year under review, efforts to shape ter (EBDC) team continued to work on establishing new working conditions at the ifo Institute with a view to strategic research partnerships and strengthening ex- achieving a more balanced gender structure among isting ones and can now report further successes in scientific staff paid off. The share of female doctoral terms of content. These are set out in the chapter on students as of December 31, 2019 was exactly 50% the EBDC within this annual report. (52% if those doctoral students who were on parental leave as of that date are included), meaning that a CESifo GmbH also developed positively in the year balanced gender ratio among doctoral students has under review. Founded in 1999, CESifo GmbH (Mu- already been reached. nich Society for the Promotion of Economics – CESifo GmbH) serves to connect the LMU’s Department of Personnel capacity reduced compared to the previous Economics and the ifo Institute with the international year. As of December 31, 2019, the number of staff at research community. CESifo GmbH supports the inter- the Institute fell by 11 to 201.

ifo Annual Report 2019 17 REPORT OF THE EXECUTIVE BOARD

Developments in fi nances in the year under review are tution). Of this amount, EUR 10.548 million was used presented in detail in the “Financial Development” for current operations and EUR 315,000 was used for Strong and stable chapter. The fi nancial situation of the ifo Institute re- investment. No reserves were available to the ifo Insti- fi nancial situation mains solid. The Institute’s fi nancial statement for 2019 tute in 2019. shows a surplus of EUR 195,000. This was channeled into reserves, increasing the Institute’s assets to a total Finally, we would like to extend our thanks to all of the of EUR 2.694 million as of December 31, 2019. ifo Institute’s staff. It is due to their high levels of commitment that the ifo Institute can look back on 2019 as In 2019, the ifo Institute received public funds totaling being a very good year. EUR 10.863 million as part of joint research funding based on Art. 91b of the Basic Law (German consti- Munich, May 2020

The Executive Board

Prof. Dr. Dr. h.c. Clemens Fuest (President) Dr. Stephanie Dittmer

18 ifo Annual Report 2019 Research and Service Departments ifo Center for Public Finance and Political Economy

The research activities of the ifo Center for Public Fi- support reforms to a lesser extent. Our results point to nance and Political Economy focus on fi scal policy, misperceptions in how individuals expect reforms to the development of public budgets under conditions infl uence their income position. of high mobility at national and local levels, and political economy. Its research includes model-based Evaluation of Tax Concessions and empirical analyses, including an examination of C. Fuest, S. Gäbler, K. Immel, F. Neumeier, B. Kauder in international experiences. More specifi cally, the de- cooperation with the FiFo Institute, Cologne, Leibniz partment’s activities focus on public debt in Germa- Centre for European Economic Research (ZEW), Mann- ny and Europe, the assessment of fi scal and taxation heim, and Fraunhofer Institute of Applied Information policy, fi scal federalism, and local fi nances. There is Technology FIT, Sankt Augustin, for the German Feder- a special focus on the motives behind policymakers’ al Ministry of Finance, June 2017 to October 2019, pub- actions from a public choice and political economics lication as Evaluierung von Steuervergünstigungen, Fifo point of view. Institute, Cologne, 2019.

How are fi nancial and fi scal policy instruments that Six measures received an overall rating of “good”. These are in use in Germany, the European Union, and in- benefi ts accounted for a total volume of EUR 2.7 billion ternationally to be evaluated? How do policymakers in 2018. Seventeen tax benefi ts accounting for a total and institutions infl uence economic policy and its out- volume of EUR 2.9 billion were rated as “suff icient”. comes, e.g., economic growth? The ifo Center for Public This latter rating intentionally uses the same term that Finance and Political Economy deals with these topics is used in schools. It is meant to indicate that the bene- and derives policy recommendations from them. fi t in question “passed” the evaluation but that there is signifi cant room for improvement. Ten tax benefi ts ac- The ifo Center for Public Finance and Political Econo- counting for a total volume of EUR 1.8 billion received an my also conducts the ifo and Frankfurter Allgemeine overall rating of “weak”. These tax benefi ts were found Zeitung (FAZ) Economists Panel, which surveys a rep- to fall far short of their expected objectives and there- resentative group of economics professors at German fore to require urgent fi xing. Such measures must be re- universities on current economic policy issues on a designed completely or else discontinued. monthly basis. The panel’s aim is to off er the public a nuanced perspective on economists’ views on key Report on the Eff ect between Debt, Budget challenges facing Germany. Composition, and Growth L. Dörr, K. Gründler, M. Mosler, N. Potrafke for the Kon- rad-Adenauer-Stift ung e.V., February 2019 to May 2019, publication as ifo Forschungsbericht 107, Munich 2019. Projects Completed in 2019 The study examines the relationship between public EconPol: Structural Reforms and Income In- debt, measures to consolidate public budgets, and eco- equality: Who Benefi ts from Market-Oriented nomic growth. The composition of the public budget Reforms? and the growth eff ects of individual budget categories K. Gründler, N. Potrafke for EconPol Europe, October is investigated in detail. The study compares the size of 2019 to December 2019, publication as EconPol Policy the individual government expenditure categories in Report 18, December 2019. Germany with the budget composition of the other EU Empirical analysis of member states. This comparison shows that Germany public budgets We fi nd no statistically signifi cant relationship be- spends above-average shares of its public budget on tween structural reforms and the distribution of in- social protection and healthcare. Spending on educa- comes. We do fi nd, however, that households at the tion, transport, environmental protection, and defense bottom of income distribution gain more from struc- is lower than in comparable European countries. The tural reforms than individuals at the middle of income empirical analysis shows that government debt and eco- distribution. Examining the support for reforms on nomic growth are negatively correlated, and that budget the household level, we fi nd that high-income earners consolidation by way of expenditure cuts is preferable to tend to support reforms, whereas low-income earners consolidation through tax hikes. Consumptive expendi-

ifo Annual Report 2019 21 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

ture is negatively associated with growth and thus pro- We examined the so-called Hauptansatzstaff el for vides room for growth-friendly consolidation. Research municipal spending of the horizontal fi scal equal- and development expenditure and expenditure on edu- ization scheme in North Rhine-Westphalia. The cation tend to be positively correlated with growth. Hauptansatzstaff el describes a nonlinear relationship between population and fi scal need. The Haupt- Public Debt in 2018 ansatzstaff el and other elements (demography, pu-

Greece pils, social spending, centrality, and area) give rise to Italy Portugal a fi gure describing fi scal need in the horizontal fi scal Cyprus Belgium France equalization scheme. The weighting of population Spain United Kingdom in the Hauptansatzstaff el was investigated based on Croatia Austria public fi nance theory and an empirical analysis. We Hungary Slovenia Ireland employ regression techniques and simulate redistri- Germany Finland bution eff ects in the horizontal fi scal equalization Netherlands Slovakia scheme. Poland Malta Sweden Latvia Romania Lithuania Denmark Czechia Bulgaria European +&,+ɭ Luxembourg Current Projects Estonia 0 50 100 150 200 ɭ%"3)2"#,/1%"&01%"3"/$",#1%" ʢ,# ifo and FAZ Economists Panel ,2+1/&"0,#1%"2/,-"++&,+ǽ J. Blum, L. Dörr, K. Gründler, M. Mosler, N. Potrafke, in- Source: World Bank dataǽ Ȫ&#, +01&121" ternal project, ongoing.

The ifo and Frankfurter Allgemeine Zeitung (FAZ) European Austerity Discourse: Is Too Much Economists Panel surveys a representative group of Saving Bound to Backfi re? economics professors at German universities on cur- K. Gründler, N. Potrafke for the Konrad-Adenau- rent economic policy issues on a regular basis. The er-Stift ung e.V., October 2018 to February 2019, publi- panel’s aim is to off er the public a nuanced perspec- cation as ifo Forschungsbericht 103, Munich 2019. tive on economists’ views on key challenges facing Germany. The economists are surveyed on diff erent The study examines the use and meaning of the term topics every two months and in the light of current “austerity” in public and academic debate. Usage of events within standardized surveys in a digital form. “austerity” has risen sharply since the fi nancial crisis, The panel takes national and international issues What does but there is no consensus on its substantive meaning. into account, focuses primarily on qualitative infor- “austerity” actually Scientifi cally, the term is used primarily in heterodox mation, and asks the economists for their appraisals mean? journals. Since there is no universal defi nition of the and expectations. term “austerity,” empirical measures used to classify periods of austerity diff er widely. This ambiguity is re- In 2019 the following topics were covered: coal phase- fl ected in empirical studies, which, depending on the out by 2038, thirty years aft er the fall of the Berlin measure used, show positive or negative real economic Wall – what about the gap between east and west?, impulses triggered by austerity policies. carbon pricing, the debt brake, and the compromise on the basic pension. The survey results are prepared Report on Reviewing the Weighting of In- and published in the Frankfurter Allgemeine Zeitung as habitants in the System of the Municipal Fiscal well as on the ifo homepage. Moreover, the results are Equalization Scheme in North Rhine-Westphalia published in an extensive way in ifo Schnelldienst. S. Gäbler, L. Dörr, B. Kauder, M. Krause, N. Potrafke for the Ministry of Homeland, Municipal Aff airs, Construc- tion and Equality of the State of North Rhine-Westpha- lia, May 2018 to February 2019, publication as ifo For- schungsbericht 105, Munich 2019.

22 ifo Annual Report 2019 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

ƛ" 1&3"+"00,#1%"0& "+0&,+ The long-term development of German social public ,6,21%&+(1%11%" 0& -"+0&,+&002ƛ& &"+1– i.e., that the basic fi nances and aggregated public budgets are simulated pension is high enough? to identify potential threats to the fi scal sustainabili- Yes ty of the German public fi nances. The project will rely on simulations until 2070 in the areas of demography, No the labor market, macroeconomic conditions and Undecided 24% growth, and demography-driven public expenditure Don’t know to assess the eff ects on aggregated public fi nances. It 43% considers population growth forecasts, employment, and scenarios regarding the macroeconomic potential 18% growth.

15% Studies in Political Economy and Defense Economics J. Blum, ongoing doctoral project.

Source: Economists Panel, December 2019. © ifo Institute In this ongoing doctoral project, various topics at the interface of public fi nance – in particular defense Research Study on the Evaluation of Energy spending – and political economy are examined. One Policy Measures in Bavaria study investigated whether changes of government M. Mosler for the FDP Parliamentary Group in the Ba- infl uence compliance with international agreements varian Parliament, August 2019 to January 2020. and applied the NATO 2 percent spending target as a test case. Another study estimated demand functions Politics in Bavaria faces a major challenge in ensuring for military expenditure and examined diff erences in the energy policy triad, i.e., the security of supply, eco- the spending behavior of democracies and autocra- nomic viability, and environmental compatibility. Both cies. nuclear and coal plants will go off line in the next few years, while grid expansions are constantly delayed. Studies in Public Finance and Political Economy The question of how power supply in Bavaria can be L. Dörr, ongoing doctoral project. secured remains unanswered. At the same time, the heat and electricity sector in Bavaria is destined for a This doctoral thesis looks at several diff erent topics complete de-carbonization, which indicates the grow- at the interface between public fi nance and political ing importance of green energy supply. economy. One of its focal points is the analysis of the economic impacts of infrastructure access. Another The task of the project is an economic assessment of project examines the eff ects of right-wing populist par- energy policies in Bavaria and the scientifi c accompa- ties at the regional level. niment for draft ing a strategic policy paper. The consulting service employs a multi-dimensional approach Sustainability and Distributional Issues: taking energy economics, fi scal parameters, and as- Studies in Public Finance, and Political Economy pects of political economy into account. The project F. Dorn, ongoing doctoral project. team supports the members of parliament with scientifi c expertise to prepare evidence-based policy deci- In this ongoing doctoral project, various topics at the sions and a political strategy paper. interface of public fi nance and political economy are A project on public examined. The project focuses on the impact of poli- fi nances, populism, Model Calculations for the Fift h Sustainability cies, institutions, and globalization on public fi nances, and political Report of the Federal Ministry of Finance public sector performance, and inequality. The project polarization K. Gründler, B. Läpple, R. Lehmann, M. Mosler, N. Po- also examines how these factors infl uence the rise of trafke in cooperation with ifo research professor M. populism and political polarization. Werding, University of Bochum, for the Federal Ministry of Finance, March 2019 to August 2020.

ifo Annual Report 2019 23 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

Studies on Taxation, Public Finances, and Regional Economics S. Gäbler, ongoing doctoral project.

This PhD thesis addresses various topics in the ﬁ eld of the public sector’s taxation and expenditure structure. There is a special focus on the German local level in view of the institutional and political framework conditions as well as regional interrelations.

Fiscal Sustainability in Public Finance M. Mosler, ongoing doctoral project.

This ongoing doctoral project examines the ﬁ scal Examining the ﬁ scal sustainability of public budgets using quantitative sustainability of methods, primarily from time series and panel data public budgets econometry. There is a special focus on public debt management in developing countries and the development of tax simulation models.

24 ifo Annual Report 2019 ifo Center for Labor and Demographic Economics

The Center’s current research addresses several press- considering that the last half-century has witnessed ing, yet under-researched, societal issues; it combines profound changes in women’s economic and social theoretical analyses with state-of-the-art causal infer- opportunities, what implications does this have for vio- ence methods, and draws upon unique data sources. lence against women? And the third question is: which type of interventions might be eff ective in preventing ECONOMIC UNCERTAINTY AND THE FAMILY violence against women? The Center addresses these questions from both a developed and a developing Can changes in the fertility decisions of couples be at- country’s perspective. In so doing, it uses sound the- tributed to demand-induced changes in labor market oretical frameworks to derive hypotheses and, based opportunities? Are people more likely to marry in reces- on these, implements empirical approaches that draw sions or in booms? Does youth unemployment aff ect upon various unique data sources and utilize both qua- intergenerational relations? The Center’s fi rst research si-experimental and experimental research designs. area aims to improve our understanding of the relationship between business cycles and family-related IMMIGRANT INTEGRATION decisions. To that end, the Center has set up the junior research group EcUFam (Economic Uncertainty and Immigrant children constitute the fastest-growing the Family), which is led by a postdoctoral researcher, segment of the population in many European coun- comprised of three doctoral students, and funded by tries, thus shaping the future of these societies. The the Leibniz Competition (SAW). Deploying a variety of successful integration of immigrant children into host methods and datasets, the group conducts research societies, both economic and social, is therefore an into the extent and importance of economic uncertain- issue of paramount social importance. The Center’s ty as induced by poor macroeconomic conditions for third research area studies the determinants of immi- key family outcomes including fertility, marriage and grant children’s educational and social integration. divorce, intergenerational relationships, gender-role Among other projects, a hallmark study was initiated attitudes, and infant health. The working group is lo- in 2015: together with external collaborators, the Cen- cated at the ifo Institute, but both the scope of its re- ter collected data on over 4,500 15-year-old pupils at search and its scientifi c network are international, with almost 60 secondary schools in Germany. Respon- project partners and supporting institutions in Europe dents participated in both a classical survey and a be- and beyond. havioral experiment (an investment game). This data collection represents the fi rst attempt to combine a A hallmark study on THE ECONOMICS OF VIOLENCE AGAINST WOMEN large-scale survey with a behavioral lab-in-the-fi eld immigrants in the experiment. During the evaluation period, but also in German education Violence against women is a global pandemic that the years ahead, it allows the Center to provide a com- system poses serious health threats to women and also has prehensive picture of immigrant children’s integration adverse consequences for their children, both in the into the host society including traditional outcomes, short and long term. Intimate partner violence, the such as their educational achievements, aspirations most common form of violence against women, is the and expectations, ethnic identity, social network, civic leading cause of female homicides worldwide. Within and social engagement, and political interest, as well the European Union, estimates point to 22 percent of as novel experimental measures such as cooperative- women experiencing intimate partner violence in their ness, trust, and reciprocity. The newly collected data lifetime. In many developing countries, this rate far will also allow for a fi rst application of causal inference exceeds 30 percent. Against this background, the Cen- methods to experimental data on social behavior, thus ter’s second research area aims to provide answers to unearthing policy interventions that foster or hinder three overarching questions. The fi rst is fundamental- immigrant children’s social integration. ly about the origins of violence against women: given that the prevalence of violence against women varies ECONOMIC AND POLITICAL EFFECTS OF CLIMATE considerably both across and within countries, what CHANGE is the role of ancestral cultural factors and historical institutions in shaping those diff erences? This leads Understanding the economic and political eff ects of to the second question, which addresses the implica- climate change is one of the crucial preconditions for tions of changing economic and social environments: tackling climate change in an eff icient manner. Like-

ifo Annual Report 2019 25 IFO CENTER FOR LABOR AND DEMOGRAPHIC ECONOMICS

wise, it is essential to understand the impact of pollu- Munich and Upper Bavaria. This study describes female tion, for example air pollution. The center analyzes the labor market participation over the past 20 years in Analyzing economic economic and political impacts of long-term climate Germany and especially in Bavaria in order to produce and political impacts change and short-term climate shocks. In particular, policy recommendations regarding an increase in fe- of climate change we analyze which mechanisms underlie the causal male employment. The employment rate of women is mechanisms. The Center uses state-of-the-art micro- rising; however, a shortage of skilled workers prevails. econometric methods and combines data on econom- Potential improvement lies not only in female labor ic, political, and historical outcomes in an innovative market participation but also in women’s number of way to identify causal mechanisms. working hours.

Projects Completed in 2019 Current Projects

Employment Eff ects of Reforms to Increase the Economic Uncertainty and the Family (EcUFam) Employment of Women and Elderly Workers P. Reich, F. Siuda, M. Fabel, supported by the Leibniz V. Meier for the Chamber of Commerce and Industry for Association, July 2015 to June 2020. Munich and Upper Bavaria, May 2019 to October 2019. The junior research group, EcUFam (Economic Uncer- This study investigates possible employment eff ects tainty and the Family), looks at issues related to the for women and elderly workers of sociopolitical and economics of violence against women. As part of the tax reforms. project, several doctoral projects are being funded by the Leibniz Association and conducted by F. Siuda Incentives for the Elderly to Remain in the (ongoing doctoral project, as of October 2015), P. Reich Labor Force (ongoing doctoral project, as of September 2015), and V. Meier, V. Endl-Geyer for the Chamber of Commerce M. Fabel (ongoing doctoral project, as of October 2016). and Industry for Munich and Upper Bavaria, October 2018 to February 2019. The Economics of Violence Against Women (EconVAW) S. Amaral, E. Guarnieri, P. Fernández Kolb, V. Endl-Gey- The study was conducted under the framework agree- er., supported by the Leibniz Association, January 2019 ment with the Chamber of Commerce and Industry to December 2024. for Munich and Upper Bavaria. Currently, the German labor market is strongly confronted with the eff ects The junior research group, EconVAW (The Economics of demographic change, which leads to a shortage of of Violence Against Women), looks at issues related to specialists in Germany. This study investigates the de- the economics of violence against women. As part of velopment and the status quo of elderly workers’ labor the project, several doctoral projects are being funded force participation, focusing on Bavaria. It also looks at by the Leibniz Association and conducted by E. Guarn- the consequences of lowering the retirement age and ieri (ongoing doctoral project, as of September 2016), off ers policy proposals designed to retain elderly work- V. Endl-Geyer (ongoing doctoral project, as of January ers in the active labor force for longer. 2019), and P. Fernández Kolb (ongoing doctoral project, as of November 2019). Studies on Incentives for an Increase in Female Employment incentives for V. Meier, V. Endl-Geyer for the Chamber of Commerce The Causal Eff ect of Child Custody on Child diff erent segments of and Industry for Munich and Upper Bavaria, October Outcomes: Evidence Using Randomization of the labor force 2018 to August 2019, publication as IHK Impulse für die Judges to Divorce Cases Wirtschaft spolitik, Munich, 2019. A. Hasselqvist, ongoing doctoral project, since Sep- tember 2019. The study was conducted under the framework agreement with the Chamber of Commerce and Industry for

26 ifo Annual Report 2019 ifo Center for the Economics of Education

The ifo Center for the Economics of Education studies employment lifecycles. It studies the role of skills for the determinants and consequences of education from individual employability and social participation in a an economic perspective. Its research aims to further rapidly changing society. One focus is on the dual vo- Exploring the dual our understanding of how the state can empower peo- cational education system, an important pillar of hu- vocational ple to benefi t from the potential of an open society, as man capital formation in German-speaking countries, education system in part of a social market economy that is up to the chal- combined with the relative importance of vocational German-speaking lenges of modern times. and general education for productivity. Furthermore, countries the Center investigates the opportunities and limita- Modern growth economics identifi es the generation of tions of adult education and training and of lifelong knowledge as a primary determinant of long-term eco- learning. For example, a dissertation submitted in 2019 nomic growth. Knowledge generation includes both the examines how fi nal grades aff ect the probability of be- development of individual skills and the generation of ing invited for a job interview. Another study of 2019 new knowledge that advances the world’s technological evaluates the reform on dropouts from upper-second- frontier. However, little can be learned from such gener- ary school in Germany in the 1960s, with the result that al macroeconomic insights for concrete policymaking at the reform increased the later income of the aff ected the micro level. The research program of the ifo Center students. for the Economics of Education therefore asks which kind of knowledge matters most for prosperity, what EDUCATION AND LONG-TERM DEVELOPMENT: determines knowledge generation, and which kind of ECONOMIC GROWTH AND PROSPERITY policy can contribute to it. The Center thus analyzes how education policies can advance the knowledge base of Beyond its individual impact, education is also deci- highly qualifi ed future workers and the innovative ca- sively important for the prosperity of society at large pacity of the economy. To understand which policies and for economic development in the long run. One work, the Center primarily employs microeconometric focus in this area is on the role played by international methods that allow for experimental or quasi-exper- student achievement in economic growth and social imental evaluation – techniques that are increasingly cohesion today. In 2019, for example, an EENEE report proving indispensable in a wide variety of contexts, but was published that estimates the economic benefi ts of are rarely used in this crucial area in Germany. improving educational achievement in the European Union. An additional focus is on an historical perspec- Education systems generate the human capital of a tive, such as how the diff usion of education before and highly educated workforce that is of crucial impor- during industrialization changed historical develop- tance for the global competitiveness of modern econ- ment. In addition, the historical perspective is com- omies exposed to an ever-changing world. In the long bined with the modern perspective by assessing the run, only continuous advances in knowledge make it long-term persistence of historical circumstances for possible to escape worldwide low-wage competition. economic development today. Moreover, education is a crucial determinant of equity and participation in society. By investigating which DETERMINANTS OF EDUCATION: CULTURE, policies infl uence the development of human capital, RESOURCES, AND INSTITUTIONS the Center explores public policies that foster growth Given the central importance of education for the pros- and cohesion in a changing world. Specifi cally, the perity of individuals and societies, the third research Center’s research is structured into four areas, two of area studies the determinants of educational perfor- which address the eff ects of education on individual mance. A particular focus is placed on three groups and societal prosperity and the other two of which ad- of determinants: 1) cultural factors including families, dress political and other determinants of education. values, and norms; 2) resources spent on education; and 3) the institutional framework of the education sys- EDUCATION AND INDIVIDUAL OUTCOMES: LABOR tem. The research on these determinants oft en draws MARKETS AND LIFECYCLES on rich micro data from various international student The fi rst research area analyzes the importance of edu- achievement tests. Research in this area focuses on cation for individual opportunities in the labor market topics such as the integration of immigrant children, and in everyday life, focusing on individuals and their the eff ectiveness of teachers, the remediating eff ects

ifo Annual Report 2019 27 IFO CENTER FOR THE ECONOMICS OF EDUCATION

of mentoring programs, student assessments as an This doctoral project analyzes the impact of education accountability tool, and the strengths and weakness- and other determinants on labor market outcomes uses of digital learning methods. Currently, one project ing microeconometric methods. The fi rst paper uses evaluates the eff ectiveness of a 1:1 mentoring program a randomized fi eld experiment among German hu- for secondary-school students. Furthermore, a disser- man-resource managers to evaluate which skill signals tation completed in 2019 examines how the alternative are valued by employers when considering the CVs of uses of student assessments, teacher specialization, applicants who enter the labor market. Results indicate and the membership of Eastern European countries in that signals in all three studied domains – cognitive the European Union aff ect student achievement. skills, social skills, and maturity – aff ect the probability of being invited for a job interview. Grade-point aver- GOVERNANCE OF EDUCATION: EFFICIENCY AND ages and social skills prove relevant for both genders EQUITY and for high-school as well as college graduates. The relevance of other signals diff ers in terms of credibility, The fourth research area focuses on how the politi- relevance, and expectedness by gender and education cal governance of education systems aff ects educa- level. Females are particularly rewarded for IT and lan- tional success and equity. Central elements of the guage skills and males for maturity. governance of education systems studied in this area include exam systems, autonomy, competition, and A second project analyzes the impact of beliefs about tracking. In 2019, for example, a project was launched refugees’ education levels on natives’ general attitudes to evaluate school system reforms in Germany, such towards refugees. In a survey experiment among 5,000 as the introduction of grading in the fi rst years of primary school and grading of social behavior. The area university students, respondents’ beliefs are shift ed by also studies the feasibility of governance reforms and providing randomized diff ering information about the their acceptability in the population, drawing on the education level of refugees. Results show that shift ing beliefs towards better education of refugees increas- The sixth Center’s own opinion survey on education policy. The ifo Education Survey thematic focus of the sixth ifo Education Survey, re- es concerns about labor market competition of high- was on educational leased this year, was on the public’s opinions on ed- skilled natives but does not aff ect general attitudes. inequality ucational inequality and the extent to which Germans This is because economic aspects are rather unimport- support measures to reduce inequality in the educa- ant for forming opinions about refugees, as opposed to tion system. The Center furthermore coordinates the humanitarian aspects. European Expert Network on Economics of Education (EENEE), a Europe-wide policy advisory network fund- A further project analyzes the eff ect of a labor market ed by the European Commission. Ultimately, the eval- deregulation on the demand and supply side of the la- uation of policies with (quasi-) experimental methods bor market. The deregulation was an amendment to aims to bring evidence-based policy advice into the the Craft s and Trade Code of Germany regarding the re- political decision-making process. quirement to become self-employed craft smen. Using individual social security data, fi rm level data, and microcensus data, the project sheds light on the impact of the reform. Results show that while the reform dras- tically increased the number of businesses in deregu- Projects Completed in 2019 lated craft occupations, the eff ect on earnings and employment for incumbent workers was slightly negative. The reform also failed to increase overall employment Microeconometric Analyses on Determinants of in the craft s sector and had no eff ect on self-employed Individual Labor Market Outcomes craft smen. L. Simon, completed doctoral project, publication of results as ifo Beiträge zur Wirtschaft sforschung 83, Mu- The fi nal project analyzes the impact of regional nich, 2019; European Economic Review, forthcoming; structural change caused by exposure to imports CESifo Working Papers No. 6832, 2017; No. 6858, 2018; from China and Eastern Europe on vocational occu- IZA Discussion Paper No. 11857, 2018; ifo Working Paper pation choices of adolescents. Manufacturing jobs No. 281, 2018. are skill-specifi c, while service jobs are more general,

28 ifo Annual Report 2019 IFO CENTER FOR THE ECONOMICS OF EDUCATION

implying that they teach transferable skills that can Current Projects more easily be applied to new jobs or technologies. The analysis shows that despite decreasing employment in manufacturing in their region, adolescents European Expert Network on Economics of choose more skill-specifi c occupations in manufac- Education (EENEE) turing. This has negative consequences for their later L. Wößmann, S. Kersten, F. Kugler, U. Baldi-Cohrs in labor market outcomes. cooperation with the Centre for European Policy Stud- ies (CEPS) and senior experts from leading European Conditions and Consequences of Education universities for the European Commission, Directorate around the World – Microeconometric Analyses General Education and Culture, January 2017 to De- A. B. Bergbauer, completed doctoral project, publica- cember 2020. tion of results as ifo Beiträge zur Wirtschaft sforschung 86, Munich, 2019; Education Economics 27, 2019; ifo The European Expert Network on Economics of Edu- Working Paper No. 299, 2019; NBER Working Paper cation (EENEE) aims to contribute to the improvement No. 24836, 2018. of decision-making and policy development in educa- Advising on tion and training in Europe. It advises the European educational policy in The dissertation topic spans from generating human Commission in the analysis of economic aspects of the EU capital to its productive use in the economy. The fi rst educational policies and reforms. It aims to support paper relates education measures to economic devel- the dissemination of knowledge on the economics of opment. The following three papers contribute to the education in Europe. understanding of student performance focusing on standardized testing, teacher specialization, and polit- In 2019, EENEE published two analytical reports and ical environments. associated policy briefs. The topics include the economic benefi ts of improving educational achieve- The fi rst project assesses the importance of human ment in the European Union and education outcomes capital for regional development in sub-Saharan Af- enhanced by the use of digital technology. In a further rica. It regards the infl uence of education – measured task of evidence-based policy advice, the EENEE net- by skills and attendance – on economic activity. The work answered three ad hoc questions about early fi ndings suggest a stronger correlation of development leavers from education and training, investing for with cognitive skills than with quantitative measures of improving the teaching profession, and returns on human capital, such as years of schooling. The second education. Finally, EENEE maintains a website on Eco- paper investigates the achievement impact of alterna- nomics of Education in Europe (www.educationeco- tive uses of student assessments. In result, the expan- nomics.org) which – in addition to informing about sion of standardized external comparisons associates the activities described above – regularly updates with improvements in student achievement. The eff ect extensive lists of references to the literature on key of school-based comparison is stronger in low-per- topics in the economics of education and on Europe- forming countries. In contrast, only internal testing an experts in the fi eld. without external comparison and internal teacher monitoring including inspectorates do not aff ect stu- The Political Economy of Education Policy: dent achievement. The third paper investigates how Insights from a Public Opinion Survey teacher specialization in a fi eld during studies aff ects L. Wößmann, E. Grewenig, S. Kersten, F. Kugler, P. Ler- student achievement. The paper fi nds that teacher getporer, L. Simon, and K. Werner, with ifo research specialization does raise the academic achievement of professors M.R. West (Harvard) and G. Schwerdt (Kon- boys, but not of girls. Finally, the fourth project exam- stanz), internal project in continuation of a project ines the infl uence of European Union (EU) membership funded 2014–2017 by the Leibniz Competition, January of Eastern European countries on student achieve- 2018 to December 2020. Publication of results in: Jour- ment. The fi ndings suggest a positive and statistically nal of Public Economics 167, 2018; European Journal of signifi cant correlation of EU membership and reading Political Economy 53, 2018; ifo Schnelldienst 18/2014, scores. 17/2015, 17/2016, 17/2017, 17/2018; 17/2019; schulma- nagement 6/2016; Harvard Kennedy School PEPG Work-

ifo Annual Report 2019 29 IFO CENTER FOR THE ECONOMICS OF EDUCATION

ing Paper 15-02, 2015; CESifo Working Paper No. 5938, Besides the descriptive depiction of the results of the 2016; No. 6192, 2016; No. 6602, 2017; No. 7000, 2018; annual surveys, the project also includes a number No. 7192, 2018; No. 7222, 2018; No. 7536, 2019; of studies that investigate diff erent topics covered by No. 7556, 2019; No. 7559, 2019; No. 7936, 2019. the ifo Education Survey more deeply. Among others, separate studies address topics such as the eff ects of The aim of the project is to better understand the public information provision on preferences for educational opinion on a broad range of topics in education policy. spending, the eff ect of information about the returns To that extent, the project conducts an annual repre- and costs of education on educational aspirations, tu- Surveying the adult sentative opinion survey of the adult German popula- ition fees, educational inequality, preferences of polit- German population tion on various topics of education policy. To study the ical parties, class size, and the eff ect of gender norms on education policy causal eff ect of information provision on public opin- on expected labor market participation. issues ion, survey experiments are administered in which randomly selected subgroups of respondents are provid- Educational Choices, Market Design, and Student ed with certain pieces of information before answering Outcomes a question common to all respondents. Comparing the K. Werner, L. Wößmann in cooperation with the Wis- answers with a control group allows quantifi cation of senschaft szentrum Berlin, funded by the German Re- the causal eff ect of the respective information on pub- search Foundation (DFG) in the CRC/Transregio 190 lic opinion. “Rationality & Competition”, January 2017 to Decem- ber 2020, publication of fi rst results in Journal of Public The ifo Education Survey 2019 surveyed over 4,000 Economics 167, 2018; CESifo Working Papers No. 7000, adults and focused on educational inequality. Results 2018; No. 7192, 2018; No. 7536, 2018; No. 7936, 2019; show that respondents correctly assess the extent of Rationality & Competition CRC Discussion Paper No. existing educational inequalities: the majority does 128, 2018; No. 146, 2019; No. 149, 2019. not suspect large performance diff erences between boys and girls or between urban and rural areas, but Education decisions are key determinants of labor they do suspect diff erences with respect to socioeco- market opportunities, social mobility, and econom- nomic status or migration background. According- ic growth. This project looks at the extent to which ly, unequal opportunities for children from diff erent traditional models can explain utility-maximizing social backgrounds or with and without migration individual education decisions like, for example, the background are perceived as a problem. Another key decision between an apprenticeship and university fi nding is that Germans support the reduction of in- education. A special focus is on potential informa- equality in education. tion asymmetries that can provide an explanation for diff erences in education decisions as part of a traditional cost-benefi t model. To this end, random Which Reform Proposals Are Supported by Germans? Many reforms that could reduce inequality are widely supported subgroups of participants in a survey receive relevant Completely favor Somewhat favor information in survey experiments before answering Neither favor nor oppose Somewhat oppose Completely oppose the same questions as an uninformed control group. Scholarships for low-income students 47 36 11 4 This makes it possible to identify the causal eff ect of

Increased public spending for schools information provision on reported decisions. In addi- 43 38 10 6 with many disadvantaged students tion, the project investigates the infl uence of behav- Free preschool 49 29 10 9 ioral factors like self-confi dence or time and risk preferences on behavior in education decisions. To obtain Compulsory preschool 35 32 14 12 8 a comprehensive picture of the relevant factors infl u- Higher salaries for teachers of disadvantaged students 30 34 18 13 5 encing educational decisions, the project works with

/ (&+$ƞ"/$/!"Ǜ 33 28 20 14 5 samples of both adults and adolescents between 14 and 17 years of age. All-day schooling 24 32 14 19 11

Coeducation of students with and without learning disabilities 16 28 15 26 15

0% 25% 50% 75% 100% Source: ifo Education Survey 2019. © ifo Institute

30 ifo Annual Report 2019 IFO CENTER FOR THE ECONOMICS OF EDUCATION

Evaluating the Eff ectiveness of a Mentoring of such diff erences are not well understood to date. Program The early-stage researcher project in this network S. Resnjanskij, S. Kersten, F. Hampf, K. Wedel, L. Wöß- conducted at the ifo Institute focuses on reforms of mann, A. Wurm, J. Ruhose, S. Wiederhold, funded by a teacher professionalization and accountability. The consortium of non-profi t foundations and the Commis- project investigates how policy reforms aff ected teach- Studying how sioner of the Federal Government for Migration, Refu- er preparation and the impact that this has on student policy reforms aff ect gees, and Integration, June 2015 to March 2021. performance. Using international large-scale student teacher preparation assessments such as PISA, TIMSS, and PIRLS, the in- and ultimately Social mobility in Germany is still very low. This is re- direct impact of such reforms on the performance of student performance fl ected in the fact that children with disadvantaged or students in math, science, and reading is analyzed. migration backgrounds are most likely to visit the lowest The following step will be to explore how teacher and academic school track in secondary school. Oft en, these school reforms shaped the teaching labor force using children do not make the leap to an apprenticeship po- TALIS, an international survey conducted on teachers, sition or further schooling. Instead, they are stuck in the with a particular emphasis on the role of teacher ac- transitional system and thus have only a small chance countability and teacher assessment. of upward social mobility. Possible reasons for the lack of perspective are inadequate assistance of parents How Does Reducing the Intensity of Tracking with low income or education levels in school-related Aff ect Student Achievement and Equity? work, low school quality, a resulting lack of training ma- Evidence from German State Reforms turity, only vague ideas about potential jobs, and a lack M. Piopiunik, L. Wößmann, funded by the German Re- of detailed knowledge about the German educational search Foundation (DFG) in the DFG Priority Program system. Given these problems, mentoring and coaching 1646 “Education as a Lifelong Process: Analyzing Data programs may be an eff ective way to improve the future of the National Educational Panel Study (NEPS),” July prospects of students from low-track schools. This proj- 2018 to July 2020. ect investigates how one of the largest 1:1 mentoring programs in Germany aff ects school grades, social com- The project aims to identify the eff ect of a reduction in petencies, and labor market success of students from the intensity of tracking on the level and equity of stu- low-track schools. The evaluation aims to investigate dent outcomes in German school systems. To do so, this both short-term and long-term eff ects of the program project exploits reforms that were implemented in half of and to uncover concrete mechanisms behind them to the German states and reduced the tracking intensity in provide generalizable recommendations for the design secondary schooling. To identify the reform’s eff ects, the of mentoring programs. In 2019, follow-up surveys cov- project applies a diff erence-in-diff erences approach to ering the school transition period were conducted to data of the 5th-grade and 9th-grade cohorts of the Na- identify potential long-term benefi ts of the mentoring. tional Education Panel Study (NEPS). It will investigate Furthermore, the econometric analysis of short- and eff ects on students’ reading and math achievement, stu- medium-term eff ects has started. dents’ age at the end of 9th grade, as well as the probability of obtaining a middle-school degree (Mittlere Reife) Outcomes and Causal Inference in International and attending Gymnasium in grade 9 and grade 10, re- Comparative Assessments spectively. The project will also investigate whether ef- P. Sancassani, L. Wößmann, M. Piopiunik, ongoing fects depend on students’ age, migration background, or doctoral project, funded by the European Commission socioeconomic background. Besides looking at achieve- Horizon 2020 framework, Marie Skłodowska-Curie Eu- ment levels, possible eff ects on the inequality in stu- ropean Training Network, August 2018 to July 2021. dents’ reading and math achievement will be explored.

The European Training Network investigates how ed- The Eff ects of Information and Assistance for ucational policies infl uence educational outcomes Parents on Early Childcare Enrollment worldwide. One of the most salient fi ndings in the fi eld P. Lergetporer, H. Hermes, F. Peter in cooperation with of education is that there are huge national diff erences ifo research professor S. Wiederhold, Catholic Universi- in student achievement in international comparative ty of Eichstätt-Ingolstadt, funded by the Jacobs Foun- studies. However, the reasons for and consequences dation, November 2016 to November 2020.

ifo Annual Report 2019 31 IFO CENTER FOR THE ECONOMICS OF EDUCATION

Early childcare is an essential tool to support child de- ferences approach. The project will use administrative velopment. Although existing research suggests that data (e.g., Microcensus) as well as survey data (e.g., Assessing barriers to children from families with low socioeconomic status SOEP) and the results of standardized student achieve- early childcare (SES) benefi t most from center-based childcare, their ment tests (e.g., PISA). participation rates tend to be relatively low compared to children from better-off families. This project inves- One of the reform evaluations is already accepted for tigates whether informational and behavioral barriers publication in the Economics of Education Review, and can explain this underrepresentation of disadvantaged deals with the question of dropouts from upper-sec- children. In a fi eld experiment with more than 600 ondary school (Gymnasium) in Germany who did not parents of childcare-aged children, we randomly pro- receive any formal degree until 1965. But then it was vided (i) information about the childcare application decided that all high-track students should auto- process, and (ii) personalized expert assistance to nav- matically receive an interim degree upon successful igate the childcare application process. The baseline completion of grade 9. Evaluating the eff ects of this survey shows that low-SES parents plan to enroll their reform with data from the National Educational Panel children almost half a year later in childcare than high- Study (NEPS), the study fi nds that the reform not only er-SES parents. At the same time, low-SES parents lack reduced switching between school tracks, but also in- basic information about the German childcare system creased successful high-track completion, university in general, and the application process in particular. In entrance rates, and later income. 2019, the focus of the project was on measuring initial post-intervention outcomes. The results show that the International Comparative Education Policy Lab treatment increased the number of applications and L. Wößmann, L. Kinne in cooperation with ifo research improved application quality among low-SES parents. professor E.A. Hanushek, Stanford University, funded by the Smith Richardson Foundation, March 2019 to Eff iciency and Equity in Education: Quasi- March 2021. Experimental Evidence from School Reforms across German States (Eff EE) Countries around the world exhibit widely diff erent L. Wößmann, L. Zierow, L. Mergele, B. Arold, E. Gre- educational outcomes; these diff erences lead directly wenig, F. Hampf in cooperation with J. Allmendinger, to the skills of their future labor forces and have clear M. Helbig, Berlin Social Science Center (WZB), funded implications for future economic performance. Un- by the Leibniz Competition, May 2019 to April 2022, derstanding what drives these diff erences has a po- publication of fi rst results in Economics of Education tentially large impact on policies that can profoundly Review, forthcoming. improve future economic well-being. However, most educational policy discussions and related policy eval- German states (Länder) reformed many important as- uations involve actions within individual countries that pects of their school systems over the post-war period. have unclear implications for explaining the signifi cant Examples include the introduction or termination of international performance gaps. Instead, when done grading during the fi rst years of primary school, grad- well, cross-national research exploiting internation- ing of social behavior, the binding character of school al assessments can make important contributions to track recommendations, religion as compulsory sub- these policy debates. The heart of the research project ject, and compulsory STEM subjects until graduation. involves deepening and expanding previous work on How did such reforms aff ect the academic achieve- international comparative education studies, partic- ment and socio-emotional development of aff ected ularly work on substantive diff erences in the institu- students and their life-course outcomes? This project tions of educational systems. Currently, four projects is conducted in cooperation with the Berlin Social Sci- are planned on the following topics: the identifi cation ence Center (WZB). and production of high teacher quality; the interaction of schooling and immigration; the development of a In order to evaluate the German school reforms, the cross-country matrix of policy changes; and the role project will apply up-to-date and appropriate micro- of intertemporal preferences of national populations econometric techniques. For causal analysis of the such as patience and risk tolerance for educational eff ects, it will rely especially upon the diff erence-in-dif- outcomes.

32 ifo Annual Report 2019 IFO CENTER FOR THE ECONOMICS OF EDUCATION

Empirical Studies in the Economics of Education phasizes the role of equality of opportunity in educa- Exposing the myth L. Wößmann, various ongoing research projects, recent tion as a core element of the social market economy. of the urban-rural publications, among others, in: European Economic Re- The annual report of the Aktionsrat Bildung focuses on dichotomy view, forthcoming; Education Economics, forthcoming; the connection between education and region, expos- Education Next, 2019; Journal for Educational Research ing the usual urban-rural dichotomy as a myth. Online, 2019; NBER Working Paper No. 25648, 2019; CESifo Working Papers No. 7536, 2019; No. 7556, 2019; Human Capital Production and Migration No. 7579, 2019; No. 7936, 2019; Handbook of Cliometrics, M. Piopiunik, ongoing postdoctoral research project, 2019; Research Handbook on Sociology of Education, publication of fi rst results in: Journal of Labor Econom- 2019; Advances in the Economics of Religion, 2019; chap- ics, forthcoming; Journal of Human Resources 54(4), ters in collected volumes; reports of the Aktionsrat Bil- 2019; Journal of Human Resources 53(3), 2018; European dung and the Academic Advisory Council of the Federal Economic Review 92, 2017; Economics Letters 139, 2016; Ministry of Economics and Energy, as well as contribu- Economics of Education Review 42, 2014; Scandinavian tions in several daily and weekly newspapers. Journal of Economics 116(3), 2014; European Journal of Political Economy 31(9), 2013. Numerous ongoing projects deal with various topics in the economics of education. A number of current stud- One focus of this research project is the application of ies investigate how the provision of specifi c pieces of microeconometric evaluation methods to policy-rele- information aff ects the educational policy preferences vant questions in the areas of education and labor eco- of the population. Among the topics addressed are the nomics. One study shows that diff erences in the cog- political approval rates for tuition fees, especially in nitive skills of teachers are an important determinant their downstream income-contingent form, higher ed- of international diff erences in student performance. ucation spending, childcare allowance, and parent-in- Another study analyzes the importance of teachers’ dependent BAföG. A methodological study examines subject knowledge for student performance in several whether incentive provision improves belief elicitation countries in sub-Saharan Africa. Another project uses in large-scale surveys. administrative micro data from the US state of Flori- da to show that teachers who entered the profession Several projects use microeconometric techniques to during a recession are considerably more eff ective in analyze the extensive micro datasets of various inter- raising their students’ test scores, suggesting that the national student achievement tests such as PISA and relative economic attractiveness of a teaching job TIMSS. The goal is to determine which lessons can be plays an important role in bringing eff ective teachers drawn from international student tests for educational into the profession. Another project uses a randomized policies aimed at eff iciency and equal opportunities. choice experiment among HR managers in Germany to Recent studies deal, among others, with a quantifi ca- investigate which skill signals are eff ective when enter- tion of the economic returns to improved educational ing the labor market. performance in the European Union and with long-run trends in the socioeconomic gap in student achieve- Another focus of the project is on migration issues. ment in the United States. One study investigates whether a high concentration of immigrants in a region hampers the integration Other studies deal with the importance of productivity chances of the migrants’ children. The results indi- One focus signals in the labor market using an experiment with CVs cate that children growing up in regions with high is on various among human-resource managers and with the lifetime co-ethnic concentration have lower host-country migration issues eff ects of job-specifi c vocational education in the labor language skills and tend to achieve lower educational market. Two contributions on economic history deal with degrees. Another project, using a survey experiment the impact of education on socioeconomic development among university students, investigates whether the during the Industrial Revolution and of Martin Luther’s attitudes of Germans towards refugees depend on the quest for education on German economic history. perceived education level of the refugees. A further study investigates whether the impact of immigration A report from the Academic Advisory Council at the on crime depends on regional labor market condi- German Federal Ministry of Economics and Energy em- tions.

ifo Annual Report 2019 33 IFO CENTER FOR THE ECONOMICS OF EDUCATION

The Eff ects of Information Provision more light on how to design eff icient and equitable pol- on Policy Preferences – Evidence from Survey icies aff ecting family life, child care, and education. The Experiments methodological framework takes particular advantage P. Lergetporer, ongoing postdoctoral research project, of the diff erent timing of the reforms’ implementation publication of fi rst results in Journal of Economic Behav- across states, but also employs variation of reform im- ior and Organization, forthcoming; Journal of Public Eco- plementation across municipalities within states. The nomics 167, 2018; European Journal of Political Economy diff erence-in-diff erences analyses are conducted using 53, 2018; European Economic Review 106, 2018; Econom- large administrative datasets (e.g., the German Micro- ics Letters 152, 2017; European Economic Review 90, 2016; census) as well as rich survey data (e.g., NEPS, SOEP). In Journal of Economic Behavior and Organization 115, 2015; 2019, a study was completed on the introduction of the Journal of Economic Psychology 46, 2015; Journal of the so-called baby year in the GDR. Since almost all women Economics Science Association 1(2), 2015; Proceedings of worked in the GDR, the analysis is not biased by selec- the National Academy of Sciences 111 (19), 2014; CESifo tion of women into the labor market. The alternative Working Papers No. 5938, 2016; No. 6192, 2016; No. 6602, to maternal care was comparable for all children due 2017; No. 6832, 2017; No. 7000, 2018; No. 7192, 2018; to standardized public childcare available even for the No. 7222, 2018, No. 7396, 2018. youngest children. The results show that the extension of parental leave from six to twelve months increased life Empirical research has produced many insights on how satisfaction among the aff ected children in adulthood. education policies could be altered to improve student outcomes. But political actors are frequently reluctant An Econometric Analysis of the Role of to carry out reforms supported by high-quality research. Individualism in Cognitive Skills Development One important reason for this discrepancy between ev- S. Resnjanskij, ongoing postdoctoral research project. idence and action could be that political actors are re- sponsive to the opinions of voters and of well-organized Using data from an international adult skill assessment interest groups, which might diverge from what is in the (PIAAC), the project investigates the role of individu- public interest more generally. This postdoctoral re- alism as one main cultural dimension in skill develop- search project empirically analyzes the determinants of ment. Individualism has recently been linked to eco- public support for education policies. Public opinion is nomic growth, but little is known about its implications An empirical analysis studied by means of representative survey experiments for human capital investments at the individual level. of what shapes public with particular focus on interest groups and the eff ects The analysis is based on 7,500 individuals from 69 coun- support for education of information provision on public preferences. The in- tries of origin. To investigate the relationship between policies dividual topics analyzed include, among others, edu- individualism and adult skills, the project looks at skill cational spending, tuition fees, educational inequality, diff erences between migrants from diff erent cultural educational aspirations, political party preferences, and backgrounds within destination countries, eliminating gender norms. In addition to these substantive topics, cross-country diff erences in educational and labor mar- the project also investigates various methodological is- ket institutions. Previous research suggests that culture sues, such as what eff ects fi nancial incentives have on is persistent and migrants take their original cultural respondent behavior, or what infl uence the survey mode toolkit with them when they relocate. Individualism is has on the representativeness of the results. measured at the country level using the Hofstede index. Results indicate that a one-standard-deviation increase Econometric Evaluations of Education Reforms in individualism is associated with an increase in nu- in Germany meracy skills by 0.25 standard deviations. L. Zierow, ongoing postdoctoral research project, publication of fi rst results in Economics of Education Review, The Role of Human Capital in Reforms of Policy- forthcoming; CESifo Working Paper No. 7806, 2019. making L. Mergele, ongoing postdoctoral research project, pub- This postdoctoral research project aims at estimating lication of fi rst results in International Tax and Public the causal eff ects of several major reforms of German Finance, 24, 2017; Journal of Public Economics, forth- states over the last decades that changed family poli- coming, BDPEMS Working Paper 2017-02, CESifo Working cies and the educational system. The results aim to shed Paper No. 7957, 2019; ifo Schnelldienst 2/2020.

34 ifo Annual Report 2019 IFO CENTER FOR THE ECONOMICS OF EDUCATION

Political reforms may shift policymaking in two dimen- The aim of the doctoral project is to gain a better un- sions. First, the authority for policymaking may change derstanding of the interrelation between education, Evaluating the between higher and lower levels of government (de- skills, and labor market outcomes. Based on high-qual- relationship between centralization). Second, the government may trans- ity skill data from PIAAC (“PISA for adults”), the fi rst education, skills, fer responsibility for certain domains to public sector project studies the eff ect of schooling on labor-mar- and labor market agents (privatization). This postdoctoral research proj- ket-relevant cognitive skills, exploiting the staggered outcomes ect examines how the human capital of the individu- introduction of a compulsory ninth grade in basic-track als aff ected by these reforms shapes the outcomes of schools across western German federal states. Instru- changes in policymaking. Policy changes studied in- mental-variable results suggest that the additional clude the decentralization of public employment ser- year of schooling increased numeracy skills of ba- vices in Germany and the privatization policies in east- sic-track students by about 0.2 standard deviations. ern Germany following the fall of the Berlin Wall. The project combines large-scale microdata and empirical A second project investigates the eff ects of economic microeconometric tools. The results suggest, for in- conditions at high-school graduation on college in- stance, that low-qualifi ed job seekers are more likely vestment decisions, subsequent skill formation, and to fi nd employment once local governments assume labor market outcomes. For identifi cation, the analy- responsibility for providing public employment ser- sis exploits business cycle fl uctuations at high-school vices. In the further course of the project, the focus will graduation over a 20-year period across 28 developed be increasingly on reforms within the school system. countries as a source of exogenous variation in the labor market opportunities of potential college entrants. Institutional Frameworks and Education Findings suggest that recessions at high-school gradu- Decisions ation increase college enrollment and graduation, lit- K. Werner, ongoing postdoctoral project. Publication of eracy and numeracy skills, monthly wages, and partici- fi rst results in: Journal of Public Economics, 167, 2018; pation in training activities on the labor market. CESifo Working Papers No. 7000, 2018, No. 7192, 2018; No. 7936, 2019; Rationality & Competition CRC Discus- The third project analyzes the role of cognitive skills in sion Paper No. 128, 2018; No. 146, 2019; No. 149, 2019. explaining diff erences in university wage premia across countries. Using international data from the PIAAC Sur- Institutional features of an education system have the vey of Adult Skills, the study provides evidence that potential to create hurdles and stepping stones for the university wage premia vary substantially across coun- students it serves. The aim of this postdoctoral proj- tries. Conditioning on skills reduces these estimates ect is to understand how the institutional framework by about one quarter. While part of the wage premium interacts with education decisions made by students in each country captures diff erential selectivity into at diff erent points in time, and the private and societal university, its extent cannot account for the observed consequences of those decisions, for example in terms cross-country diff erences. Results from internation- of labor market outcomes. Therefore, the results will al diff erence-in-diff erences estimations and from an shed more light on two questions: fi rst, they will gen- instrumental-variable model exploiting variation in erate fi ndings on how reforms of the education system, university proximity within Germany suggest that part like the inception of new school types or curriculum of the contribution of skills to university wage premia reforms, aff ect the education outcomes of exposed refl ects a positive skill eff ect of university education. students. Second, the project will study how students Diff erences in the skill eff ect of university education make education decisions within a given system, and partly account for cross-country diff erences in univer- what sources they use to inform their decision. sity wage premia.

Education, Skills, and Labor Market Success: The last project analyzes data from the PIAAC Survey of Microeconometric Analyses Using Large-Scale Adult Skills to compare employment probabilities over Skills Assessments the working-life cycle for individuals with vocational F. Hampf, ongoing doctoral project, publication of ﬁ rst and general education. An initial employment advan- results in CESifo Economic Studies 63(3), 2017; ifo Work- tage of vocational education relative to general educa- ing Paper No. 313, 2019. tion turns into a disadvantage later in life.

ifo Annual Report 2019 35 IFO CENTER FOR THE ECONOMICS OF EDUCATION

The Political Feasibility of Educational Decisions curricula aff ects long-term attitudes on evolution and E. Grewenig, ongoing doctoral project. later life decisions such as choice of major at university. A third research project analyzes the eff ect of the The doctoral project deals with the political feasibility introduction of interstate school curriculum standards of educational and labor market decisions, as well as in the US on student achievement. A fourth research the evaluation of an educational reform in Germany. A project aims to evaluate the extent to which education- fi rst research project investigates whether and how po- al success is determined by genetic endowments and sitions of the diff erent political parties aff ect the opin- how educational institutions can mediate genetic dif- ions of the German population towards educational ferences. reform proposals. A second research project methodologically examines how beliefs of the German population can be appropriately illustrated. In particular, it analyzes the impact on voters’ response behavior of a classic belief elicitation method frequently used by experimental economists: providing monetary incentives.

The third project investigates the impact of so-called gender norms, such as the norm that mothers should reduce their labor supply when their children are young, on intended labor market supply of adolescents in Germany. A fourth research projects studies a German educational reform concerning students’ transition from primary school into secondary schools. Before the actual transition takes place, each student obtains a recommendation from their primary school teacher on which track the teacher thinks the child should pursue. The aim of the project is to analyze the impact of binding teacher recommendations on the percentage of students attending high-track schools as well as on student achievement.

Microeconometric Analyses of School Reforms B. Arold, ongoing doctoral project.

The dissertation aims to analyze the eff ects of school curriculum reforms on long-term attitudes and life decisions of students applying quasi-experimental methods. The fi rst research project looks at the eff ects of Examining how the abolishment of compulsory religious education in changes to religious schools across German states by applying a panel data education aff ect approach using data from NEPS, ALLBUS, and SOEP. certain attitudes and The main focus is the extent to which such reforms behaviors aff ect religiosity, religious aff iliation, and personal prayer. In addition, other outcomes such as attitudes towards gender equity as well as family and labor market outcomes are analyzed.

The second research project focuses on the topic of evolution in US school curricula. The goal is to understand whether the omission of evolution from school

36 ifo Annual Report 2019 ifo Center for Industrial Organization and New Technologies

Disruptive innovation processes, digital transforma- clusions. The Center is particularly well-positioned to tion, and regulatory and corresponding institutional re- swift ly transfer these insights to relevant stakeholders sponses are oft en controversially discussed in public, in in academia, industry, and politics by publishing a va- the media, and in the policy debate without presenting riety of articles addressing diff erent audiences. It does “hard evidence” underlying the arguments. The research this through its active role in the policy debate (e.g., program of the ifo Center for Industrial Organization through regular participation at “Leibniz im Bunde- and New Technologies explores how policies can foster stag” (Leibniz in Parliament)), its contact with trade competitiveness and innovation, and thus promote sus- associations, and through the “Framework Agreement tainable economic prosperity in this challenging envi- on Conducting Economics Studies” with the Chamber ronment. Moreover, the Center empirically investigates of Commerce and Industry for Munich and Upper Ba- how transformative developments such as digitalization varia. This primarily applied work in turn inspires new and innovation aff ect society and how policy can steer research projects/questions in which the acquired in- them in a direction so that individuals and fi rms in a so- stitutional knowledge is employed to fi nd empirical cial market economy benefi t equally. The Center helps answers. Examples of determinants of innovation that to shed light on these questions by interrelating applied have been analyzed by the Center’s economists include economic research with industry expertise, diverse data competition, R&D subsidies and tax credits, regional sources, and modern methods of causal inference and policy, migration, and intellectual property rights. policy evaluation. The Center’s unique organizational profi le enables its applied microeconomists, industry DIGITAL INFRASTRUCTURE AND THE SOCIO- experts, and data specialists from the LMU-ifo Econom- ECONOMIC IMPACT OF DIGITAL TRANSFORMATION ics & Business Data Center (EBDC) to collaboratively Digitalization is changing the world at an ever-increas- produce cutting-edge analysis that is of high value to ing pace. It has fundamentally altered how individu- academics, practitioners, and policymakers alike. This als behave, how production and business processes internal structure is further corroborated by the Cen- are organized, and how market participants interact. ter’s strong ties to Munich’s growing group of research- At the same time, these processes and their inherent ers in innovation economics, to industry partners, and complexity present new challenges to researchers, to the the broader (inter-)national research community, practitioners, and policymakers. This research area especially the CESifo Research Network. The Center’s therefore tries to shed light on the socioeconomic im- Rigorous empirical research activities comprise the following three areas, pact of digitalization using rigorous empirical analysis. analysis which are closely intertwined and interrelated. Additionally, the Center focuses on the question of which industry, innovation, and digital infrastructure COMPETITIVENESS, INSTITUTIONS, AND policies, and what kind of institutional framework can REGULATIONS help fi rms and individuals to harness the potential of Many markets have industry-specifi c features and the digital transformation. regulations that need to be considered in the assessment of sectoral competitiveness, productivity, and overall welfare. Through its long-term qualitative industry monitoring (e.g., “Branchen special”, EURO- Projects Completed in 2019 CONSTRUCT, and various studies on trade fairs), the Center has built up the relevant expertise to reveal and German and European Industrial Policy and the evaluate measures for strengthening competitiveness Rise of China and the eff ects of regulatory changes. The Center in- C. Fuest, N. Czernich, O. Falck for the Foundation for vestigates the consequences for fi rms and industries, Family Businesses, June 2019 to December 2019, pub- individuals, and society in general. lication in ifo Schnelldienst 72(22), 2019; 72(23), 2019; 73(2), 2020. INNOVATIONS The Center’s research covers a broad range of the de- China has undergone rapid economic development in terminants and eff ects of innovation and entrepre- recent decades and can keep up with global competi- neurship, and emphasizes the policy-relevant con- tion in many markets. Chinese companies are becom-

ifo Annual Report 2019 37 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

ing increasingly present in Germany and on the world Digital Competencies – Is German Industry Ready markets. In a globalized world with a market economy, for the Future? this is perfectly normal for an emerging country. How- O. Falck, N. Czernich, T. Fackler, S. Schüller, S. Wichert ever, it may be problematic if Chinese companies enjoy in cooperation with LinkedIn, March 2018 to July 2019. advantages over domestic companies or competitors from third countries in foreign markets through prefer- As a very important economic pillar in Germany, the ential access to resources in their home country. This manufacturing sector in particular must proactively raises a justifi ed concern that European and German address the shift s that the digital transformation will companies will (irreversibly) fall behind in competition bring today and in the future. Therefore, this study ex- with state-supported Chinese companies. The ques- amined how German manufacturing is positioned with tion therefore arises which answers German and Eu- regard to the digital skills of its employees. This analy- ropean economic policy can and should provide here. sis is based on extensive, detailed member profi les of the professional network LinkedIn in Germany, which Development of This study gives an overview of the development of provides new insights into the qualifi cation structure German-Chinese German-Chinese trade and investment relations and in the German manufacturing sector and extends pre- trade and describes the institutional conditions under which vious fi ndings from off icial statistical data. In addition investment they take place, in particular, for German companies to taking stock of applied and advanced digital skills in operating in China. Finally, it discusses what measures diff erent industries, professions, and regions, the study German and European policymakers should take to en- also examines the economic sectors from which digital sure fair competition between German, European and skills come, how they are distributed across hierarchi- Chinese companies. cal levels, and how they have developed over time: – Today, 48 percent of LinkedIn members from the Car Manufacturing – How the CASE Megatrends German manufacturing sector report digital literacy. Transform the Value Chain In the case of advanced digital skills, i.e., skills that O. Falck in cooperation with J. Koenen, ARC Econ enable companies to drive digitization and develop GmbH, for the Chamber of Commerce and Industry for new business models, the fi gure is only 36 percent; Munich and Upper Bavaria, March 2019 to July 2019, a surprisingly low fi gure for a country with highly publication in IHK Impulse für die Wirtschaft spolitik, digitized production. Munich 2019. – The higher in the hierarchy the members are, the Due to the interaction of four megatrends (connected less advanced digital skills they report: 41 percent of cars, autonomous driving, shared mobility, electric ve- new entrants have advanced digital skills, 40 per- hicles; acronym: CASE), the automotive industry is fac- cent of employees, 30 percent of managers, and only ing fundamental change in the next two decades. The 25 percent of board members. study examines the possible consequences for the in- – Diff erences are apparent in terms of professions, dustry in Bavaria along the entire value chain. The Ba- gender, size of employer, and geographical location: varian automotive industry will successfully navigate as expected, most soft ware developers report the ongoing transformation towards electric drives. having advanced digital skills (88 percent), but only However, there is a risk that manufacturers could be- 42 percent of the project managers, 39 percent of come dependent on leading internet companies in the the mechanical engineers, 31 percent of the product core area of connected cars. managers, and 21 percent of the sales specialists. Women are strong in applied digital skills, whereas Rather than subsidizing cell production in Germany, men are strong in advanced digital skills (37 percent; research and development on battery science and women: 33 percent). Employees in small and technology should be promoted. There is a need for medium-sized enterprises (SMEs) have fewer ad- regulation in Germany and Europe in the areas of au- vanced digital skills (35 percent) than those in large tonomous driving and alternative mobility services, companies (41 percent). Of the 10 cities with the promoting and rewarding innovation and at the same highest shares of digital skills in the German time strengthening complementarities to public trans- manufacturing sector, 6 are located in southern port. Germany.

38 ifo Annual Report 2019 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

The growing importance of digital skills is illustrated by – The sector had 118,616 employees subject to so- the fact that the share of all newly added skills is increas- cial insurance (SI) in 2018 (+36 percent since 2012), ing across all sectors. However, digital skills are not yet representing 8 percent of all SI employees in the standard equipment for all employees in German man- greater Munich area. Of all ICT employees, 85 per- ufacturing. Therefore, attention should be paid to the cent work in services, the majority of them in pro- teaching of applied and advanced digital skills at all programming and IT consulting. fessional levels, including executive management levels. – In the city, the ICT sector generates more than 7 percent of the total sales of all industries. ICT Sector in the Greater Munich Area K. Candel-Haug, N. Czernich, O. Falck for the Chamber – Of all the new companies in Germany, 5 percent are of Commerce and Industry for Munich and Upper Ba- founded in Munich. Of all the new companies in the varia, October 2018 to September 2019, publication in ICT sector, 9 percent are founded in Munich. IHK Impulse für die Wirtschaft spolitik, Munich 2019. – Greater Munich’s ICT sector also did well in comparison to other highly innovative regions in Ger- Greater Munich’s ICT The study was being conducted as part of a commis- many: more businesses, more employees, signiﬁ - sector sion from the Chamber of Commerce and Industry for cantly higher sales, as well as its start-ups having an Munich and Upper Bavaria to provide objective, sci- above-average number of employees. ence-based economic advisory work. Entitled “ICT in the Greater Munich Area, 2019,” the study examined Newly Founded ICT Companies with at Least One Employee, the structure of the ICT industry in the greater Munich 2012–2016 area, as well as the industry’s development over the Berlin past ﬁ ve years using three indicators: “employees sub- Munich ject to social insurance”, “number of companies”, and 11% “revenue”. Furthermore, it evaluated ICT in the greater Rhine-Main region 9% Munich area compared to other locations in Germany Hamburg and abroad, and focuses especially on start-up activity. 6% Rest of Germany

5% Employees Subject to Social Insurance in the ICT Sector in the Greater Munich Area 69% ICT Services ICT Wholesale ICT Production 120,000

100,000 Source: Establishment History Panel; German Federal Employment Agency. © ifo Institute 80,000

60,000 ifo Industry Colloquium 2019 40,000 P. Brandt, N. Czernich, L. Dorﬀ meister, O. Falck, S. Lit-

20,000 sche, S. Rumscheidt, J. Schricker, C. Vogel, K. Wohlra- be, A. Wölﬂ in cooperation with the Chamber of Com- - merce and Industry for Munich and Upper Bavaria and 2012 2013 2014 2015 2016 2017 2018 ﬁ nancially supported by the Bavarian State Ministry of ɭ,1) " 1,/: +36% Source: German Federal Employment Agency. © ifo Institute Economics, Regional Development and Energy; publication in ifo Schnelldienst 73(1), 2020.

The results of the study are as follows: On November 6, 2019, the ifo Industry Colloquium – Total number of businesses increased by 11 percent took place again. Around 150 representatives from in- over the 2012–2017 period. Of all businesses in the dustry, politics, and science took part. The welcome Munich region, 6 percent are active in ICT. address by Eberhard Sasse, President of the Chamber

ifo Annual Report 2019 39 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

of Commerce and Industry for Munich and Upper Ba- Forum 3 – Construction industry: Challenges and new varia, was followed by the opening speech by Clemens approaches to modernization Fuest, President of the ifo Institute, on the topic of “The Discussion moderator: J. Wallner, Bayerischer Bauin- German Economy: Economic Situation and Economic dustrieverband e.V.; sector development: L. Dorﬀ meis- Policy Needs”. ter, ifo Institute; expert contributions: J. Pahl, German Energy Agency (dena), I. Hübner, Vonovia Technischer Service Nord, L. Dorﬀ meister, ifo Institute.

Forum 4 – Services: How do companies have to organize themselves in order to make optimal use of IT services? Discussion moderator: C. Geißler, ifo Institute; sector development: K. Wohlrabe, ifo Institute; expert contributions: N. Czernich, ifo Institute, C. Frischmuth, Bundes- verband für selbständige Wissensarbeit e.V., B. Wiserner, ConSol Consulting & Solutions Soft ware GmbH.

The next ifo Industry Colloquium will take place on October 28, 2020.

The Economic Impact of the German Trade Fairs Prof. Clemens Fuest, President of the ifo Institute H. Penzkofer for the Association of the German Trade Fair Industry, August 2017 to September 2019, publica- This was followed in two parallel blocks by the forums tion in press releases of the AUMA, AUMA-Schrift enreihe Current trends and “Industry” and “Trade” as well as “Construction indus- Edition 49. challenges try” and “Services”. In the four forums, the ifo Insti- tute’s industry analyses and forecasts were presented Direct spending by exhibitors, visitors, and trade fair and current trends and challenges in the respective venues impacts almost all sectors of the German econ- economic sectors were discussed. omy. Income as a result of this eff ect, a large part of which is spent again, must also be taken into account. This year’s guest speaker was Andreas Peichl, Director Thus, according to calculations, the result is a boost of the ifo Center for Macroeconomics and Surveys, on in output double that of direct spending, a total of the topic of “Regional diff erences in the German real EUR 28.0 billion. Trade fairs also ensure that 231,000 estate market”. people have full-time jobs and generate EUR 4.5 billion in taxes at the federal, state, and municipal level. Thus, Speakers at the forums were: besides fulfi lling their main purpose of providing a mar- ketplace and transparency for supply and demand in Forum 1 – Industry: Does Germany need a more active individual sectors, trade fairs also have a considerable industrial policy? overall economic impact. Discussion moderator: H. Schultz, ifo Institute; sector development: S. Litsche, ifo Institute; expert contribu- The Economic Impact of the Frankfurt Trade Fairs tions: O. Falck, ifo Institute, A. Fier, Deutsche Telekom and Events AG, R. Obermeier, Chamber of Commerce and Industry H. Penzkofer for the Messe Frankfurt GmbH, January for Munich and Upper Bavaria. 2017 to March 2019.

Forum 2 – Trade: Marketplaces and platforms on the rise The total aggregate output as a result of the direct and Discussion moderator: W. Fischer, CityPartnerMünchen indirect impact of a typical trade fair and event year is e.V.; sector development: S. Rumscheidt, ifo Institut; ex- about EUR 3.6 billion, or approximately 33,260 gain- pert contributions: G. Wittmann, ibi research, L. Schade, fully employed persons. Furthermore, the resulting Mercateo, P. Höly, ANWR Group/Schuhe, S. Rumscheidt, tax revenue of the various authorities (City of Frank- ifo Institute. furt, Hesse, and Germany) was estimated. With the

40 ifo Annual Report 2019 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

trade fair and event related output of EUR 3.6 billion, Economic Outcomes and Driving Forces the concomitant tax revenue is about EUR 657 million. of Innovation: Evidence on Digitization and Migration The Trade Fair Index K. Candel-Haug, completed doctoral project. H. Penzkofer in cooperation with Messe Frankfurt GmbH, January 2018 to May 2019. This dissertation project focuses on the creation and diffusion of innovation in the context of digitization The results of this analysis clearly show that trade and migration. Two papers showed how digitization fairs are a mirror of the markets. Key fi gures for inter- and the possibilities of new information and commu- national trade fairs in Germany, like developments in nication technologies impact fi rm organization and visitor and exhibitor numbers, are linked very closely productivity in various ways. The third chapter of the to trends in German economic output which, in turn, dissertation project analyzed the contribution of immi- also impacts several countries in Europe. The Trade grants from new EU member states to innovativeness Fair Index describes both the business developments in Germany and, unlike results for the US, fi nds signifi - and business expectations of German companies at in- cant positive complementarities. ternational consumer and capital goods trade fairs in Germany. It provides an up-to-date evaluation of the Economics of Innovation in Telecommunications trade fair activities of these companies. A. Mazat, completed doctoral project, supported by Deutsche Telekom AG. The Economic Impact of the Dortmund Trade Fairs, Congresses, and Events In the doctoral project of Andreas Mazat, the fi rst paper H. Penzkofer for the Westfalenhallen Unternehmens- addressed the eff ect of high-speed internet availabil- gruppe Dortmund GmbH, January 2017 to November ity on entrepreneurs’ decisions to start a business, as 2019. well as on fi rm location. Another study addressed the question of whether the increasing popularity of on- The total purchasing power eff ect as a result of the line shopping among the German population leads to a direct and indirect impact of a typical trade fair and change in the (employment) structure in the traditional event year is about EUR 493 million, or approximately stationary retail sector. The third dissertation project 4,240 gainfully employed persons. With the annual rev- of A. Mazat examined the importance of improving enue relating to the trade fair and event amounting to broadband internet product quality for the competi- EUR 493 million, the concomitant tax revenue is about tiveness of German internet providers. In addition, the EUR 88 million. potential of mobile internet technologies to close gaps in broadband internet coverage across rural areas is considered. 2/ %0&+$,4"/ƛ" 10 Average event year of Westfallenhallen Dortmund Studies on Empirical Innovation and Regional Billion euros 600 Economics T. Lohse, completed doctoral project. 493.20 500

382.60 The fi rst part of the study evaluated a place-based 400 innovation policy, the so-called Innovative Regional 300 Growth Cores program. This program has been central 212.00 to the economic development strategy of eastern Ger- High-speed 200 many but has received only little (empirical) attention internet access so far. The second part investigated how the willing- impacts investment 100 ness of consumers to shop online aff ects the station- 0 ary retail sector. The third part of this dissertation was Dortmund Whole of North Rhine- Whole of Germany concerned with the question of how the availability of Westphalia high-speed internet access impacts fi rm-level invest- Source: Calculations ot the ifo Institute. © ifo Institute ments.

ifo Annual Report 2019 41 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

fortunately continue to support us as a doctoral stu- Current Projects dent at the EBDC and at the same time do his doctorate at LMU. Framework Agreement on Conducting Economics Studies In 2019, the EBDC continued to support numerous re- O. Falck, A. Fichtl for the Chamber of Commerce and In- search projects, has carried out service projects, and dustry for Munich and Upper Bavaria, July 2017 to July initiated new collaborations. 2021. In particular, the ifo Institute and the EBDC further The Chamber of Commerce and Industry for Munich intensifi ed their cooperation with the Bavarian State and Upper Bavaria has commissioned the ifo Institute Off ice for Statistics (LfStat). For this reason, the presi- to conduct a major, ongoing project involving indepen- dents of the two institutions signed a fi rst agreement dent science-based economic advisory work. As part of in April. The specifi c goal is to actively promote joint this project, the ifo Institute is involved in conducting research projects that provide new, more detailed in- economic studies (meta-analyses, empirical policy eval- sights into regional economic issues in Bavaria. In No- uations, execution and evaluation of surveys, etc.), the vember, a second agreement was renewed. It will en- Exchange draft ing and organization of economic policy-oriented able the branch off ice of the Research Data Centre of of knowledge on events, as well as a regular exchange of knowledge on the Statistical Off ices of the Länder at the EBDC to con- economic policy economic policy topics. All of ifo’s centers are involved tinue their work even aft er the LfStat moves to Fürth. topics in the project. The ifo Center for Industrial Economics Thus, researchers can still access administrative micro- and New Technologies is supervising the project. data for off icial statistics of the LfStat and the Federal Statistical Off ice in Munich in the future. The LMU-ifo Economics & Business Data Center (EBDC) In addition, the EBDC team has been working intensive- O. Falck, H. Mittelmeier, V. Reich, S. Wichert, S. Yang. ly on “Open Science” topics. In addition to the annual PhD student seminar on “Good Scientifi c Practice”, For the EBDC, the year 2019 was strongly infl uenced by there was another very well-attended workshop on the preparations for the Leibniz evaluation in July. In “Replicability and Reproducibility in the Social Scienc- particular, the EBDC team worked on a strategic, long- es”, which was held by Lars Vilhuber, the Data Editor term Big Data concept for the future of the EBDC. There of the American Economic Association. Furthermore, has been further change and continuity at the EBDC in the EBDC team developed a new platform for the reg- terms of personnel. istration and archiving of empirical projects and implemented it in the new ifo intranet. This platform now makes it even easier for ifo researchers to preserve their projects in the long term and make them available for follow-up research.

Aft er the return of EBDC doctoral student Shuyao Yang from her parental leave, the complete EBDC team is ea- ger to tackle new exciting projects in 2020.

Infrastructure Project of the DFG CRC “Rationality & Competition” H. Mittelmeier, S. Wichert, funded by the German Sci- ence Foundation, January 2017 to December 2020.

Since January 2017 the EBDC has been part of the infrastructure project of the DFG-funded collaborative Aft er many years as a student assistant and most re- research center (CRC) “Rationality & Competition”, cently as a specialist, our colleague Valentin Reich will which is backed by several research institutions from

42 ifo Annual Report 2019 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

Munich and Berlin. The members of the CRC analyze Recommendations on Databases and Methods for individual- and fi rm-level (ir)rational decision behavior the Evaluation of R&D Tax Incentives in a competitive environment and investigate suitable O. Falck, A. Peichl in cooperation with KMU Austria and policy responses in such situations to prevent market IHS Wien for the Federal Ministry of Education and Re- failure. The infrastructure project supports and links search, September 2019 to April 2020. the activities of the CRC’s empirical research. It coordinates data collection eff orts for all CRC members – As of January 1, 2020, the German federal government administratively and methodically; gives recommen- has introduced R&D tax incentives. By promoting re- dations on research data management; and provides search through tax incentives, the federal government a secure infrastructure to work with confi dential data. intends to increase the share of R&D investments in Promoting research The EBDC in particular is responsible for data archiving Germany’s gross domestic product to 3.5 percent by through tax and data publication to promote replications and sec- 2025 and hopes to supplement existing project fund- incentives ondary studies for the SFB members. To this end, the ing. The objectives of this law are to be evaluated aft er EBDC has developed an online interface (including a fi ve years at the latest in order to assess their impact on metadata repository) that enables CRC researchers to Germany’s innovative capacity and their contribution document and archive their research projects and data to achieving the share of 3.5 percent. The aim of this collection projects easily and completely through the project is to develop an evaluation plan. CRC homepage. Evaluation of the Next-Generation Access Program Data as a Resource: The Economics of Data T. Fackler, O. Falck, S. Schüller in cooperation with Provision and Access – Status Quo Ernst & Young and WIK-Consult for the Federal Minis- O. Falck in cooperation with J. Koenen, ARC Econ GmbH, try of Transport and Digital Infrastructure, June 2017 for the Chamber of Commerce and Industry for Munich to June 2021. and Upper Bavaria, July 2019 to February 2020. Empirical evidence suggests that broadband internet The aim of the project is to study the economics of data access has positive eff ects on local growth and em- provision and access, and to contribute to the under- ployment and accelerates structural change. The Ger- standing of data ownership. man federal government, therefore, aims to ensure the comprehensive availability of next-generation broad- Industrial Digital Economy – B2B Platforms band technologies for all German households. Yet, O. Falck in cooperation with J. Koenen, ARC Econ there are areas in which market-driven expansion by GmbH, for the Federation of German Industries (BDI), private suppliers appears to be unprofi table. For such December 2019 to April 2020. areas, the Next Generation Access Program is meant to incentivize the private expansion of broadband infra- Digitization and data are of rapidly growing impor- structure through complementary state aid. Following tance for the European economy. Online platforms European Commission guidelines, the eff ectiveness of play a special role here. In their function as interme- these measures will be evaluated in a rigorous empir- diaries, they promote new business models. B2B and ical policy evaluation design. In its collaboration with B2B2C platforms play a central role in the process of the consortium, the ifo Institute focuses on the statisti- digitization in the German industry, be it in mechanical cal analysis of the data. engineering, the steel industry, or the intelligent connection of millions of devices. Within the scope of the Traff ic Management by Means of Congestion “Industrial Digital Economy – B2B Platforms” study, Pricing – The Case of Munich the current state of economic research is illustrated. O. Falck, A. Fichtl, A. Wölfl in cooperation with INTRA- Consequently, the scientifi c analytical framework is PLAN Consult GmbH for the Chamber of Commerce and applied to selected concrete examples that are repre- Industry for Munich and Upper Bavaria, July 2019 to sentative of the respective platform segments. These April 2020. case studies serve to illustrate how competition works in practice and how value is generated within the plat- Munich is one of the most congested cities in Europe. form ecosystem. Thereby, traff ic jams are not only caused by moving

ifo Annual Report 2019 43 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

traff ic (those people who are driving somewhere), but ple for this transfer of insights and information is the also by people driving around looking for a parking scientifi c support of a group of students in the na- Reducing traff ic and spot. The project empirically investigates whether and tional competition YES! Young Economic Summit on congestion how a fee for either form of traff ic can reduce traff ic the topic “The last-mile challenge – How can the eco- and congestion and can thus provide a political impe- nomic objectives of delivery services be agreed with a tus to avoid the overuse of the scarce supply of streets resource-conserving urban development?”. Based on in the inner city and the region of Munich. the information generated in various reports from the trade sector, the school group was successfully super- Information System “Branchen Special” vised and took third place in the Germany fi nal. H. Hofmann, C. Vogel in cross-departmental cooperation with about 15 other ifo industry experts for the A list of all reports available and their publication dates DG-Verlag, Wiesbaden, biannual publication in Bundes- can be consulted on the ifo website (https://www.ifo. verband der Deutschen Volksbanken und Raiff eisen- de/en/node/42951). Individual reports can be obtained banken (BVR), DG-Verlag, Wiesbaden. from the Volksbanken und Raiff eisenbanken, while subscriptions are available from the DG-Verlag in Wies- “Branchen special” reports on the 150 most important baden. branches covered by Germany’s medium-sized companies. Biannually updated industry reports are pub- Economic Situation and Structure of Europe’s lished on the following economic sectors: services, Construction Sector (EUROCONSTRUCT Network) agriculture, construction, retail, manufacturing, and L. Dorff meister for the partner institutes, the organizers environment. The reports contain in-depth analyses and participants in the EUROCONSTRUCT conferences, and forecasts of branch structure and the current eco- as well as recipients of the conference proceedings and nomic situation in a clear, standardized format. More for presentations at specialist conferences, publication specifi cally, the reports off er information on supply in ifo Schnelldienst 72(2), 2019; 72(13), 2019, as well as in and demand structures in the consumer goods and various specialist journals. services markets, company size, and trends towards concentration. Turnover and production forecasts, The European research and advisory network as well as capacity utilization and price development EUROCONSTRUCT consists of 19 European member monitoring are conducted to evaluate the economic institutes (15 from Western Europe and four from outlook. The economic condition of the branch is as- Central and Eastern Europe). At conferences, held sessed using the results from company comparisons, twice a year in diff erent locations, current forecasts off icial statistics, and an analysis of trends in prices for all partner countries – as well as for Europe as a and costs. An industry rating featured in every report whole – are presented. The forecasts not only fea- off ers key information on current and future trends in ture fi gures (in euros) diff erentiated by construction turnover and profi ts in the industry, as well as the in- type, but also present physical variables of construc- tensity of competition in the industry and its vulner- tion (number of dwellings). The conferences in 2019 ability to economic cycles at a glance. Data from off i- (held in Rome in June, and in Warsaw in November), cial statistics as well as from primary and secondary among other things, focused on the increasing rele- sources are used as an information base, especially vance of water management systems, as well as on association statistics and the results of surveys con- the future potential of innovative approaches like 3D ducted by diff erent institutions. The results of the ifo construction printing, building information modeling Business Survey are particularly important as they or virtual reality. As far as the general development of enable a well-grounded assessment of current and fu- construction activities are concerned it is striking that ture development. in the years 2020–2022 the market expansion is likely to continue at a signifi cantly lower level compared All reports focus on industry-specifi c institutional to 2019. Civil engineering and renovation measures changes and on the way diff erent market participants will gain importance whereas the building construc- react to them. Some of these institutional changes tion segment and new construction are more likely to are taken up by ifo researchers and become subject stagnate. The 2020 summer conference will be held in to deeper examination in separate projects. An exam- Stockholm.

44 ifo Annual Report 2019 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

Housing Construction in the EUROCONSTRUCT Area lancers, outsourcing, internal transfers, working time

New construction volume ,20&+$-"/*&10ɭ accounts). The aim of the project is to provide insights Stock measures into the role of ﬂexibility measures in business cycles on a long-term basis. Changing special questions are also Data-driven Billion euros (in 2018 prices) 1,000 #lats 450 2.4 devoted to current personnel policy issues. The results recruitment methods of selected special questions are published on the ifo In- 400 2.2 stitute’s homepage and also in the ifo Schnelldienst on

350 2.0 a regular basis. In 2019, special questions were asked on data-driven recruitment methods, the Working Time 300 1.8 Act, the Bridge Part-Time Act, and the minimum wage.

250 1.6 The Economic Impact of the Munich Trade Fairs 200 1.4 H. Penzkofer for the Messe München GmbH, January 2015 2016 2017 2018 2019 2020 2021 2019 to December 2020. ɭ"/*&10&++"4)6 ,+01/2 1"!+!"5&01&+$/"0&!"+1&)+!+,+-/"0&!"+1&) 2&)!&+$0Ȁ#,/ /"1/&1&+!1,+1%"!"3"),-*"+1,# ,+01/2ction starts 4020"!ǽ The objective of this project is to calculate the direct © &#, Institute Source: EUROCONSTRUCT. and indirect production and income eﬀ ects as well as the resulting tax revenue of the Munich trade fairs. Randstad ifo Personnel Manager Survey Based on surveys conducted for the project among vis- P. Brandt, O. Falck, J. Schricker, K. Wohlrabe for Rand- itors and exhibitors at selected Munich trade fairs, the stad Deutschland GmbH & Co. KG, ongoing project, total number of visitors and exhibitors and their expen- which is published on the company’s website and that ditures are determined. The calculations of the direct of the ifo Institute. Furthermore, articles based on this and indirect eﬀ ects are derived from an estimation data are released in ifo Schnelldienst. model that primarily uses the characteristics of the visitors and exhibitors and individual expenditures (e.g., !'201*"+10 ,)),4&+$1%"&+&*2*$" + /"0"ɭ accommodation, stand construction). Fall Rise % 50 The Economic Impact of the Trade Fairs and Events in Oldenburg 40 H. Penzkofer for the Weser-Ems Halle Oldenburg GmbH & Co.KG, September 2019 to December 2020. 30 Based on surveys conducted for the project among

20 visitors and exhibitors at selected Oldenburg trade fairs and events, the total number of visitors and exhibitors and their expenditures are determined. The 10 calculations of the direct and indirect eff ects are derived from an estimation model that primarily uses the 0 Prices Mini- Interns Hours Head- characteristics of the visitors and exhibitors and indi- jobs worked count vidual expenditures. ɭ+)61%,0" 20&+"00"01%14"/"ƛ" 1"! 61%"*&+&*2*4$"&+ /"0"ǽ ,2/ "ǿ+!01!Ȓ&#,"/0,++")+$"/2/3"6ǽ Ȫ&#, +01&121" Essays in the Economics of Digitization J.V. Alipour, Roland Berger scholarship holder, ongoing Four times a year, the ifo Institute surveys personnel doctoral project. managers in manufacturing, wholesaling and retailing, and the service sector on the importance of flexibility In one of his projects, he investigates which factors in personnel placement. The participating managers favor and hinder the diff usion of information and com- provide a general assessment of flexibility and an as- munication technologies (e.g., cloud computing appli- sessment with respect to specifi c measures (overtime, cations) across fi rms. The main focus lies on regional limited contracts, “mini-jobs”, temporary workers, free- characteristics at companies’ locations, such as the

ifo Annual Report 2019 45 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

availability of broadband internet or the composition prospective policies when the fi rms are constrained by of the population. The project is based on a newly a lack of manpower. The second chapter looks at the compiled data set which, due to its comprehensive- eff ect of partial VAT rebate on the adjustments of core ness and richness of detail, is expected to yield valu- and peripheral products within multi-product fi rms. able insights. The third chapter deals with fi rms’ export decisions, with a special focus on multi-destination fi rms when Economics of Innovation in Telecommunications facing restrictive TBT measures from importing coun- V. Lindlacher, ongoing Ph.D. project, scholarship from tries. The last chapter exploits the eff ect of maritime Deutsche Telekom AG. piracy on fi rms’ choice of transport mode.

The doctoral project deals with determinants of inno- Socioeconomic Impact of Broadband Internet vation in telecommunications and investigates its un- S. Schüller, ongoing postdoc project, publication as derlying mechanisms, applying individual level data. CESifo Working Paper No. 6129, 2016; in Wirtschaft s- dienst, 96(8), 2016; Regional Science and Urban Eco- In one project, Valentin Lindlacher calculates own- nomics 77, 2019; Research Policy 49(1), 2020. and cross-price elasticities of demand between internet contracts with diff erent technologies and of- The ongoing processes of digitization in economy fering diff erent bandwidths. Based on this analysis, and society certainly have important implications, he suggests drawing the boundaries of the market not only for economic growth but also for labor mar- for broadband internet access along bandwidth and kets and political systems. The diff usion of broad- technologies. band infrastructures enabling fi rms and households to access high-speed internet plays a crucial role in Infrastructural In a further project that he started this year with two this “digital revolution”. Two projects focus on the determinants for coauthors from ParisTech and the University of Cape causal impact of ADSL2+ broadband availability on mobile money Town, he investigates infrastructural determinants for voting behavior and on fi rm performance, both ex- mobile money in diff erent sub-Saharan African coun- ploiting a local public broadband infrastructure de- tries. He applies modern data, such as light-light satel- livery program in the Province of Trento, Italy. A third lite data and geoinformation soft ware. project analyzes the impact of digitization on “working from home”. Digitization in Research and the Economy V. Reich, ongoing doctoral project. The Socioeconomic Eff ects of the Digital Transformation This doctoral project is concerned with the chanc- S. Wichert, ongoing postdoc project. es and risks of new digital technologies as well as incentives for their adoption. Central aspects are data Building on a chapter of his completed Ph.D. project availability, artifi cial intelligence, and technological (on the eff ects of broadband internet on health), part skills. The focus of the research is the impact of these of this habilitation project now extends this issue to factors on the industrial sector, labor markets, and the the study of the socioeconomic eff ects of digital trans- market of knowledge. Additionally, new technologies formation on individuals, companies, and society as a are utilized directly in the analyses. Unconventional whole. This includes the analysis and development of and unstructured data is investigated and datasets are institutions and policies that infl uence, promote, or combined using machine learning to create new and regulate digital processes with a view to strengthen- innovative data. ing competition and innovation. In order to tackle this question, it is oft en necessary to prepare a suitable Enterprises’ Constraints and Policies empirical data basis from various sources. The second S. Yang, ongoing doctoral project. part of the project is therefore devoted to the development and application of methods for analyzing and This doctoral project contains four chapters that inves- linking innovative datasets, in particular the ifo com- tigate fi rms’ behavior under diff erent circumstances. pany datasets, with new statistical methods (like ma- The fi rst chapter studies fi rms’ contemporaneous and chine learning).

46 ifo Annual Report 2019 IFO CENTER FOR INDUSTRIAL ORGANIZATION AND NEW TECHNOLOGIES

Labor Mobility, Incentives, and Innovation T. Fackler, ongoing postdoc project, publication in Research Policy, 2019, 103863.

Building on dissertation projects that focus on the determinants of innovation, this project extends the scope to include both the creation and the consequences of technological progress. In particular, the role of knowledge workers in the process of innovation as well as the eﬀ ects of digitization on the labor market are explored. The incentives for ﬁ rms and individuals play a crucial role in all of these areas. Methodologically, the project takes advantage of the increasing computational power available to researchers, using machine learning tools for the analysis of large data sets.

ifo Annual Report 2019 47 ifo Center for Energy, Climate, and Resources

The research activities of the Center are determined In the reporting year, the speciﬁ c research focus was

by the opportunities and challenges that arise in the on the design of CO2 prices and the eﬀ ectiveness of cli- context of climate change, the scarcity of natural re- mate policies in view of the longevity of assets in the sources, and sustainable energy supply. The results energy sector. In cooperation with external research- of its research serve as a basis to provide policymakers, the Center developed a proposal for the design of

ers with in-depth information on the eff iciency and CO2 pricing in Germany and presented it, for example, eff ectiveness of climate, energy, and environmental to the environmental committee of the German Bun- policies. The focus is on topics that are relevant in the destag. The Center continued its research on stranded longer term and that are mainly analyzed within pe- assets by examining how investors and fi nancial mar- rennial research projects and, whenever appropriate, kets react to climate policies and how this infl uences in cooperation with researchers from other disciplines their expectations. Furthermore, it was analyzed how and research institutions. Depending on the research policy measures can be designed to counteract inef- question, the Center’s research uses theoretical and fi cient investment behavior while considering, for numerical methods as well as empirical approaches. example, the incentives of various interest groups on energy markets. Transforming energy In the fi eld of energy, the Center is particularly con- systems cerned with the transformation of energy systems in The Center also supported a number of diff erent cli- the course of their decarbonization. ents through consulting projects: methods and indicators for improving the monitoring of the bioeconomy The characteristics of energy supply in combination with were developed for the German Federal Ministry for behavioral, security-of-supply, and economic aspects Economic Aff airs and Energy (BMWI) as part of a multi- lead to areas of tension in the transformation of energy year project. Also, several of the Center’s researchers systems, which the Center analyzes at diff erent regional contributed to the work of the German Advisory Coun- levels. For example, the eff ects of energy policy measures cil on Global Change (WBGU), the Steering Committee on regional added value and employment were examined of the Science Platform on the German Climate Protec- for the Alpine foothills in a multi-year project that was tion Plan 2050, and the project of the German Acade- completed in 2019. The question of the eff ects of a delay in mies of Science “Energy Systems of the Future.” The the expansion of the transmission network from northern Center furthermore participated in the Dialogue on to southern Germany was the focus of another project. Climate Economics of the German Federal Ministry of Education and Research (BMBF). Since German energy policy must also be seen in the context of European developments, the research car- In addition to its research tasks, the Center maintains

ried out by the Center also takes policies and CO2 mi- a web-based information platform on resource and tigation goals on the European level into account. In this energy related topics. It also contributes to the ex- analysis, the Center employs a model of the European isting database for the international comparison of electricity market in which wind and solar energy are economic institutions (DICE) with indicators from the depicted in detail. The model was developed further areas climate change and energy policy. in 2019 in order to explicitly integrate the price respon- siveness of demand and the acceptance of energy generation technologies. Also, in collaboration with other universities and research institutes, consistent scenarios for the transition of the power market were developed, which allow a meaningful comparison of diﬀ erent electricity market models and their results.

At the center of research on climate and resources, which is closely linked to the research on energy, are the eﬀ iciency and eﬀ ectiveness of climate policies and analyses on the impact of climate and energy policies on the use of energy resources.

48 ifo Annual Report 2019 IFO CENTER FOR ENERGY, CLIMATE, AND RESOURCES

Projects Completed in 2019 knowledge of bio-based components. These methods have been tested for their empirical feasibility in a pilot study for the year 2015 using case studies that cover Determination of Economic Indicators for four areas of oleochemistry (bio-based surfactants and Monitoring the Progress of the Bioeconomy soaps, bio-based lubricants, vegetable oil-based plas- J. Wackerbauer, T. Rave, in cooperation with the Leibniz tics, and biodiesel). Institute for Bioeconomy (ATB), Potsdam, the Fraun- hofer Institute for Systems and Innovation Research ISI The proposed innovation indicators on patent and at Karlsruhe, and the nova-Institute, Hürth for the Ger- publication activities were als determined for the sub- man Federal Ministry for Economic Aff airs and Energy, segments of the pilot study. In interviews, the experts April 2016 to March 2019, publication as ifo Forschungs- considered the results as very plausible. The fi gure bericht 104, ifo Institute, Munich, 2019. shows the results of the “patent application” indicator for the example of biolubricants. International com- This was the fi rst research project in Germany that de- parison illustrates the strong technological base that veloped a systematic and comprehensive method for Germany also has for the other examined fi elds of oleo- recording the economic signifi cance of the bioecono- chemistry. my based on the combination of industry statistics and production statistics. It represents one of the three pil- Transnational Patent Applications for Biolubricants, lars of the German federal government’s bioeconomy 2010 –2015 monitoring. The bioeconomy monitoring is intended 900 to cover traditional areas such as the wood industry 800 or the food industry as well as new innovative applica- 700 tions for bio-based materials. 600

Continuous monitoring will create a knowledge base 500 400 786 for political action and a public debate about the bio- 726 economy. To achieve the objectives of the National 300 200 Policy Strategy, the bioeconomy indicators developed 307 100 in the project were refi ned and methods of data col- 133 107 99 68 lection were established that allow systematic mea- 0 53 surement of all dimensions of the bioeconomy and modeling of interrelationships and mechanisms. This provides the basis for identifying the progress made in the transformation process towards a bioeconomy Source: WPINDEX (STN); Fraunhofer ISI. © ifo Institute and potential barriers or trade-off s. Also, it allows policymakers to design and take appropriate measures, For the combination of economic and environmental if necessary. indicators, the indicator “substitution rate” proved to be well-suited to refl ect the progress of the bioecono- Tracking the progress During the three-year project period, a total of 65 in- my in individual sectors. This indicator describes the of the bioeconomy dicators on three topics (general economic indicators, share of fossil-based biomaterials that has already innovation and education indicators, and indicators been replaced by bio-based products. The fi gure for biomass production and use) were compiled and/ shows examples of the substitution of fossil fuels by or developed, and their derivation and application bio-based products in diff erent product groups. This were described and documented. For sectors which indicator could be combined with both economic and can be fully attributed to the bioeconomy, e.g., the environmental indicators to capture the impact of the food industry, the corresponding data can be obtained transformation from a fossil-based economy to a bio- with relatively little eff ort from off icial statistics. For based economy. those sectors that are only partially attributable to the bioeconomy, such as the plastics industry, estimation methods have been developed based on expert

ifo Annual Report 2019 49 IFO CENTER FOR ENERGY, CLIMATE, AND RESOURCES

Substitution Share for Plastics, Soaps and Surfactants, The study examined the question how Bavaria’s elec- Lubricants, and Biodiesel, 2015 tricity supply can be managed aft er the decommis- % sioning of the last two nuclear power plants in oper- 14 ation, if the expansion of the electricity grid is further 12 delayed or completely abandoned. It was based on literature reviews of existing studies on the develop- 10 ment of energy consumption in Bavaria, evaluation 8 of various energy consumption forecasts, expert

6 interviews, and calculations of the impact on electricity prices using the ifo electricity market model 4 EU-REGEN. 2 By the year 2025, a capacity gap of around 4.5 gigawatts 0 Plastics Soaps and Lubricants Biodiesel will arise in Bavaria’s energy supply. This demand sur- Surfactants plus can initially be met by electricity imports, the ex- Source: ATB calculations based on ecoinvent (2017); pansion of decentralized power generation, and grid FNR (2014); Weiss et al. (2012). © ifo Institute stabilizing measures, which will, however, cause high operating costs. If the expansion of the grid by the two planned high-voltage DC transmission lines, each with Considering the time needed to conduct the case stud- a capacity of 2 GW, is further delayed or abandoned, ies for the four sub-areas of oleochemistry, developing the capacity gap arising by 2025 would have to be per- a full survey of the economic indicators for all branches manently closed by electricity imports and increased of economic activity that are only partially attribut- decentralized power supply. This would result in high- able to the bioeconomy would require a considerable er costs for grid stabilizing measures. Abandoning the amount of work. The extension of the statistical classi- expansion of the grid would also raise the political fi cations could be a starting point for the further devel- pressure to introduce two price zones in Germany. Ac- opment of bioeconomy monitoring. For this purpose, a cording to the model calculations, the price diff erence further diff erentiation between bio-based production between southern Germany and northern Germany in and non-bio-based production should be introduced this case would be EUR 2/MWh in 2025, rising to EUR 5/ at the lowest classifi cation level of the product clas- MWh or 5.7 percent by 2050. sifi cation. Furthermore, improvements in production statistics and the extension of reporting requirements Wholesale Prices in the Scenario without Grid Expansion in other off icial statistics would be required. Final- Northern Germany Germany can ly, it should be pointed out that Germany can play a Southern Germany Euro/MWh be a pioneer pioneering role in the fi eld of bioeconomy monitor- 95 ing in the European Union if the legislator creates the appropriate framework. On a broader basis, German 90 bioeconomy monitoring could support and advance 85 European initiatives and develop a vision for European bioeconomy monitoring. 80 75 Decentralized Energy Supply Versus Network Expansion 70

K. Pittel, J. Wackerbauer in cooperation with Techni- 65 cal University of Munich for the Chamber of Commerce and Industry for Munich and Upper Bavaria, March 60 2015 2020 2025 2030 2035 2040 2045 2050 2019 to December 2019, publication as Impulse für die Source: Calculations of the ifo Institute Wirtschaft spolitik, IHK für München und Oberbayern, with the EU-REGEN model. © ifo Institute Munich, 2019.

50 ifo Annual Report 2019 IFO CENTER FOR ENERGY, CLIMATE, AND RESOURCES

The energy policy options of the Bavarian state gov- simulations embedded an investment model delivered ernment to improve the supply situation comprise the by the ifo Institute. The model consists of a net pres- acceleration of licensing procedures, the abolition of ent value analysis that evaluates the profi tability of the 10-height rule for wind turbines, the improvement the measures and, therefore, plays an important role of the framework for biogas plants, photovoltaics, and in the deployment path resulting for each scenario. combined heat and power, and increased research This exercise makes it possible to quantify the costs of funding for new storage technologies. the energy transition in the region and determine the extent to which additional fi nancial support schemes INOLA – Innovations for Sustainable Land and beyond the existing ones are needed to achieve the de- Energy Management at the Regional Level ployment paths of the diff erent scenarios. J. Lippelt, A.M. Montoya, K. Pittel, M. v. Schickfus, M. Zimmer in cooperation with A. v. Streit and W. Maus- A second task of the ifo Institute was to determine er, University of Munich, W. Mayer, Kempten University the economic impacts of the deployment scenarios in of Applied Sciences, the communal civil society “En- terms of value added and employment at the regional ergiewende Oberland” and utility company partners level. for the German Federal Ministry of Education and Re- search, October 2014 to December 2019. The results show that investments in renewables generate an aggregated regional value added ranging The objective of the INOLA project was the interdisciplin- from EUR 252–397 million, depending on the scenar- ary and transdisciplinary development of system solu- io. Considering that the value added in 2014 amount- tions for sustainable land use and energy management ed to EUR 9.5 billion, the presented fi gures translate of the model region “Energiewende Oberland” (“Ober- to a share in value added of between 2.5 percent and land Energy Transition”). The Energiewende Oberland 3.3 percent. Most of the employment eff ects of the en- region covers four administrative districts south of Mu- ergy transition occurs in medium-skilled employment, nich, of which three are addressed within the project. making up about 63 percent of the full-time equivalent The central question of the project was which social and jobs associated with the regional energy transition. technical innovations are necessary in order to establish sustainable regional land use jointly with an adequate An important assumption made as part of INOLA was energy system. Cooperation between municipalities that factors of production are fully mobile within Ger- and districts as well as the refl exive design of the inno- many. We show that this assumption gives the sec- vation process are crucial in achieving these objectives. tors in the Oberland region access to a very large pool of workers and capital, that is, that of the rest of the In cooperation with regional actors, the project team country. Thus, the negative eff ects on other sectors formulated scenarios constructed along two dimen- are almost fully “exported” to the region(s) where no sions. The fi rst dimension describes the overall eco- investments take place. In our case, the decline in val- nomic and social setting and considers, on the one ue added and employment occurs almost exclusively in hand, a business-as-usual (BAU) scenario and, on the sectors of the rest of the country and not in our region other hand, a scenario with a trend towards a more sus- of study. Moreover, we fi nd that although employment tainable economy and society (GREEN). The second di- in the Oberland region increases in all three categories mension diff erentiates between focusing primarily on (low-, medium-, and high-skilled), the increase in medi- small-scale or on large-scale renewables installations. um-skilled employment is stronger than for the other In the framework of these scenarios, two geography two categories. departments at LMU Munich ran simulations leading to possible deployment paths for renewable energy The results from our analysis will be used in the deci- Joint development of from 2015 to 2035. On the one hand, the simulations sion-making process at local and regional level: INOLA innovation strategies were based on the natural potential for renewable will provide necessary insights and tools to the civil energy generation in the region, the existing land use society actors and decision-makers, enabling them to restrictions (e.g., due to conservation areas), and the assess the economic sustainability of diff erent land use preferences of the population regarding technology and energy management options and thus accelerate types and installations’ size. On the other hand, the the joint development of innovation strategies.

ifo Annual Report 2019 51 IFO CENTER FOR ENERGY, CLIMATE, AND RESOURCES

Current Projects The project partners’ energy market models are also improved through coordinated development and the general validity of the models is improved by the stron- Research Network for the Development of New ger incorporation of economic and social factors. It is Methods in Energy System Modeling (4NEMO) the implicit sensitivity analysis of the model structures, K. Pittel, M. Mier, C. Weissbart for the German Federal among other factors, that gives the joint research proj- Ministry for Economic Aff airs and Energy, November ect high relevance. Accordingly, the project will help in- 2016 to February 2020. crease the validity, comprehensibility, and comparability of policy analyses based on energy market models. The envisioned goals of the “Energiewende” of in- Future research projects and consulting activities can creasing the market share of renewables and reduc- be better coordinated among the involved institutes ing greenhouse gas emissions have led to a dynamic through the creation of a common database and the transformation of the energy system. Closely con- possibility of linking the models. This can also improve Advancing nected to the increased share of renewable energy is the speed and eff iciency of future joint projects. Addi- regionalization the advancing regionalization of the energy system. tionally, all project partners pursue a transparent use Both the increasing market penetration of intermit- of models and scenarios, as well as a better socio-po- tent generation technologies and the higher spatial litical interpretation. dispersion of production structures and networks call for improvements in the coordination of the en- The research eff ort comprises fi ve work packages. The ergy system and of all actors of society. This implies ifo Institute is working on work packages 1, 2, 4, and 5 that, beside technical feasibility and economic via- and furthermore is coordinating the entire research ef- bility, social acceptance is becoming an increasingly fort. In work package 1, a list of requirements refl ecting important aspect in the development of future energy the changed conditions on energy markets was defi ned systems. last year. A model analysis was coordinated by the ifo Institute in a sub-package to identify the strengths and The dynamic environment of energy systems is also weaknesses of a representative group of about 40 en- visible in the variety of existing energy system models, ergy market models. The goal of work package 2 is that though these are still capable of refl ecting only part of the involved institutes adapt their existing models to the aforementioned challenges. the new requirements along four clusters (technology, acceptance, regions, and uncertainty). In this context, In view of the above, the ifo Institute coordinates nine the ifo Institute analyzed the models that were already renowned research facilities and institutes of higher selected for work package 1 with respect to their capa- education to pursue the two main goals of 4NEMO: bility to answer major energy policy questions. Within the cluster technology, the ifo Institute developed a 1. To improve the coherence, comparability, and framework to implement investments in energy eff i- transparency of energy system models. This con- ciency and short-term demand response in power mar- cerns not only modeling and publications of model ket models. This allows for quantifying the role of po- structures, but also the consistency of datasets and wer demand for reaching the reduction of CO emis- technology assumptions. 2 sions. 2. To improve the integration of economic and social factors and the corresponding uncertainty in energy Furthermore, the ifo Institute is currently extending its models. own modeling approach within this work package by including the costs related to usually neglected exter- To this end, integrated scenarios that include a detailed nal eff ects, e.g., landscape impacts, which can cause representation of economic, social, and technological local public opposition towards renewable energy conditions are developed. Systematic model compar- technologies. At the same time, consistent socio-tech- isons and analyses generate a sample space that fur- nological scenarios and a concrete dataset were devel- thers the understanding of the strengths, weaknesses, oped in work packages 3 and 4 over the past year. In the and comparative advantages of the respective mod- fi nal work package 5, these scenarios are used as the els to allow for a better understanding of the results. basis for a comparative model analysis.

52 ifo Annual Report 2019 IFO CENTER FOR ENERGY, CLIMATE, AND RESOURCES

German Advisory Council on Global Change (WBGU) may also change human beings themselves: the report K. Pittel, J. Pfeiff er for the Alfred-Wegener Institute, provides an impulse for the science community, society, Bremerhaven, December 2016 to September 2020. and politics to consider digitalization and sustainability as two fundamental processes of societal transforma- The German Advisory Council on Global Change is an tion in a more integrated way in the future, and to devel- independent scientifi c advisory body of the federal op and discuss corresponding governance challenges in government, which was set up in 1992 in the run-up depth and in time. to the United Nations conference on environment and development (“Rio Earth Summit”). The principal Two WGBU policy papers refi ned the main conclusions task of WBGU is to analyze global change of the natu- from its fl agship report for two political processes. On ral environment and its implications for humanity and the occasion of the meeting of the High Level Political societies and to raise the awareness and draw the at- Forum on Sustainable Development (HLPF), the poli- tention of the broader public and politicians to global cy paper “Digital Momentum for the UN Sustainability environmental and development challenges as early as Agenda” raised awareness at the level of UN sustain- Achieving possible. ability politics for how relevant digitalization and its the sustainable governance are for achieving the sustainable devel- development Pursuing an interdisciplinary approach, the advisory opment goals. Building upon the agenda of the HLPF, goals council develops fl agship reports and policy papers the policy paper focuses on four fi elds – education, the that focus on a specifi c topical aspect and/or more di- digitally supported circular economy, modernization rectly address a specifi c political process. In its work, of sustainability governance, and extending the scope the WBGU assumes a broad notion of sustainability for of the current sustainability agenda for longer-term which the conservation of the natural environment is challenges beyond 2030. It was presented during the as characteristic as ensuring societal, economic, and meeting of the HLPF. In cooperation with international political participation and protecting and fostering partner institutions, the WBGU also initiated a process self-eff icacy and cultural diversity. to discuss and develop a charter for a sustainable digital age. In April 2019, the fi rst fl agship report of the current term, which started in 2016, was handed over to the In a second policy paper, the WBGU presented corner- federal government. The report, entitled “Towards our stones of a European way to a common digital future. Common Digital Future,” characterizes digitalization as On the one hand, those cornerstones represent the a profound process of societal transformation, which systematic integration of digitalization into European today is mostly not systematically harmonized with sustainability policy. On the other hand, European dig- sustainable development goals. Still, digital change cre- ital policy should be more actively shaped in line with ates windows of opportunity for societal and economic sustainability goals, for example regarding the regula- transformations that are necessary to achieve the goals tory framework for privately collected data, and with of sustainable development, for example as laid down in a new, expanded understanding of infrastructure and the Agenda 2030 or the Paris agreement. In many fi elds, the responsibility of the state to provide it in the digital for example in the energy sector, digital technologies age. The policy paper provides input for the upcoming can provide important and sometimes even necessary presidency of Germany of the Council of the EU and re- solutions for sustainable development. However, the lates to the Green Deal initiative of the new European report also illustrates that digital change can counter- Commission. act these goals and, in any case, raises new challenges for sustainable development: it is already conceivable All nine members of the advisory council from various that digitalization will induce fundamental, structural scientifi c disciplines are supported by personal assis- changes in the medium and longer term, for example in tants and by the scientifi c and administrative staff of labor markets, that raise questions/concerns about fu- the secretariat in Berlin. The ifo Institute is represented ture societal structures and about the capacity of soci- by Karen Pittel and her assistant Johannes Pfeiff er. Af- eties to govern, for example, the adjustments necessary ter Prof. Dirk Messner left the WBGU, Karen Pittel was for sustainable development. Increasing cognitive ca- elected as the new co-chair of the council in December pacities of technical systems and artifi cial intelligence 2019.

ifo Annual Report 2019 53 IFO CENTER FOR ENERGY, CLIMATE, AND RESOURCES

Energy Systems of the Future (ESYS) – Board of wards a more decentralized energy system, which is Directors induced by the transition to renewable energy sourc- K. Pittel, J. Pfeiff er for acatech – National Academy of es, and the future role of centralized technologies and Science and Engineering, fi nanced by the German Fed- components in energy systems. The working group eral Ministry of Education and Research, February 2013 concluded that a climate-friendly, stable, and sustain- to February 2020. able energy system will require a mixture of decentralized and centralized elements and structures. It The project “Energy Systems of the Future” (ESYS) of arrived at this conclusion by considering not only the the German Academies of Science (acatech – Nation- supply side of the system but also the necessary exten- al Academy of Science and Engineering, the German sion of the grid infrastructure, digital technologies, and National Academy of Sciences Leopoldina, and the interconnectedness as means to coordinate more de- Union of the German Academies of Sciences and Hu- centralized components of the energy system as well manities) provides scientifi c advice and impulses to as the adequate regulatory framework. In a way that politics and society about how to design and imple- complements this work, the working group “Resilience ment a more sustainable energy system. ESYS was of Digitalized Energy Systems” studies the far-reaching launched in 2013. implications that the digitalization of the growing number of increasingly diverse components and agents of Led by acatech, ESYS brings together experts from vari- the energy system has for the security of energy sys- ous scientifi c fi elds, from industry and institutions, and tems and energy supply. The working group will devel- Governance of the from civil society organizations to identify and discuss op both technical and regulatory options to deal with energy turnaround challenges, opportunities, and policy options for the these new challenges. governance of the energy turnaround and the realiza- tion of its climate and energy policy goals. Interdisci- A topical focus of ESYS over this year has been the pric-

plinary working groups collaboratively review the most ing of CO2 in sectors that are not integrated into the recent insights in topics like sector coupling or raw European Emissions Trading System. The ESYS work- materials for the energy transition. In a format called ing group “Electricity Market Design” developed and

Analyses, a comprehensive and rather descriptive discussed diﬀ erent options for pricing CO2 in those overview of the insights and background information sectors. These options were also presented and dis- on the respective topics is provided. Policy options are cussed during an event in Berlin moderated by Karen discussed and evaluated in Position Papers. The work- Pittel. On the future electricity market design and the

ing groups are in constant and ongoing exchange with pricing of CO2 emissions in Germany, members and representatives from academia, industry, politics, and personnel of ESYS also exchanged ideas with mem- civil society organizations. ESYS chooses the topics of bers and employees of the Bundestag. In a second the working groups independently. part, the working group also studies diff erent options to revise the current regulatory approach for tackling ESYS is governed by the six-member Board of Direc- and managing congestion in the German power grid. tors, to which Karen Pittel was appointed in 2017. The This congestion management is becoming increasing- Board of Directors coordinates the working groups and ly relevant with respect to both costs and security of publicly represents the initiative with the support of supply due to the transformation of the overall sys- the administrative and scientifi c staff of the ESYS sec- tem. The working group’s results will be published in retariat in Berlin. The Board of Directors is also in close the fi rst half of 2020. exchange with politics, industry, and civil societal organizations. Johannes Pfeiff er assists Karen Pittel in Fossil Resource Markets and Climate Policy: her work for the Board of Directors. Stranded Assets, Expectations, and the Political Economy of Climate Change (FoReSee) With respect to topics, the working group “(De-)Cen- K. Pittel, N. Jaakkola, W. Marz, A. Schmitt, S. Sen, tralized Energy Systems” fi nished its reports towards M. von Schickfus, C. Traeger in cooperation with DIW, the end of the year. Both the Analysis and the Position Berlin, and Humboldt University Berlin for the German Paper will be published at the beginning of 2020. The Federal Ministry of Education and Research, October working group considered both the development to- 2018 to September 2021.

54 ifo Annual Report 2019 IFO CENTER FOR ENERGY, CLIMATE, AND RESOURCES

The FoReSee research project analyzes the interplay preferences. At the same time, voters’ income inequal- between policies to mitigate global climate change and ity and their diff ering preferences with respect to en- the behavior of various participants in fi nancial and vironmental protection and redistribution have an im- fossil fuel markets. The main objective is to investigate pact on the varying climate policy platforms of parties how policies can be designed to overcome the inertia trying to represent their constituents. The ifo research- Calibrated political of the energy system and facilitate its transformation ers analyze, using theoretical and calibrated political economy models without excessive costs to society. FoReSee quantifi es economy models, how diff erent policy instruments may the redistribution of rents implied by various proposed lead to diff erent outcomes when political outcomes are climate policy instruments in sectors and countries allowed to be endogenous. Preliminary results on the vulnerable to asset stranding. It aims to understand special interest group part are expected in the fi rst half private actors’ responses to current and expected, po- of 2020. A draft of a paper on party competition was put tentially uncertain, climate policies, and considers how online as an ifo Working Paper in December 2019. climate policy design should take these responses into account. FoReSee puts the emphasis on the interplay In work package 5, the team at ifo investigates how of actors, policies, and information on fossil fuel and uncertainty and related beliefs over future climate fi nancial markets, while taking into account political change and climate policy interact with asset prices economy and institutional constraints to eff ective and technological investments in both fossil fuel and climate change mitigation. In addition to traditional clean energy production assets. Moreover, it addresses policy instruments, FoReSee investigates recently dis- the question of how policies and fi nancial instruments cussed supply- and demand-side climate policies and can be designed to eff iciently address these long-run strives to suggest alternative instruments. The combi- risks, as well as potential investment ineff iciencies, nation of empirical, numerical, and applied theoretical in order to minimize the resulting costs to society. To modeling provides comprehensive guidance on appro- carry out the analysis, the researchers at ifo, in collab- priate and feasible policy design. oration with researchers at the University of California at Berkeley, are currently developing a stochastic mac- The team at ifo heads work packages 2, 4, and 5. In work roeconomic model that builds on their previous work package 2, it investigates how fi nancial investors and in numerical modeling. Importanly, this model con- markets respond to new information and signals on cli- tains a disaggregated energy sector with explicit rep- mate policy, and which types of information shape inves- resentation of diff erent fossil and clean energy assets. tors’ expectations of asset stranding. Moreover, it deter- The model-building process was initiated in 2019 by a mines which are the relevant signals from policymakers, three-week research visit by Alex Schmitt in Berkeley. and how companies react to climate policy risk and un- Initial results are expected in the fi rst half of 2020. certainty. In order to answer these questions, the team analyzes the eff ects of policy shocks on stock markets, Additional work packages are headed by research such as the ballot results of two carbon tax initiatives in teams at the DIW and Humboldt University in Berlin. the state of Washington in the US and the gradual de- Work package 1 assesses how climate policies will af- velopment of a German climate policy proposal initially fect fossil fuel asset stranding, lock-in eff ects, and rent known as the Climate Levy. These two studies have been distribution, using detailed numerical models. Work published as CESifo Working Papers. Moreover, the team package 3 studies the behavior of resource-dependent is currently analyzing the interplay between institutional developing countries and how potential adverse re- investors and clean/fossil innovation. actions to climate policy can be mitigated, combining methods from public policy analysis and economics. Work package 4 takes a political economy perspective and explores how climate policy interacts with energy Short- and Long-Term Impacts of Climate Extremes sector special interest groups and the electorate’s het- (SLICE) erogeneous preferences. Climate policy will have dif- M. Zimmer in cooperation with T. Geiger, C. Otto, Pots- ferent impacts on assets, depending on their pollution dam Institute for Climate Impact Research (PIK), A. Zim- intensity. To the extent these assets are owned by dif- mer, J. Granadillos, Climate Analytics, and D. N. Bresch, ferent groups in society, these assets represent vested ETH Zurich, for the German Federal Ministry of Educa- interests that manifest themselves in diff ering political tion and Research, November 2018 to October 2021.

ifo Annual Report 2019 55 IFO CENTER FOR ENERGY, CLIMATE, AND RESOURCES

Despite signifi cant progress since the last Assessment The BMBF funding line “Economics of Climate Change Report of the Intergovernmental Panel on Climate – Phase II” comprises four thematic areas, each with Change (IPCC), the long-term economic impacts of a number of individual projects. For each thematic extreme climatic events such as fl oods, storms, and area, accompanying activities within the “Dialogue droughts are still poorly understood. Since extreme on Climate Economics” accompany and connect the events are projected to intensify under global warm- research projects and promote exchange with non-ac- ing, it is essential to gain a sound understanding of the ademic stakeholders and the interested public. The main impact channels through which extreme events “InterPol” project deals with the coordination of topics cause long-term impacts on economies and societies related to the thematic area (TSP) 4 “International Cli- in order to quantify the overall costs of climate change mate Policy.” and inform decision-makers about the implications of mitigation targets and eff ective adaptation strategies. The overarching funding line aims at further strengthening the climate-economic research competence in The SLICE project aims at fi lling this knowledge gap. Germany, connecting the research community even Our analysis covers low-, middle-, and high-income better internally and externally, increasing the applica- countries. In a fi rst step, we use empirical methods to tion relevance of climate-economic research through identify historical long-term eff ects of extreme events greater involvement of stakeholders, and improving on households and on the macroeconomic level. We the dissemination of research results to target groups place particular focus on the role of public spending outside academia. In this context, the focus of TSP 4 and debt, insurance schemes, distributional aspects, lies on the diverse eff ects and obstacles of internation- and poverty; these are known to be important deter- al climate policy, which can be of crucial importance minants of long-term losses incurred in the aft ermath for its successful implementation. The project aims to of disasters. Based on these fi ndings, we develop two encourage intensive exchange between the research separate dynamical models to represent the long-term teams about implementation obstacles and resulting eff ects on the micro- and macroeconomic level, which policy implications, and to deliver the results to stake- are then employed to assess future risks. holders in politics, business, associations, and NGOs at the national, but also European and non-European To this end, we combine projected hazards with socio- level. economic data and translate them into direct economic damages. We then use these direct damages as input for Karen Pittel and Waldemar Marz organized an own the dynamic models to calculate long-term losses under breakout group (“Climate Policy in the Social Market diff erent levels of global warming. Finally, we link our Economy”) at the 6th Climate Forum of the BMBF fund- micro- and macroeconomic analyses to assess the eff ec- ing line “Economics of Climate Change” in Berlin in No- tiveness of diff erent adaptation options, ranging from vember. Overall, the climate forum focused on the top-

physical measures (e.g., dikes) to fi nancial instruments ic “CO2 Pricing – From Theory to Practice.” Previously, (e.g., insurance schemes). Our work identifi es regional Karen Pittel and Waldemar Marz had already taken part hotspots, and assesses strategies to enhance economic in a kickoff workshop for all individual projects and key resilience, as is critical for, e.g., eff ective operation of the topics of the BMBF funding line in the summer. In addi- Strategies Green Climate Fund (GCF). A strong stakeholder focus tion, both took part in regular meetings of the Execu- for economic is ensured by a dedicated stakeholder workshop, the tive Board (with the topic coordinators of all TSPs and resilience publication of policy briefs, and close collaboration with the overall coordination) and the Advisory Board. public and private partners such as the World Bank, the insurance sector (Munich Re, Swiss Re), and consulting (Standard & Poor’s).

Economics of Climate Change – Thematic Coordination: International Climate Policy (InterPol) K. Pittel, W. Marz for the German Federal Ministry of Ed- ucation and Research, October 2019 to September 2022.

56 ifo Annual Report 2019 ifo Center for International Economics

As the Center’s Director took up the position of Pres- business partners who could provide new growth im- ident to the Kiel Institute for the World Economy in pulses and close the demand gap that industrialized March 2019, the ifo Executive Board decided to initiate countries in particular have left behind due to the fi - a joint appointment process with LMU for a successor. nancial crisis and the subsequent recession. With this 21st-century The re-appointment of the professorship is intended in mind, in fall 2013 China’s President Xi Jinping pre- maritime Silk Road to strengthen research and teaching of the economic sented the idea of building an economic belt along the causes and consequences of globalization. Specifi - Silk Road and a 21st-century maritime Silk Road (One cally, the Center will in the future deal with questions Belt and One Road) together with other interested on how economic globalization and technical change countries. work together, how to avoid trade confl icts and protec- tionism, and how welfare gains can be realized through The study analyzed the opportunities and risks of international exchange. It is not only the sum of wel- this Belt and Road Initiative (BRI) for Europe, Germa- fare gains that is of central importance, but also their ny, and Bavaria, with a specifi c focus on Central Asian distribution, including also the question of whether countries. Aft er giving an overview of the initiative, the structural change driven by the globalization process study discusses the opportunities and the challenges creates losers and how this can potentially be compen- arising from the Belt and Road Initiative for the global sated for. The Center and its newly appointed Director economy in general and the Bavarian economy in par- will thus make a substantial contribution to the ifo re- ticular. One area of focus is the change in the relative search topics of economic growth and sustainability, competitive position of individual regions and on the the future of Europe, and globalization and inter-sys- shift in the importance of diff erent modes of transport. tem competition. The study also outlines country-specifi c risks relating to local institutional defi cits, government debt sustainability problems, and political and geopolitical confl icts in the BRI countries. Finally, the study derives Projects Completed in 2019 recommendations for policy actions for Bavaria, Ger- many, and the EU.

Megatrends in World Trade: The New Silk Road – Growth Region between Europe and Asia G. Felbermayr, A.-N. Sandkamp, M. Goldbeck in cooper- Current Projects ation with W.-H. Liu, F. Bickenbach, Kiel Institute for the World Economy, for the Chamber of Commerce and In- dustry for Munich and Upper Bavaria, November 2018 Quantitative Tools for the Analysis of Global Gover- to April 2019, publication in Impulse für die Wirtschaft s- nance Issues (QUANTAGG) politik, Munich, 2019. R. Aichele, F. Teti, M. Steininger, M. Braml for the Leibniz Association (SAW), January 2016 to December 2020. The economic rise of the People’s Republic of China since the beginning of economic reforms forty years The goal of QUANTAGG is to contribute to the develop- ago is one of the greatest development successes in ment of quantitative tools for policy analysis that can world history. China is now the second largest econo- be used to address some of the most pressing interna- my in the world behind the United States and is playing tional cooperation issues of our times. These include an increasingly important role in both the global econ- the consequences of trade liberalization and the reor- omy and global politics. dering of the multilateral trade order, and international climate policy. In the last few years, new methods in What’s more, China has taken initiatives to identify and quantitative trade modeling have become available, promote additional growth drivers. Economic policies but they are only now starting to be used in applied have been implemented internally to promote innova- trade policy analysis. QUANTAGG attempts to make tion and a more eﬀ icient use of resources with the aim use of the methodological advances to improve our un- of implementing a new, quality-based, and sustainable derstanding of important developments in the global growth model. China was looking externally for new economy and to inform economic policy.

ifo Annual Report 2019 57 IFO CENTER FOR INTERNATIONAL ECONOMICS

In a research paper with Inga Heiland, Rahel Aichele Feodora Teti spent six months at the Tuck School of investigates to what extent trade liberalization has Business at Dartmouth. During her research stay she contributed to global production fragmentation and fi nalized a novel database on tariff s. The data compris- the formation of production networks, taking global es product-level detailed information on tariff s for 197 value chains into account. The work derives structural countries and their trading partners. It spans 30 years, equations for value-added trade fl ows and indicators namely 1988 to 2017, and it is planned to be updated in of production sharing put forward in the extant litera- the future. The data is unique with respect to the time ture and develops model-based measures for produc- and country coverage as well as the level of detail. With tion networks from a multi-sector gravity model with this data at hand, Feodora Teti shows new stylized facts inter-sectoral linkages. The model is used to perform about tariff s and global trade policy. Furthermore, she a counterfactual analysis of China’s WTO accession in aims to estimate theory-consistent import demand 2001. The results imply that China’s WTO accession was elasticities leveraging the high-precision data. a driving force behind the strengthening of production networks with its neighbors. The paper appeared in Together with Gabriel Felbermayr and Jasmin Gröschl, the Journal for International Economics. Marina Steininger fi nalized a paper about the economic consequences of Brexit. The paper builds on further In another project module, Rahel Aichele and Marina developments of the trade simulation model, which are Steininger investigate how much excessive trade there part of this project. A special focus of the analysis are

is when pricing in the environmental costs of CO2 emis- structural estimations of required model parameters, sions. Global value chains – in which goods are shipped which allow for asymmetries and take diﬀ erent steps of back and forth multiple times, oft en over great distanc- European integration into account. Together with Ga-

es – rely heavily on CO2-intensive global transportation briel Felbermayr, Marina Steininger published a paper services (i.e., maritime and air transport). Consequent- about the trade creation eﬀ ects of adoption of the euro

ly, CO2 taxation is expected to aﬀ ect the structure of resulting from a reduction in transaction costs. global value chains. To be able to quantify the eﬀ ects of regional and global climate policies with and on global Marina Steininger was invited to visit the Paris I, Sor- value chains, the module gathers data on the emissions bonne University in Paris from March until end of June of production as well as global transportation, data on 2019. During this time, she studied the interaction be- the shares of transportation modes for bilateral sec- tween weather events, migration, and trade in a gen- toral trade, and maritime distances between countries eral equilibrium framework that makes it possible to

and develops a quantitative trade model with CO2 estimate and quantify the economic impact of climate emissions and modes of transportation. change induced migration on sending and receiving countries. First, the paper examines how extreme Feodora Teti, together with Gabriel Felbermayr and Er- weather events aff ect migration. In the second part, a dal Yalcin, investigates the necessity of rules of origin dynamic trading model is further developed. in free trade agreements (FTAs). Rules of origin exist to prevent non-member countries from exporting their Martin Braml investigates social preferences for trade goods to an FTA member via the FTA country with the liberalization and globalization. The study, which ad- lowest external tariff rate and then transhipping the dresses the political economy of trade politics, is based goods within the FTA – also called trade defl ection. The on survey waves of the Eurobarometer. This setup al- research paper uses a new database to analyze diff er- lows identifi cation of national and regional diff erences ences in countries’ external tariff schedules and fi nds in attitudes within the EU. that the latter correlate strikingly for countries belong- ing to the same deep FTA. Therefore, in most FTAs, Additionally, Martin Braml, together with Gabriel Fel- for a vast majority of products, trade defl ection is not bermayr, investigates current account discrepancies. profi table even in the absence of costly rules of origin, These occur if trade fl ows between countries are misre- rendering rules of origin unnecessary. This empirical ported in the sense of correct double-entry bookkeep- Eff ects of rules research paves the way for a quantitative analysis of ing. In a study published in CESifo Economic Studies, the of origin the eff ects of rules of origin. In 2019, the paper was authors show that it is uncertain whether the EU runs published in the Journal for International Economics. a current account surplus or a defi cit with the United

58 ifo Annual Report 2019 IFO CENTER FOR INTERNATIONAL ECONOMICS

States. In the light of increasing global trade tensions, insurance records or the news. This introduces severe this study received a lot of attention. As the reason for reporting and endogeneity biases, as both insurance annual discrepancies that are nearly equivalent to the penetration and damage caused are correlated with size of the Portuguese economy, the authors argue development. To tackle this issue, Felbermayr and that tax evasion of multinational enterprises could be Gröschl have proposed a database, ifo GAME, which responsible, as particularly reﬂ ected by discrepancies collects information on geological and meteorological between Dutch and US statistics. events from primary sources.

In another study, which is published as CESifo Working This project has developed an extended database on Paper and is currently in the process of a journal publica- meteorological and geological intensities and exploits tion, Martin Braml and Gabriel Felbermayr point out that it to answer a number of research questions situated the EU runs a trade surplus with itself amounting to EUR at the crossroads of environmental economics, de- 307 billion annually, or 2 percent of EU GDP. This self-sur- velopment economics, and international trade. The plus is logically impossible, as each surplus must neces- research strategy follows three steps: fi rst, we inves- sarily mirror a defi cit in the same amount. The authors tigate how natural disasters aff ect international trade argue that VAT fraud seems to be the likely reason why and production patterns. Second, we analyze losses in exports within the EU are systematically upward-biased. economic growth due to natural disasters at the local level and potential spillover eff ects. Third, we use Co- Martin Braml spent six months at Stanford University lombian fi rm-to-fi rm transaction data to identify how for an academic visit. During this time, he investigated fi rms behave if they are aff ected by natural disasters on which basis the EU and the US select products that either directly or indirectly through partner fi rms. Fi- qualify for imposing retaliatory tariff s in the event of a nally, we use unique international money transfers and trade confl ict. This selection is relevant, as it could be migration corridors to identify the impact of natural di- motivated either by lobbyism, or political consider- sasters on the behavior of agents. ations, or welfare maximization in an economic manner. In 2017 and 2018, we created the dataset on natural di- International Market Interactions, Institutions, saster intensities for 1979–2014 around the globe and and the Costs of Natural Disasters estimated the short-run eff ects of natural disasters J. Gröschl for the Deutsche Forschungsgemeinschaft on international trade. Results show strong heteroge- (DFG), January 2017 to March 2021. neity across disaster types and country groups: while Eff ects of countries with high debt levels and the least developed natural disasters Natural disasters can result in severe economic shocks, countries see both their imports and exports reduced, on international with consequences for human and economic develop- developed countries are almost never aff ected. Disaster trade ment. Moreover, anthropogenic climate change could impacts are strongest within the fi rst quarter aft er the increase the frequency and severity of such events. shock and vanish within a year of disaster occurrence. Thus, studying how past natural disasters shaped economic outcomes and how these had been conditioned Currently, we are working on cleaning the Colombi- by institutional setups or by trade openness, migra- an fi rm-to-fi rm transaction-level data to be able to tion, and capital fl ows, can provide important insights match it to our gridded geological and meteorological into how to cope with the eff ects of climate change in events database. This major data work will be ongoing the future. in 2020. When fi nalized, the information on fi rm location around the globe will be matched to the disaster Empirical studies suggest that similar disaster events intensity data and used to analyze the behavior of fi rms have diff erent eff ects throughout the world and that when directly or indirectly aff ected by a disaster event. countries’ institutions as well as their embeddedness In addition to this data eff ort, we are working on clean- in international markets are an important factor in ing the information on money transactions and collect- adapting to natural disasters. However, most of the ing information on major migration channels around empirical literature suff ers from a number of problems. the globe. In 2020, we plan to look into the eff ects of First, studies have usually used information on the inci- natural disasters on money transfer fl ows at a fi ne local dence of natural disasters from databases drawn from level in certain migration corridors.

ifo Annual Report 2019 59 ifo Center for Macroeconomics and Surveys

Research at the ifo Center for Macroeconomics and studying the economic eff ects of diff erent fi scal union Surveys focuses on economic policy analyses, macro- scenarios, for example of a common unemployment economic research, and inequality and redistribution. insurance scheme in the euro area. Researchers in this The Center also provides services in the form of survey area have examined public attitudes towards those re- data and methodological expertise, as well as business forms by means of randomized survey experiments. In cycle indicators and macroeconomic forecasts. The another policy-relevant project, the Center has devel- Center’s “ifo Business Climate Index,” a monthly survey oped the fi rst dynamic scoring framework for modeling of 9,000 German fi rms, receives considerable public and analyzing tax and benefi t reforms for all EU coun- and media attention as it is Germany’s most important tries together with co-authors from the European Com- leading business cycle indicator. mission and its Joint Research Centre. To this end, the researchers involved have combined EUROMOD with QUEST, the European Commission’s dynamic stochas- Research Projects tic general equilibrium (DSGE) model used for the analysis of structural reforms. This work has a direct policy The Center’s research focuses on: impact, as the newly developed framework will be applied by the European Commission within the context – economic policy analyses of the European Semester in the future. – macroeconomic research – inequality and redistribution Another research area is the European Central Bank’s monetary policy and its impact on fi nancial stability and the overall economy. Special attention is paid to PROJECTS IN ECONOMIC POLICY ANALYSES the analysis of TARGET2 balances. Furthermore, the Center’s research focuses on the reform process of fi - This research area covers a wide range of economic nancial sector regulations, particularly with regard to policy analyses. the European Banking Union. The Center employs various methods to study the ef- fi ciency, welfare, and stabilizing eff ects of economic Projects in Detail policies from national, European, and international One focus of the research into national fi scal policies perspectives. Researchers in this area conduct ex post in EU member states is on analyzing the eff iciency ef- analyses using both macro- and microdata to assess fects of tax and transfer systems, as well as their redis- the impact of implemented reforms. Ex ante analyses tributive and stabilizing eff ects. Analyses are conduct- address the eff ects of reform proposals for the German ed using various empirical approaches and models, tax-benefi t system, fi scal policies in other EU member including the tax-benefi t microsimulation model for states, as well as the economic eff ects of fi scal integra- the European Union (EUROMOD), which allows the mi- tion in Europe using (behavioral) simulation models. cro-based analysis of changes in respective tax and ifo’s tax-benefi t These include ifo’s tax-benefi t microsimulation model transfer policies in the EU-27 and the simulation of microsimulation for Germany (developed together with the ifo Center counterfactual policy reforms. model for Public Finance and Political Economy), EUROMOD, the tax-benefi t microsimulation model for the Euro- Two projects by Mathias Dolls, Clemems Fuest, An- pean Union, and the NBER’s TAXSIM model for the US. dreas Peichl, and Christian Wittneben focus on the role These models allow micro-based analyses of changes of automatic stabilizers. In particular, the fi rst project in tax and transfer policies and the simulation of coun- (“Crisis, Fiscal Consolidation, and Automatic Stabiliza- terfactual policy reforms. Based on the results of these tion”) analyzes how reforms of tax-benefi t systems in empirical studies, researchers develop policy recom- the period 2007–2015 aff ected the automatic stabili- mendations for designing eff icient and equitable tax zation capacity in the EU based on harmonized Euro- and transfer systems. pean microdata. Factors like unemployment benefi ts or income taxes can stabilize individual and aggregate The Center has actively contributed to the current de- income and smooth consumption demand in the event bate about euro area reforms through various research of shocks. Our analysis makes it possible to disentan- projects and policy papers. It has published papers gle automatic changes in net government intervention

60 ifo Annual Report 2019 IFO CENTER FOR MACROECONOMICS AND SURVEYS

from those that take place aft er explicit government ing structural reforms. We assess the current policy legislation (discretionary changes), as well as changes proposal, provide an in-depth analysis of its advan- in actual incomes and behavioral responses. We fi nd tages and potential risks, and subsequently devel- automatic stabilizers to be generally heterogeneous op our own proposal for the design of such a fi scal across countries – both in levels and in terms of policy instrument. This project is based on a report for the changes over the crisis. Stabilization coeff icients vary European Parliament, which assessed convergence in from less than 25 percent in eastern European coun- the Economic and Monetary Union, and is funded by tries to almost 60 percent in Belgium, Germany, and the Leibniz Research Alliance “Crises in a Globalized Denmark. We discuss the implications of our results for World.” post-crisis recovery. A joint research project by Robert Lehmann, Xenia The second project (“Labor Supply and Automatic Frei, and Felix Rösel, both of ifo Dresden, and Sebas- Stabilizers”) estimates the stabilizing eff ects of tax tian Langer of the Leibniz Institute of Ecological Urban and transfer systems through a marginal incentives and Regional Development, Dresden, investigates channel. We develop a random utility-discrete choice whether election externalities exist between diff erent model of household behavior to analyze the incentive layers of government. To this end, the authors draw on eff ects of taxes. This model is used in conjunction with voting polls for Germany in total, and Berlin in partic- and as an augmentation of the (static) tax model EU- ular, for the four main parties (CDU, SPD, the Greens, ROMOD. When income taxes are progressive, the tax and the Left ). The results suggest that shocks in feder- rate that a household faces will fall following an in- al parliament voting intention impact state parliament come decline in a recession, thereby increasing work voting intentions, but – as a new fi nding – the reverse incentives and hence labor supply. This eff ect off sets also applies to the same extent. The eff ects also diff er part of the initial income decline, stabilizing aggre- across parties. Electoral externalities are lower for the gate income and output. The magnitude of the eff ect CDU but increase in times of government. The oppo- depends on the change in the marginal tax rate aft er site holds true for the SPD and the Left . Aft er journaling a change in gross income, as well as the elasticity of in 2019, the paper has been accepted for publication labor supply with respect to a change in the aft er-tax in Kyklos. wage. We estimate a structurally discrete choice labor supply model and individual tax rates for households A current research project by Mathias Dolls and Car- in the EU using the microsimulation model EUROMOD la Krolage analyzes the eff ect of fi nancial incentives and EU-SILC household data. Our estimations show on retirement entry behavior in the context of a ma- that up to 10 percent of a fall in household income is jor recent policy reform in Germany (“Rente mit 63”). off set by an increase in labor supply. The EU average This reform enables individuals with long contribution is roughly 2 percent. The results reveal a great deal of histories to retire much earlier without facing any de- heterogeneity across countries, which is mainly due to ductions. Using high-quality administrative data from diff erences in the progressivity of tax systems across public pension accounts, we conduct both an event Europe. The incentive eff ect is large in countries with study and a coarsened exact matching procedure. a highly progressive tax schedule, while it is zero for The results indicate that individuals who are eligible countries with a fl at tax, where the marginal tax rate is for the early retirement scheme retire on average 6.4 constant. Diff erences in labor supply elasticities also months earlier. play a signifi cant role. In a further project, Mathias Dolls, Clemens Fuest, Car- A further study by Mathias Dolls, Clemens Fuest, Car- la Krolage, and Florian Neumeier examine the eff ects la Krolage, Florian Neumeier, and Daniel Stöhlker of real estate transfer taxes (RETT) on house prices Eff ects of real estate (“Incentivizing Structural Reforms in Europe? A Blue- using a rich micro dataset on German properties cov- transfer taxes print for the European Commission’s Reform Support ering the period 2005–2018. The authors exploit a Programme”) assesses the European Commission’s 2006 constitutional reform that allowed states to set recently proposed reform delivery tool. By providing their own RETT rates, leading to frequent increases in fi scal transfers to member states, this tool strives to states’ tax rates in subsequent years. Their monthly incentivize governments to conduct growth-enhanc- event study estimates indicate a price response that

ifo Annual Report 2019 61 IFO CENTER FOR MACROECONOMICS AND SURVEYS

strongly exceeds the change in the tax burden for sin- economies of the euro area had to cope with sharply gle transactions. In other words, twelve months aft er rising borrowing costs and signifi cant diff iculties in a reform, a 1 percentage point increase in the tax rate tapping international capital and money markets. reduces property prices by on average 3.5 percent. However, unlike the typical sudden stop, the econo- Eff ects are stronger for apartments and apartment mies of the euro area had access to additional resourc- buildings than for single family houses. The authors es to cushion the eff ects of private capital outfl ows. interpret these results in the context of a theoretical In particular, they enjoyed the extraordinarily accom- model that accounts for the eff ects of RETT on a prop- modating provision of liquidity to commercial banks erty’s resale value. If a property is expected to be trad- by the European Central Bank as part of its unconven- ed more frequently in the future, the decline in its price tional monetary policy measures. Commercial banks can exceed the increase in the tax burden. Moreover, without access to private interbank lending, but with larger price eff ects can be explained by higher bar- suff icient collateral, could obtain from their national gaining power of sellers. central bank the liquidity needed to compensate for the drying up of private funding. As the closing of these Analysis of the recent The research group also conducted an analysis of the funding gaps through central bank liquidity was very tax reform in the US recent tax reform in the United States. Dorine Bou- unevenly distributed across member countries’ bank- mans, Clemens Fuest, Carla Krolage, and Klaus Wohl- ing systems, signifi cant and persistent imbalances in rabe survey German businesses and worldwide survey the national central banks’ positions in the trans-Euro- experts regarding the eff ects of the tax reform. Their pean payment system, known as TARGET2, emerged. analysis indicates the eff ects on businesses’ tax burden The main results can be summarized as follows. First, and investment choices, as well as depicting implica- recourse to the European Central Bank’s unconven- tions for regions around the world. tional monetary policy measures – refl ected in the accumulation of TARGET2 balances – was mainly driven The research project “The German Current Account by capital fl ow shocks. In contrast, cyclical drivers like and Capital Market Imbalances in the Eurozone against innovations to aggregate demand or aggregate supply the Background of German Firms’ Investment and Sav- do not seem to induce statistically signifi cant changes ing Decisions: Causes and Policy Implications” is a joint in TARGET2 positions. Second, results from a counter- work by Timo Wollmershäuser and Christian Grimme factual analysis suggest that uneven recourse of na- as well as Thorsten Klug and Eric Mayer at the Universi- tional banking systems to the European Central Bank’s ty of Würzburg. The project is supported by the German unconventional refi nancing operations caused real Bundesbank. It examines the behavior of the German distributional eff ects across the euro area economies. non-fi nancial corporate sector, which became a net While in the distressed euro area member countries lender over the last two decades. The project has iden- deeper recessions could be avoided, the accumulation tifi ed several channels that prove the close relation- of TARGET2 claims in the core countries dampened agship between a rise in corporate net lending and the gregate economic activity. In January 2020 the paper widening of the German current account surplus. In the was accepted for publication in the Journal of Banking fi rst working paper, which was published as ifo Work- and Finance. ing Paper No. 280 and has since been revised, we show that fi nancial friction, world demand, and labor supply shocks can explain around 40 percent of the variation PROJECTS IN MACROECONOMIC RESEARCH in corporate net lending and the current account on a The Center’s macroeconomic research primarily in- one year horizon. vestigates the causes and economic impact of macroeconomic shocks and deduces their implications for In the project “Capital Flows in the Euro Area and TAR- applied business cycle analysis. Thematically, its work GET2 Balances” Timo Wollmershäuser, together with focuses on the infl uence of fi nancial market frictions Nikolay Hristov of the Deutsche Bundesbank and Oli- and uncertainty, as well as the impact of monetary ver Hülsewig of the University of Applied Sciences Mu- and fi nancial policy measures on real and fi nancial nich, looks at the consequences of the capital fl ow re- variables. Many questions are drawn from experiences versals in the euro area between 2008 and 2014. Like in and observations related to the global fi nancial crisis many other episodes of sudden stops, the distressed and the euro crisis. As far as methods are concerned,

62 ifo Annual Report 2019 IFO CENTER FOR MACROECONOMICS AND SURVEYS

both theoretical approaches such as DSGE models and banks gather more information to reduce uncertainty empirical time series approaches such as VAR models and increase the customer relationship. This reduces are used. The survey data collected by the ifo Institute short-term interest rates. is oft en used in empirical work. Financial constraints and business uncertainty, for example, are identifi ed The study “State-Dependent or Time-Dependent Pric- using special questions from the ifo Business Survey ing? New Evidence from a Monthly Firm-Level Survey: at the fi rm level. 1980–2017” (Christian Grimme together with Huw D. Dixon of Cardiff Business School) analyzes the relative In the area of forecasting methodology, the Center pri- importance of time and state dependence in the price marily concentrates on processes of information con- setting of fi rms. The results show that both factors densation and selection against a background of the are important. In particular, price increases can be enormous amounts of data available to the forecasters well explained only by the interaction of both factors. (partly as a result of ifo’s own surveys). For example, Therefore, theoretical models that explain price fl uc- this area investigates whether microdata from business tuations should include both factors and not, as they and surveys are suitable for forecasting macroeconom- currently do, just one of the two. The results are pub- ic time series. In addition, alternative condensation lished as CESifo Working Paper No. 7842, 2019. procedures for microdata on participants, industries, and regional delimitations are examined. One example The project “The Price and Employment Response of is boosting techniques that enable the identifi cation Firms to the Introduction of Minimum Wages” (Sebas- of core information (e.g., fi rms with a high forecasting tian Link) studies the short-term price and employ- quality). Furthermore, processes like Bayesian model ment reaction of manufacturing fi rms and service averaging or models with mixed frequencies are ex- companies to the introduction of a statutory minimum amined for their suitability and are further developed. wage in Germany in 2015. Exploiting variation in treat- For these purposes, Robert Lehmann, Magnus Reif, and ment intensity across diff erent industries and regions, Timo Wollmershäuser started the internal project “IFO- the minimum wage’s eff ects are analyzed by means of CAST 2.0” to further increase the quality of the ifo-in- the unique fi rm-level survey data of the ifo Business ternal forecast methodology. Survey on expected and realized changes in prices and employment. In line with previous studies, the esti- Projects in Detail mated employment eff ect is only very modestly neg- In the project “Nonlinear Eff ects of Uncertainty on ative and insignifi cant. In contrast, fi rms that were af- Lending Conditions: Evidence from Firm-Level Data”, fected more strongly by the minimum wage increased Christian Grimme, together with Steff en Henzel of the their prices signifi cantly more frequently in the period Munich University of Applied Sciences, analyzes wheth- around its introduction. Making use of the high cor- er the link between uncertainty and loans is nonlinear. relation between the survey data and administrative The question is tackled using fi rm-level data from the producer price indices reveals that the magnitude of ifo Institute. Increases in uncertainty have negative the price eff ect is quantitatively large. Altogether, the eff ects, especially when the level of uncertainty is still results suggest that price pass-through is an import- low. This is because banks cut back on their lending ant margin of adjustment for fi rms in response to min- particularly in those situations. imum wages. The paper is circulated as CESifo Working Paper No. 7575, 2019. The study “Uncertainty and the Cost of Bank vs. Bond Finance” by Christian Grimme was again revised in The project “The Eff ect of Disaggregate Information 2019. It analyzes the impact of an increase in econom- on the Expectation Formation of Firms” von Sebastian ic uncertainty on the costs of corporate bonds and Link (together with Lukas Buchheim of LMU Munich) bank loans in Germany and the US. The paper shows studies a new aspect of fi rms’ expectation formation New aspect that bond yields rise during periods of volatility, while by asking whether expectations primarily refl ect ag- of fi rms’ expectation bank loan rates fall. This diff erence is due to the fact gregate, industry-wide information (e.g., industry formation that banks, unlike the capital market, collect borrow- trends) or disaggregate information (e.g., fi rm-specifi c er-specifi c information, because they are interested in information). First, they show that disaggregate infor- long-term customer relationships. In uncertain times, mation is strongly associated with expectations even

ifo Annual Report 2019 63 IFO CENTER FOR MACROECONOMICS AND SURVEYS

when controlling for aggregate information at high-di- current and the following quarter, the Import Climate mensional industry levels. Moreover, aggregate and performs best for France, Germany, Italy, and the Unit- disaggregate information explain comparable shares ed States under real-time conditions. For Spain and of the variance in expectations. Second, they exploit a the United Kingdom, the Import Climate works partic- natural experiment to identify the causal eff ect of new ularly well for the latest set of data. Thus, the new in- information on expectations. The predictable demand dicator is also of high practical relevance. In 2019, the eff ects for durable goods due to the German VAT in- revised results of the research project were published crease of 2007 implied that, at the time, durable goods as ifo Working Paper 294. retailers had access to more reliable information about their future demand than non-durable goods retailers. The research project “Forecasting Exports across Eu- Using this observation in a diff erence-in-diff erences rope: What Are the Superior Survey Indicators?” by design, they fi nd that “treated” fi rms were signifi cant- Robert Lehmann investigates the question of wheth- ly more forward-looking ahead of the VAT-induced de- er superior indicators to forecast export growth exist mand shift s. Overall, their results suggest that fi rms across a multitude of European countries. Based on rationally incorporate disaggregate information into a forecast experiment, he shows that four indicators their expectations. in particular can be described as superior: the Export Climate (in the style of the ifo Institute), the Produc- Furthermore, Sebastian Link published his paper tion Expectations of domestic manufacturing fi rms, “The Harmonization of the ifo Business Survey’s Mi- the Industrial Confi dence Indicator, and the Economic cro Data” in the Journal of Economics and Statistics. Sentiment Indicator. The manuscript was published as Every month, the ifo Business Survey (IBS) receives CESifo Working Paper 7846 in September 2019. approximately 9,000 responses from a representative set of German fi rms about their current and expect- In the project “Predicting Ordinary and Severe Reces- ed economic conditions along various dimensions. sions with a Three-State Markov-Switching Dynamic Thus, the microdata of the IBS is ideally suited to Factor Model. An Application to the German Business study various aspects of fi rm behavior and expec- Cycle” by Magnus Reif together with ifo research pro- tation formation. However, methodological hetero- fessor Kai Carstensen and Markus Heinrich, both of geneities between diff erent subsets of the IBS have the University of Kiel, and Maik Wolters of the Univer- prevented joint analyses of fi rms in all main sectors sity of Jena, work is done to develop a model to date of the economy. This paper expands the scope for business cycle turning points. To this end, a variety economic research based on the IBS by presenting of so-called large-data methods (LARS, LASSO, elas- a harmonization procedure that overcomes these tic-net) are applied to select the optimal set of indica- heterogeneities and that substantially improves the tors for each period. It is demonstrated that applying possibility of merging fi rms to administrative data at this automatic variable selection provides superior disaggregate industry levels. results compared to the case of a fi xed set of indicators. Moreover, the model is used to compute short- A research project entitled “Forecasting Imports with term forecasts of German GDP growth. It is shown Information from Abroad” by Christian Grimme, Rob- that a nonlinear factor can signifi cantly increase fore- ert Lehmann, and Marvin Noeller focuses on forecast- cast accuracy. ing import growth. Imports are usually seen as the aggregates with the largest forecasting bias. Two rea- The project “Macroeconomic Uncertainty and Fore- sons for this can be identifi ed: fi rst, imports are, next casting Macroeconomic Aggregates” by Magnus Reif to exports and investments, the aggregate with the investigates the predictive power of economic uncer- highest volatility in quarterly growth rates; and sec- tainty. To this end, both linear and nonlinear models A new class of leading ond, no import leading indicator exists. This research are used. The author fi nds that nonlinear models, i.e., indicator project fi lls this gap and creates a new class of leading models that assume diff erent transmission mecha- indicator, the ifo Import Climate, to forecast import nisms in times of high and low uncertainty, provide growth for six advanced economies. The Import Cli- more accurate forecasts. In particular, the predictive mate is based on international survey results, as well densities provide a better description of the actual as price and cost competitiveness measures. For the forecast uncertainty.

64 ifo Annual Report 2019 IFO CENTER FOR MACROECONOMICS AND SURVEYS

Furthermore, Magnus Reif (together with Markus Hein- published by the German government are biased com- rich of the University of Kiel) studies whether forecast pared to the Joint Economic Forecast. Both the govern- accuracy can be improved by modeling structural mental and the Joint Economic Forecast are especially change in the economy. In contrast to existing studies biased for longer forecast horizons, which is mainly dealing with this question, the authors use mixed-fre- driven by a false assessment of trend growth in gross quency models, i.e., models that enable the use of indi- domestic product. However, the government also sig- cators published with diff erent frequencies. They fi nd nifi cantly deviates from the Joint Economic Forecast, that this new model class provides especially precise which results in an even worse forecast. Moreover, infl ation forecasts. this deviation may also be driven by political infl uences. The results of the project were published as CESifo In the MPRA Paper No. 81772, Johanna Garnitz, Robert Working Paper 7460 in January 2019, which was accept- Lehmann, and Klaus Wohlrabe evaluate the properties ed for publication in the German Economic Review in of the indicators gained from the World Economic Sur- January 2020. vey to forecasting GDP growth of 44 diff erent countries. Three key results emerge: fi rst, models including WES PROJECTS IN INEQUALITY AND REDISTRIBUTION information perform better compared to a benchmark model for the majority of countries. Second, the WES The Center also investigates trends in income and economic climate and the WES economic expecta- wealth distribution, as well as other indicators of inclu- tions in particular are the best performing indicators sion and equal opportunity. Using a variety of econo- that result from the World Economic Survey. Lastly, in metric techniques, the Center conducts microdata analyses to explore trends in wealth and income dis- 70 percent of all cases, extending the country-specifi c tribution, and to identify the causal eff ects of tax and forecasting model with WES information on key trad- transfer policies. ing partners increases forecasting quality. The article has been published in Applied Economics and the main Particular attention is devoted to the empirical anal- results were also used to inform the general public by ysis of equal opportunity and regional diff erences in publishing them in the ifo Schnelldienst. inequality. In addition, researchers analyze potential drivers of changing inequality like globalization and In addition, Stefan Lautenbacher, together with Rüdi- demographic change, and especially the role of tax and ger Bachmann of the University of Notre Dame, Kai transfer systems. Individual preferences regarding re- Carstensen of the University of Kiel, and Martin Schnei- distribution and attitudes toward “fair” tax systems are der of Stanford University, analyzes newly collected additional areas of research. Based on these studies, fi rm-level ifo data on subjective uncertainty. This is researchers provide policy advice for reforms of the tax part of the research project “Expectation Formation, and transfer system to improve equality of opportunity. Uncertainty, and Ambiguity at the Firm Level, Mea- surement and Macroeconomic Implications,” which is funded by the Thyssen Foundation. The work of the Projects in Detail project team has led to several new fi ndings. Amongst For the empirical analysis of equality of opportunity, others, the new data reveals that there is no simple we acquired two DFG grants for the period 2017–2020. linear relationship between perceived uncertainty In the fi rst project, we teamed up with research part- and sales growth. In fact, uncertainty is generated by ners from France, Sweden, and Luxembourg to inves- (larger) changes of past sales growth. In addition, un- tigate the infl uence of unequal opportunities over Investigating the certainty is closely linked to longer-term fi rm charac- the entire course of individuals’ lives. Rather than infl uence of unequal teristics and the fi rms’ environment, and particularly focusing on a specifi c stage of adulthood, this proj- opportunities to fi rm size, the sales growth trend, and the volatility ect analyzes how circumstances in childhood aff ect of sales over time. infl uential decisions that mark individuals’ transition to adulthood, and how these decisions translate into In their project “The Macroeconomic Projections of the social and economic outcomes at later stages in life. German Government: A Comparison to an Independent We simultaneously address these questions from in- Forecasting Institution,” Robert Lehmann and Timo tergenerational mobility and equal opportunity per- Wollmershäuser ask whether the off icial forecasts spectives and draw on cross-country comparisons to

ifo Annual Report 2019 65 IFO CENTER FOR MACROECONOMICS AND SURVEYS

identify the causal mechanisms via which social and In a second paper, Paul Hufe and Andreas Peichl (to- economic advantages are transmitted from one gen- gether with Ravi Kanbur of Cornell University) ac- eration to another. knowledge the multiplicity of normative ideals when evaluating the fairness of a given income distribution. In the second project, on which we are working with More specifi cally, they reconcile the ideals of equal op- partners from Poland, the UK, and Italy, we go beyond portunities and absence of poverty from a perspective the conventional approach of treating income as the of inequality measurement. A remarkable advantage Well-being is a only outcome dimension of interest. It is widely ac- of their approach is its appeal to the measurement of multidimensional knowledged in the literature on this topic, and more so unfair inequalities. They develop a family of measures concept in practical decision-making, that well-being is a multi- of unfair inequality, which combine in essential fashion dimensional concept that incorporates not just income both inequality of opportunity and absolute depriva- but also health, education, and civic participation. tion. An empirical application of their approach yields Therefore, if the goal of public policy is to seek equality strong upward corrections to inequality of opportunity of opportunity, its measurement must account for the based on quantifi cations of unfair inequality. multidimensionality of well-being. To date, however, researchers on the equality of opportunity have made In a last contribution, Paul Hufe (together with Daniel little progress in this respect – a shortcoming that this Mahler of the University of Copenhagen and Paolo Bruno- research project addresses. To this end, we investigate ri of the University of Florence) proposes a set of new theoretical models of equality of opportunity with the methods to estimate inequality of opportunity based on goal of linking individual responsibility and multidi- conditional inference regression trees. More specifi cal- mensional well-being and off ering various measure- ly, the authors illustrate how these methods represent ment approaches to evaluating equality of opportunity a substantial improvement over existing empirical ap- in the presence of multiple outcomes. Furthermore, we proaches to measuring inequality of opportunity. First, will bring the measures developed to the data in order they minimize the risk of arbitrary and ad hoc model to assess equality of opportunity with respect to multi- selection. Second, they provide a standardized way of dimensional well-being. trading off upward and downward biases in inequality of opportunity estimations. Finally, regression trees can Our research on equality of opportunity has yielded sci- be graphically represented; their structure is immediate- entifi c papers for publication in peer-reviewed journals. ly readable and easy to understand. This will make the measurement of inequality of opportunity more easily In the fi rst paper, Paul Hufe and Andreas Peichl inves- comprehensible to a large audience. Furthermore, the tigate the existence of unequal opportunities with re- use of cutting-edge machine learning methods contrib- spect to political participation in the US. While it is well utes to ifo’s eff orts to incorporate methods from big data documented that political participation is stratifi ed analysis into its methodological toolkit. by socioeconomic characteristics, an open question is how this fi nding bears on the normative evaluation In a new research project, Andreas Peichl and Paul of the democratic process. In this paper, the authors Hufe (together with Daniel Weishaar of LMU Munich) draw on the analytical tools developed in the equality investigate the properties of conventional measures of of opportunity literature to answer this question. They inequality of opportunity in the context of developing investigate to what extent diff erential political partic- countries. In particular, more restrictive data environ- ipation is determined by factors that lie beyond indi- ments could lead to non-trivial biases in the context vidual control, rather than being the result of individ- of these countries. The authors show that conven- ual choices. Using rich panel data from the US, they do tional measures of inequality of opportunity applied indeed fi nd a lack of political opportunity for the most to “poor” data environments should be interpreted disadvantageous types. Opportunity shortages tend as lower bounds of the true extent of unequal oppor- to complement each other across diff erent forms of tunities. For this reason, the authors complement the participation and persist over time. They also fi nd that lower bound estimates with upper bound estimates family characteristics and psychological conditions to illustrate the bandwidth of possible estimates and during childhood emanate as the strongest determi- to restrict the scope for misinterpreting the point esti- nants of political opportunities. mates of conventional point estimates.

66 ifo Annual Report 2019 IFO CENTER FOR MACROECONOMICS AND SURVEYS

Further inequality-related research projects are cur- Education Economics whether school investments into rently in progress and have been presented at scientifi c the quality and quantity of the teaching body exert a conferences. Amongst others, Carla Krolage and An- diff erential eff ect on students depending on their edu- deas Peichl (together with Daniel Waldenström of the cation-related genetic endowments. As such they con- Research Institute of Industrial Economics, Stockholm) tribute to a rapidly growing body of economic research develop alternative measures for assessing top income that aims to integrate novel insights from behavioral shares to account for population and economic growth. genetics into the focus of social science research. Based on real and growth-adjusted income thresholds, as well as on fi xed group size, these measures show that ECONPOL EUROPE top income shares in the US have not been simply fan- ning out over time. Instead, the fi ndings show diverging EconPol Europe – The European Network for Econom- developments at the top, i.e., while the overall trends of ic and Fiscal Policy Research is a unique collaboration Piketty and Saez (2003) are robust, there are some im- of 14 policy-oriented university and non-university A unique portant qualifi cations. More specifi cally, when linking research institutions that contribute their expertise collaboration of top incomes to productivity growth, they fi nd sharper to the discussion of the future design of the European research institutions interwar drops in top shares and almost no increases at Union. In spring 2017, the network was founded by the all aft er 1990. In addition, not only did groups just below ifo Institute together with eight other renowned Euro- the very top experience less income growth than those pean research institutes as a new voice for research above them, but they also benefi ted less than the upper in Europe. The ifo Institute was commissioned by the middle class located just below them in terms of income German Federal Ministry of Finance to set up this in- distribution. An analysis of pre-tax national account dependent network devoted to research and to con- measures yields similar results. tributing its results to the economic and fi scal policy debate in Europe. In a project on wage inequality and the German minimum wage, Maximilian Blömer (together with Nicole Guertzgen of the University of Regensburg and IAB, Laura Pohlan and Holger Stichnoth of ZEW, Mannheim, and Gerard van den Berg of the University of Bristol) estimates an equilibrium search model using German administrative data and uses this for counterfactual analyses of a uniform minimum wage. The model with worker and fi rm heterogeneity does not restrict the sign of employment eff ects a priori and allows for diff erent job off er arrival rates for the employed and the unem- ployed. They fi nd that unemployment is a non-mono- tonic function of the minimum wage level. In the sample of low- and medium-skilled individuals, a minimum wage equivalent in real terms to the one actually introduced in 2015 raises the unemployment rate by 1.4 percentage points, an increase of 13 percent vis-à-vis the old steady-state value. The researchers fi nd that eff ects The network members are: diff er strongly by labor market segment. Cross-segment variation of the estimated eff ects is mostly driven by – ifo Institute – Leibniz Institute for Economic Research fi rm productivity levels, rather than by search frictions at the University of Munich e. V. (ifo; Munich, Ger- or the opportunity cost of employment. Detailed results many) were published as CESifo Working Paper No. 7160, 2018 – Centre for European Policy Studies (CEPS; Brussels, and ZEW Discussion Paper 18-032. Belgium)

Marc Stöckli and Paul Hufe investigate in a joint re- – Centre d’Études Prospectives et d’Informations In- search project with researchers from the ifo Center for ternationales (CEPII; Paris, France)

ifo Annual Report 2019 67 IFO CENTER FOR MACROECONOMICS AND SURVEYS

– CERGE-EI (Prague, Czech Republic) The network’s research results are disseminated through various EconPol Europe publication channels – CPB Netherlands Bureau for Economic Policy Analy- including working papers, policy reports, policy briefs, sis (The Hague, Netherlands) and opinion pieces. In 2019, 19 EconPol Working Pa- – Instituto Universitario de Economia at the Univer- pers, 9 EconPol Policy Reports, 9 EconPol Policy Briefs, sidad Carlos III de Madrid (Madrid, Spain) and 11 EconPol Opinions were published. These publi- – Institute for Advanced Studies (IHS; Vienna, Austria) cations discussed a variety of politically relevant topics, such as the future eﬀ ects of Brexit on the European – KOF Swiss Economic Institute at ETH Zurich (Zurich, economy, macroeconomic imbalances and absorption Switzerland) channels of macroeconomic shocks in the Eurozone, – REM at the Lisbon School of Economics and Manage- reforms of the common agricultural policy, debt rules ment of the Universidade de Lisboa (Lisbon, Portugal) in the Eurozone, and tax competition in Europe. – Toulouse School of Economics (Toulouse, France) 16 – University of Oxford (Centre for Business Taxation) EconPol 2019 (Oxford, UK) November POLICY REPORT Vol. 3 – Università di Trento (Department of Economics and Management) (Trento, Italy) – VATT Institute for Economic Research (VATT; Hel- A Primer on Developing sinki, Finland) European Public Goods – ZEW – Leibniz Centre for European Economic Re- Clemens Fuest (ifo Institute, LMU, EconPol) Jean Pisani-Ferry (EUI, Bruegel) search (Mannheim, Germany)

The mission of EconPol Europe is to contribute its research ﬁ ndings to help solve the pressing economic and ﬁ scal policy issues facing the European Union, and thus to anchor the European idea more deeply in the member states. Its task is also to transfer its research results to the relevant target groups in government, business, and research, as well as to the general public, and to build a bridge between national and European policy debates.

With its cross-border cooperation on ﬁ scal and Promoting growth, economic issues, EconPol Europe aims to promote prosperity, and social growth, prosperity, and social cohesion in Europe cohesion and, in particular, to provide research-based contributions to the successful development of the Euro- pean Economic and Monetary Union (EMU). Its tasks In addition to various academic workshops, lunch sem- consist of joint interdisciplinary research in the fol- inars, and a parliamentary breakfast with members of lowing areas: the European Parliament, EconPol Europe organized the network’s third annual conference in November 2019. – sustainable growth and best practice The two-day conference focused on “Europe’s Competi- – reform of EU policies and the EU budget tiveness and the Rise of China.” The conference brought together some 150 scientists, politicians, experts from – capital markets and the regulation of the ﬁ nancial German and European institutions, and journalists to sector discuss current developments in international trade – governance and macroeconomic policy in the Euro- and other economic policy issues. The conference was pean Monetary Union structured as follows: The aft ernoon of November 7,

68 ifo Annual Report 2019 IFO CENTER FOR MACROECONOMICS AND SURVEYS

2019 started with a speech by Carlos San Basilio (Sec- dicators in forecasting. Examples are bridge equations, retary General of the Treasury and International Financ- vector-autoregressive (VAR) models, factor models, ing, Spanish Ministry of Economy and Business) on the and models of mixed frequencies. For a forecast hori- future agenda for Europe’s competitiveness, followed zon of over two quarters, more structural time-series by a speech by Daniel Gros (Director, CEPS). Next came methods and macroeconomic models are used. In a panel discussion about the rise of China and the re- recent years, the Center has set up the so-called ifo- sulting challenges for Europe. Koen Jonkers (European DGSE model for Germany, which simulates the German Commission), Sherry Madera (Refi nitiv), Luisa Santos economy as part of the euro area in the framework of (BusinessEurope), and Xu Zhengbin (Chinese Mission to an estimated micro-founded, structural multi-country the EU) participated in the panel. In the evening, a ple- model. This model is not only used for forecasting but nary session on Chinese competition included Stefano also adopted in policy simulations. Schiavo (University of Trento), Andrea Ciani (Düsseldorf Institute for Competition Economics), and Koen Jonkers. To ensure that its economic forecasts are scientifi cally sound, the Center’s models for the analysis and fore- On November 8, various sessions were held on the top- casting of the business cycle are constantly examined ics of productivity growth in the European Union, labor with regard to their practical suitability. Based on the market eff ects of digitalization and automation, euro Center’s own research, the models are regularly im- area governance, and many other current issues. proved and new developments in forecasting methods are implemented. Service Functions Service Projects A key service function of the Center is conducting and in- terpreting business surveys. The regularly collected data The Center regularly carries out a number of service 70 years of the not only constitutes an integral part of the ifo Institute’s projects, based on its own research work and contin- ifo Business Survey economic forecasts; they also form the basis of industry uously monitored according to scientifi c criteria. The and aggregate economic forecasts of businesses, industry most important projects are the ifo Business Surveys associations and government agencies. The survey results and the economic forecasts. are extensively discussed and interpreted in the media. In economic research, microdata derived from ifo Business IFO BUSINESS SURVEYS Surveys plays an important role in testing economic be- The business survey introduced by the ifo Institute in havioral patterns – for example investment and employ- 1949 was an innovation in business-cycle and market ment behavior, labor market trends, or pricing policies. observation. Today it is one of the most important The Institute’s excellent reputation in the area of business sources for assessing the current economic situation in surveys is also confi rmed by the fact that the surveying Germany. In 1990, shortly aft er the German Economic techniques developed at the Center are currently used in and Currency Union took eff ect, the business survey over fi ft y countries around the world. The regular surveys was expanded to include eastern Germany. are also part of the harmonized European Commission Business Surveys Framework, from which the Center re- The monthly survey is based on roughly 9,000 respons- ceives considerable funding. Each month the Center deliv- es from fi rms throughout Germany on how they see ers parts of its aggregated survey results, which are then their business situation and related aspects of opera- included in the European Sentiment Indicator. tional activities. The standard questions require fi rms to appraise their current situation and assess their The Center’s economic forecasts are based on ongoing business expectations and plans in the three to six observation and analysis of economic developments, months ahead. Survey participants are asked to ex- taking the survey results and the constructed indica- clude seasonal fl uctuations from their assessments. tors into special consideration. Numerous empirical As this is only partially possible, the results undergo models are used in its forecasts. For the short-term an additional seasonal adjustment. The survey results, forecasts, approaches are typically applied that suit- which are subject to a complex evaluation procedure, ably compact and employ information from timely in- provide information on some 600 individual sub-sec-

ifo Annual Report 2019 69 IFO CENTER FOR MACROECONOMICS AND SURVEYS

tors, manufacturing industry, the service sector, con- its results every month. Special monthly evaluations struction, as well as wholesale and retail trade. and commentaries of the ifo Business Survey are provided by the ifo Institute for Bavaria, Baden-Württem- The ifo Business Survey aims to capture the busi- berg, North Rhine-Westphalia, and Saxony. ness-cycle component of macroeconomic developments. It does not predict long-term growth trends. ifo Business Climate Germanyɭ The ifo Business Survey is designed to supplement Seasonally adjusted oﬀ icial statistics. It provides information on economic ifo Business Climate Assessment of business situation phenomena that are not ascertained by oﬀ icial statis- Index, 2015 = 100 Business expectations tics, and it is published in a timely manner. 110

The long time series of the ifo Business Survey is used 105 to derive informative business-cycle indicators. The ifo Business Climate Index, combined with quarterly ques- 100 tions on capacity utilization and order stocks, provides a reliable picture of the current business situation and short-term developments. A key advantage of ifo’s 95 economic indicators vis-à-vis the off icial statistics are their early availability. Off icial German production and 90 new-order indicators are generally not published until 2015 2016 2017 2018 2019 four weeks aft er the end of the reporting period, and ɭ+2# 12/&+$Ǿ0"/3& "0" 1,/Ǿ1/!"Ǿ+! ,+01/2 1&,+ǽ are oft en subject to major revisions. The results of the Source: ifo Business Survey, December 2019 © ifo Institute ifo Business Survey are released between the 22nd and 27th day of the survey month. Furthermore, participants IFO INVESTMENT SURVEY OF MANUFACTURING give their appraisal of and expectations for their fi rms, INDUSTRY thereby off ering supplemental information to the quan- The ifo Investment Survey was the forerunner of all the titative information provided by the off icial statistics. German Federal Statistics Off ice’s investment surveys. Today it supplements off icial ex post data with timely Time series from External individuals interested in the time series of the information on projections based on company plans. multiple sources ifo Business Survey can obtain data from the ifo Insti- This makes the ifo Institute the only source of quantifi ed tute’s database service. The data off ered also includes estimates of current developments in investment prior time series from other sources. to the publication of off icial ex post data. As a voluntary survey – the ifo Investment Survey is like all non-off icial IFO BUSINESS CLIMATE GERMANY surveys and is not grounded in law – it cannot essentially replace a comprehensive survey. This is especially true The ifo Business Climate, which is calculated as the with respect to the desired sub-division of the branches. transformed mean of the balances of the business situation and expectations for the next six months, has IFO INVESTMENT SURVEY OF LEASING been published regularly by the ifo Institute since 1972. Since April 2018 it has been published as the ifo Busi- With its business survey of the leasing sector, the ifo In- ness Climate for Germany, which also contains the ser- stitute closes a statistical gap. Unlike in other areas of vice sector. It has proven to be a reliable early indicator the investment survey, this is a comprehensive survey, of economic development in Germany. Compared to as there are no off icial statistics for the extrapolation of the production index for manufacturing industry pro- sample results. It has been conducted in cooperation vided by off icial statistics, it leads, on average, by two with the Berlin-based German Association of Leasing to three months. As a result, it has become an integral Companies every October since 1977. At the end of the part of German economic forecasts. The national and year the results are presented in ifo Schnelldienst and in international importance of the ifo Business Climate a comprehensive leasing report. The latter comprises can be seen in the reactions to the publication of the the size and kind of the investment, as well as the dis- new forecast by fi nancial markets, which eagerly await tribution across sectors.

70 ifo Annual Report 2019 IFO CENTER FOR MACROECONOMICS AND SURVEYS

Leasing Quotas of Germany ifo World Economic Climate Share of leasing in total economic investmentɭ Economic climate .2&-*"+1)"0&+$ɮ Assessment of economicsituation % Total leasing Balances Economic expectations 25 80

60 20 40 15 20

10 0

-20 5 -40 0 -60 1987 1991 1995 1999 2003 2007 2011 2015 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ɭ5 )2!&+$/"0&!"+1&) ,+01/2 1&,+ǽ"4011&01& ) ,+ "-1țȜ0,#ǖǞǞǖǽ ɮ%/",#*,3 )"-/,-"/16)"0&+$&+1,1)&+3"01*"+1&+".2&-*"+1ǽ Source: ifo World Economic Survey (WES) IV/2019. © ifo Institute ,2/ "ǿ "!"/)11&01& )ƛ& "Ȁ&#, +3"01*"+12/3"6ǽ Ȫ&#, +01&121"

LOGISTICS INDICATOR IFO INSURANCE SURVEY The Logistics Indicator is conducted on behalf of In close collaboration with the Federation of the Ger- Bundesvereinigung Logistik (BVL) within the context man Insurance Industry, the ifo Institute has been con- of the Institute’s economic surveys. The objective is to ducting a quarterly business survey for the insurance gain a timely insight into developments in the logistics sector since the end of 1999. Included in the survey are industry. Monthly replies from over 4,300 companies Monthly replies from insurance companies in the areas of life, health, and participating in the survey are used to answer ques- over 4,300 companies property/casualty. In terms of gross premiums, the in- tions about the current situation and expectations surance companies participating in the survey account for the months ahead. In addition to logistics service for over 75 percent of premium income. providers, users of logistics services are surveyed and summarized in the overall aggregate of the logistics IFO WORLD ECONOMIC SURVEY (WES) industry. The results are available for the period from For over 30 years, the objective of the ifo World Eco- 2005 in a seasonally adjusted form. The results are nomic Survey (WES) has been to depict the current commented and illustrations are created on a quar- economic situation and outlook in numerous industri- terly basis. The results and the comments will be pub- al and transformation countries as accurately as pos- lished on the BVL website. sible. DATABASE FAMILY BUSINESS FOUNDATION In 2019, the ifo Institute also polled over 1,200 inter- The aim of the cooperation between Stift ung Famil- national business experts at institutes or multination- ienunternehmen and the ifo Institute, which began in al enterprises on the economic situation and outlook 2017, is to build up a comprehensive company data- in some 120 industrial, emerging, and developing base on the basis of scientifi c methods and fi ndings. economies. In return, participants received detailed In the future, this database will develop into one of survey results. The WES results are also published in Germany’s leading and internationally renowned data the quarterly English-language journal ifo World Eco- sources for scientifi c research relating to the activities nomic Survey, and in condensed form in German in ifo of family businesses. The basis for the development Schnelldienst. In Latin America, the ifo Institute has of the enterprise database are inter alia fi rm and in- cooperated with Fundação Getulio Vargas/Instituto dividual data from representative enterprise surveys, Brasileiro de Economia (FGV/IBRE) since 2007, which information from public annual accounts, and data publishes the WES results for this region. from off icial statistics. The creation of a family business panel and a corresponding control group should

ifo Annual Report 2019 71 IFO CENTER FOR MACROECONOMICS AND SURVEYS

enable the analysis of family businesses in comparison Joint Economic Forecast (Gemeinschaft sdiagnose). In to non-family businesses with regard to their econom- June 2018, a new two-year contract was awarded to ic signifi cance and economic activities. As part of this the ifo Institute by the German Federal Ministry for project, the ifo Institute also produces the “Jahres- Economic Aff airs and Energy. The other four success- monitor der Stift ung Familienunternehmen” on an an- ful consortia were the German Institute for Economic nual basis. This involves conducting a representative Research (DIW), the Halle Leibniz Institute for Econom- company survey of current and relevant issues, which ic Research (IWH), the RWI – Leibniz Institute for Eco- enables the analysis of the economic developments nomic Research, Essen, together with the Institute for of family businesses. The “Jahresmonitor der Stift ung Advanced Studies in Vienna (IHS), as well as the Kiel Familienunternehmen 2019 – Wirtschaft spolitik für Institute for the World Economy (IfW). The Joint Eco- eine starke EU” is dedicated to the future of Europe nomic Forecast comprises forecasts for Germany, the from the point of view of German companies and the European Union, and other major countries, as well as expectations of the future economic policy of the EU. an evaluation of those economic policies that aff ect Around 1,400 companies took part in the survey on Germany’s economic activity. It is presented at the fa- which the report is based. cilities of the federal press conference (Bundespresse- konferenz) in Berlin, and subsequently submitted to IFO ECONOMIC FORECASTS the German Federal Ministry for Economic Aff airs and Energy. Four times a year, the Center publishes a detailed report on the German economy that includes forecasts Quantifying the of gross domestic product (sector origin, use, and EUROZONE ECONOMIC OUTLOOK dynamics of economic distribution), the labor market, infl ation, as well as The Eurozone Economic Outlook is a European joint activity public expenditure and revenues. Thanks to the Ger- initiative of the ifo Institute, KOF in Zurich, and Istat man economy’s strong links with the world economy, in Rome. It provides an estimate (for the past quarter) and in particular with the European economy, a fore- and a forecast (for the current and following quarters) cast is also made for the European Union and other of real GDP, private consumption, industrial output, important countries. A well-founded analysis of the and infl ation in the Eurozone. Forecasting is primarily economic situation forms the basis of the forecast. conducted by applying econometric forecasting meth- Special attention is paid to quantifying the dynamics ods. The projections are then rounded off using the of economic activity and to identifying business-cy- personal appraisals of the project team. The Eurozone cle turning points. Since 2010, the Center has also Economic Outlook is published quarterly – in January, provided annual sector accounts for institutional April, July, and October – as a two-page press release in sectors, the economy as a whole, non-fi nancial and German and English. fi nancial corporations, private households (including non-profi t organizations), the government sector, as well as for the rest of the world. The accounts pro- EUROPEAN ECONOMIC ADVISORY GROUP (EEAG) vide a systematic overview of important transactions The European Economic Advisory Group at CESifo between sectors that are included in the overall eco- (EEAG) is a European expert advisory board consisting nomic fi gures. of seven well-known economists from seven countries and currently chaired by Giuseppe Bertola (Università The Center frequently makes statements to the media di Torino). It was launched in 2001 by CESifo. The group on the current economic outlook and the economic writes detailed reports on specifi c economic policy policy problems related to it. The economic implica- issues. The Center provides a forecast and analysis of tions of fi scal and monetary policy decisions are also economic activity in Europe and the world for the EEAG analyzed and commented upon. Report. Special matters are also treated on a regular basis. The forecast is part of the “Economic Outlook” JOINT ECONOMIC FORECAST chapter. In spring and in autumn the Center, together with the department for business cycle research of KOF Swiss Economic Institute at ETH Zurich, participates in the

72 ifo Annual Report 2019 IFO CENTER FOR MACROECONOMICS AND SURVEYS

ECONOMIC ANALYSES, PREPARATION OF Service Projects in Detail INDICATORS, AND FORECASTS The project aims to compute monthly, survey-based ifo Business Survey electricity indicators to forecast electricity consump- K. Wohlrabe, P. Brandt, L. Dorff meister, S. Sauer, tion in Germany and in the ENBW customer base; and S. Rumscheidt, S. Litsche, A. Bauer, F. Leiss, monthly to build an appropriate econometric model to predict publication in ifo Schnelldienst and ifo Konjunkturper- the target time series over a forecast horizon of up to spektiven. 12 months. The electricity indicators will be generated from the disaggregated results of the ifo Business ifo World Economic Survey (WES) Surveys of manufacturing industry and will refl ect the cyclical variations in power demand. The forecasting K. Wohlrabe, J. Garnitz, D. Boumans, J. Nothhaft , quar- model is based on the idea of improving predictive terly publication in ifo World Economic Survey and ifo accuracy by combining a larger number of individual Schnelldienst. forecasts and models not only of business cycle fl uctuations, but also the medium-term trend, seasonal- ifo Investment Survey in Leasing ity, temperature, and structural eff ects of electricity A. Städtler, M. Reif, regular publication in ifo Schnell- demand. Additionally, this project includes consulting dienst. services connected with the current state of the business cycle and economic policy issues. ifo Business Survey of the Insurance Sector S. Litsche for the Association of German Insurance Companies, information for clients and participants.

Proﬁ t Situation and Trends S. Litsche, biannual determination of the proﬁ t situation and trends in the metal and electricity industries.

ifo Business Survey for Bavaria F. Leiss, K. Demmelhuber, S. Rumscheidt for the Bavari- an Ministry of Economic Aﬀ airs, Regional Development, Energy, regular publication in Konjunktur in Bayern as well as on the client’s website.

ifo Business Survey for Baden-Württemberg S. Litsche for Landeskreditbank Baden-Württem- berg – Förderbank, regular publication in the series L-Bank-ifo-Konjunkturumfrage and on the internet http://konjunktur-bw.de.

ifo Business Survey for Saxony M. Weber, regular publication in ifo Dresden berichtet.

ifo Business Survey for North-Rhine Westphalia A. Weichselberger for NRW Bank, regular publication in the series NRW.Bank.ifo-Index and on the internet.

ifo Investment Survey Manufacturing Industry A. Weichselberger, regular publication in ifo Schnell- dienst.

ifo Annual Report 2019 73 IFO CENTER FOR MACROECONOMICS AND SURVEYS

ifo-KfW Business Cycle Barometer for Medium-Sized Businesses S. Sauer for the KfW Bank Group, regularly published by the client.

ifo Employment Barometer K. Wohlrabe, A. Bauer, monthly publication in Handels- blatt, ifo Konjunkturperspektiven, and on the internet.

ifo Export Expectations K. Wohlrabe, monthly publication as a press release and on the internet.

ifo Managers Survey K. Wohlrabe for Wirtschaft sWoche, regular publication in Wirtschaft sWoche and on the internet.

Database Family Business Foundation A. Rathje, U. Hannich, K. Wohlrabe, S. Rumscheidt, for Stift ung Familienunternehmen, regular publication in Jahresmonitor Stift ung Familienunternehmen and on the internet.

Implications of Climate Change and Climate-In- duced Disasters for Individuals, Firms, and the Insurance Sector (CLIMATE_AFFECT) R. Lehmann in cooperation with Helmut-Schmidt-Uni- versity Hamburg for the German Federal Ministry of Education and Research, November 2018 to June 2022, academic publications are planned during the term.

Model Calculations for the Fift h Sustainability Re- port of the German Federal Ministry of Finance R. Lehmann, K. Gründler, M. Mosler, N. Potrafke in cooperation with the University of Bochum for the Ger- man Federal Ministry of Finance, March 2019 to August 2020, publication planned as ifo Forschungsbericht.

Eff ects of Currency Confl icts on the German and European Economy C. Grimme, R. Šauer, T. Wollmershäuser for the German Federal Ministry for Economic Aff airs and Energy, Sep- tember 2019 to October 2019, publication as ifo For- schungsbericht 109, ifo Institute, Munich 2019.

74 ifo Annual Report 2019 ifo Center for International Institutional Comparisons and Migration Research

Institutions are important for long-term economic RESEARCH growth and equality of opportunity. The ifo Center for The Center’s research can be divided into four areas. International Institutional Comparisons and Migra- The fi rst research area studies migration and institution Research helps to address various societal chal- tions, with a focus on migrant self-selection, migrant lenges by analyzing the causes and economic impacts integration, and knowledge remittances associated of institutions, with a special focus on migration, fi - with migration. A paper on self-selection of emigrants nancial intermediation, and how beliefs and prefer- from Denmark, written together with EconPol partner ences interact with institutions. With its publication VATT, was published. Another paper, coauthored with of the ifo DICE Report and the CESifo Forum, as well the ifo Center for Industrial Organization and New as the maintenance and development of DICE (Data- Technologies and the University of Munich, analyzes if base for Institutional Comparisons of Economies), the emigrants remit knowledge back to their country of or- Center fulfi ls key service tasks for academia and the igin and is forthcoming in Research Policy. A paper on general public. international spillover eff ects of family reunifi cation rules received a “revise and resubmit”. The research Labor market DICE DATABASE AND THE JOURNAL IFO DICE on refugees includes a fi eld experiment on how to integration of REPORT foster the labor market integration of refugees – with refugees With its unique DICE database, the ifo Institute com- a researcher from the University of Glasgow and one piles information on institutional rules and regula- from the University of Munich. Collection of almost all tions and makes it available to the interested public. data and the fi rst analyses were completed in the DFG DICE provides users one-stop-shop access to quanti- project “Language-Skill Investments and Migration tative and qualitative information on diff erent topics, Decisions” analyzing language learning and migra- which is compiled from numerous sources and can be tion intentions. Collaboration with researchers from linked to other economically relevant indicators. The Uppsala University using geocoded register data from database addresses a wide range of users and is ac- Sweden to study the eff ect of allocating refugees to in- cessible free of charge. The database currently covers dividual neighborhoods continued. One paper on the the following topics: banking and fi nancial markets, implications of EU enlargement for fi rm productivity in business, education and innovation, energy, resourc- sending countries is being revised. es, natural environment, infrastructure, labor market, In the second research area of migration and political migration, public sector, social policy, and macroeco- economy, a paper coauthored with CEPII that studies nomics. the role played by immigration in the electoral success of extreme parties in French presidential elections for It is closely linked to the ifo DICE Report. This quarter- the years 1988–2017 was published. ly journal analyzes institutions, regulations, and economic policy approaches across countries. Its editors The third research area of institutions and fi nancial are Marcus Drometer, Yvonne Giesing, Christa Hainz, intermediaries studies the impact of institutional and Till Nikolka. In the “Forum” section of the journal, regulations on fi nancial intermediation. One contri- a selected topic is covered by several authors from bution analyzes whether there is a gender eff ect on diff erent perspectives. The ifo DICE Report off ers addi- credit conditions and how this eff ect is related to tional contributions related to the topic of the Forum, diff erent perceptions of gender roles. Another paper, in the sections “Research Reports”, “Reform Models”, which shows how suitable diff erent survey questions “Database”, and “News”. are as an approximation for corporate credit access and the role of institutional arrangements for cred- CESIFO FORUM it access, was published. Furthermore, it explained CESifo Forum includes contributions from internation- how a fi rm’s perception of the general willingness of ally reputable authors on policy issues of worldwide banks to lend depends on its individual credit mar- interest, as well as data and information from the ifo ket experience. This research result was used to re- Institute. This English-language journal is published formulate the question of access to credit in the ifo on a quarterly basis by CESifo GmbH and edited by business surveys. Chang Woon Nam.

ifo Annual Report 2019 75 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

In the fourth research area on institutions and society, In the course of the DICE relaunch, the needs of the the team studies how institutions and society interact. users were analyzed in detail. Based on these fi nd- A paper on how political instability aff ects households’ ings, a concept for the content and technical redesign investment behavior, especially investment in health of the database was developed. With this concept, and education, was published in January 2019 in World the user-friendliness of the DICE database was im- Development. A working paper on target-specifi c beliefs proved and numerous features were introduced, such and redistributive preferences was published, off ering as the possibility of graphical editing and a sign-in insights into both perceived equality of opportunity function. In addition, DICE’s fl exible database struc- and its political consequences. Furthermore, a paper ture enables users to combine data and create their on the causes of urban decline in eastern German mid- own data sets. sized cities and their diff erentiated resurgence strategies is in the revision process.

INTERNATIONAL ADVISORY AND RESEARCH ʹ try un T PROJECTS Co im e

The ifo Center for International Institutional Compar-

p i

isons and Migration Research participates in various c >

interdepartmental international consulting and re-

r c search projects. The focus here is on the evaluation e + and analysis of economic risks, as well as on institutional reforms.

Projects Completed in 2019 ifo DICE Report M. Drometer, C. Hainz, Y. Giesing, T. Nikolka, C. Rhode, Transparency – Tax Secrecy by International T. Stitteneder. Comparison C. Fuest, M. Drometer, C. Rhode, T. Stitteneder for the In 2019, the “Forum” section of the ifo DICE Report dis- Foundation for Family Businesses, Munich, September cussed the following topics: deposit insurance, fi scal 2018 to January 2019. rules for Europe, the 30-year anniversary of the fall of the iron curtain, and innovation policy. The “Research There are signifi cant historical and cultural diff er- Reports” and “Reform Models” rubrics are not themat- ences in the way private tax information is handled ically defi ned, but again, they always cover country internationally. Countries such as Germany and the comparisons of the organization of economically rel- US, where data privacy plays a central role in the tax evant institutions. The “Database” section highlights law, are in stark contrast to the Scandinavian model, and introduces new entries in the DICE database. ifo which favors a rather open approach to information. DICE Report articles can be downloaded from the ifo At the same time, transparency plays an important homepage. role when it comes to the exchange of tax-relevant Tax secrecy information between countries. This exchange helps CESifo Forum in a global context national tax authorities respond to tax evasion that C.W. Nam. arises in a globalized world. The study analyzes tax secrecy in a global context, focusing on the public access In 2019 the “Focus” section of CESifo Forum addressed to tax information and the exchange of information the following topics: the US-China trade war, the between countries. EU-Japan Economic Partnership Agreement, urban challenges in Europe, and economic sanctions. CESifo DICE: Database for Institutional Comparisons of Forum articles can be downloaded from the CESifo Economies homepage. C. Hainz, P. Poutvaara, C. Rhode, T. Stitteneder.

76 ifo Annual Report 2019 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

V Current Projects 2019 Winter Vol. 17 Language-Skill Investments and Migration Decisions REFORM MODEL FORUM P. Poutvaara, T. Nikolka, M. Huber in cooperation with Taxing German Old-age "+0&,+0 &/)6+!#Õ &"+1)6 ifo research professor S. Übelmesser, University of Jena, Bernd Genser, Robert Holzmann Innovation Policy Paul Hünermund, Dirk Czarnitzki, Krzysztof Szczygielski, Bettina Becker, Hanna Hottenrott, Cindy Lopes-Bento, sponsored by the Deutsche Forschungsgemeinschaft RESEARCH REPORT Enrico Vanino, Stephen Roper, Bodo Knoll, Nadine Riedel, David Popp Initial Placement Restrictions: (DFG), Bonn, March 2018 to March 2020. Opportunity or Challenge for Refugee Integration? Felicitas Schikora This project collects survey data in several countries

DATABASE Innovation – Global Trends on adult language learning and migration intentions, and Regulation Joop Adema, Yvonne Giesing, as well as motives for language learning and migra- Julia Gorochovskij, Tanja Stitteneder tion intentions. A survey of university students was NEWS New at DICE Database, completed in Czechia, India, Italy, Mexico, the Nether- Conferences, Books lands, and Spain. Together, this survey and an earlier survey conducted in Goethe Institutes shed light on language learning and migration decisions. They also highlight the role played by the labor market and family considerations, as well as preferences concerning institutional factors and social norms, especially in terms of gender norms, in migration decisions. The project results will contribute to a better understanding of the characteristics and motives of potential migrants; and will allow policymakers to design immi- Motives of language gration and integration policies taking these factors learning 03 into account. There are four paper projects: the fi rst 2019 focuses on the motives of language learning, the sec- Autumn Vol. 20 ond studies migration intentions, the third analyzes the role of internationally applicable qualifi cations compared to country-specifi c ones for migration (in- SPECIAL SPOTLIGHT TRENDS The Role of Volunteers The Bitkom-ifo Statistic Update tentions), and the fourth studies the decisions to in- in German Refugee Digital Index: A New Crisis and Their Indicator for the Eco- vest in language skills in the presence of potentially Contribution to Local nomic Development of Government Expen- the Digital Economy in diture Germany gender-specifi c migration incentives. The data col- Chang Woon Nam and Axel Pols, Stefan Sauer and "1"/1"&+%,ƛ Klaus Wohlrabe lected will allow further analysis beyond these papers in the future.

International Migration in Europe and Central Asia FOCUS (ECA) Urban Challenges in Europe T. Nikolka, P, Poutvaara for the World Bank, November /+( ƛ&(&+Ǿ2)%"0%&/"Ǿ ),/&+ǽ/1%,),*"+!)&+ǽ %,"+ "/$Ǿ "/1Ȓ + ,0-"/0 2018 to June 2020.

The ongoing project for the World Bank will deliver four papers. The ﬁ rst one analyzes the welfare eﬀ ects of migration in Europe and Central Asia using a computational model. The second paper focuses on self-selection of refugees and irregular migrants who arrived in Europe or Turkey in or aft er 2015. The third and the fourth paper summarize insights related to language learning and migration intentions.

ifo Annual Report 2019 77 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

Sustainable Finance These research results, which were developed in coop- C. Fuest, C. Hainz, T. Stitteneder for the Chamber of eration with C. Hainz, ifo Institute, E. Beckmann, OeNB, Commerce and Industry for Munich and Upper Bavaria, and W. Pyle, Middlebury College, have already been December 2019 to February 2020. published.

The study is being carried out within the framework The other two subprojects are funded by the Think For- agreement for the preparation of economic studies ward Initiative (TFI) and also use data from the OeNB with the Chamber of Commerce and Industry for Mu- Euro Survey. The second subproject deals with the nich and Upper Bavaria. This study discusses the ex- willingness of a person to stand up for the liabilities tent to which the measures proposed in the EU Action of a third party by assuming a guarantee: How well do Plan Sustainable Finance are suitable for establishing a people understand the concept of a guarantee and the sustainable fi nancial sector. Since the fi nancial sector’s legal consequences of it? Does the willingness to guar- orientation towards sustainability cannot be an end antee collateral depend on fi nancial knowledge about in itself, the impact of the measures proposed in the guarantees? EU Action Plan on companies is of great importance. Therefore, this project also discusses the possible ef- The third subproject investigates whether there are fects of the EU action plan on SME fi nancing. network eff ects when issuing guarantees: Are people who rely on guarantors to secure their loans also those Analysis of Internal Migration Responses to who act as guarantors themselves, and vice versa? Refugee Placement and Local Electoral Outcomes What role do social norms play here? M. Valeyatheepillay, ongoing doctoral project. Emigration Choices over the Skill Distribution In a fi rst subproject, Swedish geocoded data is used B. Rude, ongoing doctoral project. to empirically evaluate the success or failure of refugee placement policy in terms of neighborhood inte- This Ph.D. project investigates which characteristics gration and dynamic sorting following the initial refu- and skills drive migration decisions. To this end, Finn- gee placement. The project examines how integrated ish population data is analyzed in cooperation with re- the refugees are in terms of their individualized neigh- searchers from Finland and the United Kingdom. borhood, investigates their subsequent moves and sorting among short- and long-distance subsequent ifo Center of Excellence for Migration and movers. Integration Research (CEMIR) P. Poutvaara, H. Rainer, L. Wößmann, M. Drometer, In a second subproject, Swedish geocoded data and Y. Giesing, T. Nikolka, M. Valeyatheepillay, M. Piopiunik electoral data are used to analyze the extent to which in cooperation with the ifo research professors G. Bor- electoral outcomes, and more specifi cally the suc- jas, Harvard University, Cambridge (MA), and G. Peri, Election eff ects cess of an anti-immigration party, aff ected migration University of California, Davis. on educational responses and ethnic segregation of immigrants; and attainment how these migration responses depend on the initial CEMIR brings together migration research from diff er- allocation. A third subproject will analyze the eff ects ent ifo centers, while also providing a forum for mi- of elections on educational attainment and the labor gration research beyond the Institute. In 2019, CEMIR market integration of refugees and their children. organized a series of lunchtime seminars to provide ifo postdoctoral and doctoral students and external Essays on Financial Education, Household Finance, guests the opportunity to present their latest research. and Financial Intermediation It also organized a junior economist workshop in July. S. Reiter, ongoing doctoral project. CEMIR continues to foster collaboration within the In- stitute and with external researchers. Till Nikolka col- In a fi rst subproject, microdata from the Austrian Na- laborated with researchers from Uppsala University tional Bank (OeNB Euro Survey) were used to investi- on a project analyzing the spillover eff ects of national gate the role of home ownership in terms of access to immigration policies to a third country. Yvonne Giesing credit in Central, Eastern and Southeastern Europe. published an article about a fi eld experiment to study

78 ifo Annual Report 2019 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

the labor market integration of refugees together with Michele Battisti (former ifo Center for International Economics, now University of Glasgow) and Nadzeya Laurentsyeva (CEPS and LMU Munich). CEMIR researchers contributed to the migration debate at various conferences and events and in the media.

DICE Database for Institutional Comparisons of Economies and ifo DICE Report M. Drometer, C. Hainz, Y. Giesing, T. Nikolka, P. Pout- vaara, C. Rhode, T. Stitteneder.

The new DICE database is more user-friendly and contains extensive features, such as options for graphical visualization and a sign-in function. In addition to oﬀ ering an optimized user experience thanks to a modern interface and extensive features, DICE has an impres- sive ﬂ exible database structure, which allows users to create and process their own datasets. An in-depth collaboration with experts from other research areas should continue to ensure the highest data quality.

The ifo DICE Report provides comparative analyses of institutions, regulations, and economic policy approaches across countries. It combines cutting-edge research with current economic policy issues and provides input for the DICE database.

CESifo Forum C.W. Nam.

Looking forward, the Center will continue to publish the CESifo Forum journal in 2020. Apart from the crucial issues related to European integration and the future of the EU, CESifo Forum also aims to focus on current economic topics of worldwide interest from a Europe- an perspective.

ifo Annual Report 2019 79 ifo Center of Excellence for Migration and Integration Research – CEMIR

The ifo Center of Excellence for Migration and Inte- gration Research (CEMIR) was established in January 2012; until December 2015, it was funded by the Leib- niz Association project “Optimal Immigration Policies in Europe: From Confl icting Interests to Mutual Gains CEMIR (SAW-2012-ifo-3).” CEMIR brings together expertise Center of Excellence from four ifo research centers: the ifo Center for Inter- for Migration and Integration Research national Institutional Comparisons and Migration Re- search, which is responsible for coordinating CEMIR; the ifo Center for the Economics of Education; the ifo As in previous years, CEMIR organized a junior econ- Center for International Economics; and the ifo Center omist workshop and a lunchtime seminar series, at Pooling research for Labor and Demographic Economics. The research which ifo researchers and external guests presented expertise conducted in these centers analyzes migration and in- their work. tegration from the diff erent perspectives of labor economics, international economics, public economics, and education economics. CEMIR’s research helps to answer the question of how recipient countries’ welfare state and labor market institutions, as well as their immigration policies, should ideally be designed so that migration can unlock mutual benefi ts for all parties involved. CEMIR also analyzes questions related to the integration of immigrants, with a special focus on refugees. Through research, scientifi c conferences, and discussion events, CEMIR aims to provide scientifi c information to infl uence the debate over migration in a German and European context.

In CEMIR, ifo center directors Panu Poutvaara, Helmut Rainer, and Ludger Wößmann worked together in 2019 along with ifo researchers Marcus Drometer, Yvonne Giesing, Till Nikolka, Britta Rude, and Madhinee Va- leyatheepillay of the ifo Center for International Insti- tutional Comparisons and Migration Research, Marc Piopiunik of the ifo Center for the Economics of Educa- tion, and Thomas Fackler of the ifo Center for Industrial Organization and New Technologies. They cooperated with a range of external researchers, including the ifo research professors George Borjas of Harvard Uni- versity, Giovanni Peri of the University of California, Davis, and Silke Übelmesser of the University of Jena, as well as the researchers Ilpo Kauppinen of the VATT Institute for Economic Research, Romuald Méango of the Munich Center for the Economics of Ageing, Matz Dahlberg of Uppsala University, Martin David Munk of Aalborg University, Anthony Edo of CEPII, Nadzeya Lau- rentsyeva of CEPS, Michele Battisti of the University of Glasgow, Cevat Giray Aksoy of the European Bank for Reconstruction and Development and Research, and Alicia Adsera of Princeton University.

80 ifo Annual Report 2019 Research Group Taxation and Fiscal Policy

The Taxation and Fiscal Policy research group head- of sovereigns. The resulting sovereign debt crisis has ed by Clemens Fuest was created in October 2016. It constrained fi scal capacity substantially and triggered currently consists of two PhD students, one postdoc- heated debates about the future institutional setup of toral researcher, and one senior economist (50 per- the eurozone. The research group studies the develop- cent), who carry out research projects and engage in ment of fi scal policy in the eurozone and beyond and policy consulting with a focus on taxation and fi scal contributes to the discussion about reforms of euro- policy. Taxation, government debt, and public spend- zone governance. The research group also analyzes the ing are key areas of public policy. They play a role in development of the EU budget and makes proposals nearly all areas of government activity, and they af- for reforming it. fect allocative eff iciency, the distribution of income, and the stability and sustainability of economic development. The Taxation and Fiscal Policy research group therefore pays particular attention to the fol- Projects Completed in 2019 lowing issues. The Economic and Fiscal Consequences of a Capital INTERNATIONAL TAXATION Income Tax Reduction in Sweden C. Fuest, F. Neumeier, D. Stöhlker in cooperation with Growing global economic integration along with the M. Stimmelmayr, ETH Zurich, for Svenskt Näringsliv further liberalization of international capital fl ows (The Confederation of Swedish Enterprises), December have increased the relevance of international tax mat- 2018 to May 2019. ters and intensifi ed tax competition. Reports about multinational enterprises that reduce their tax burden by shift ing profi ts from high-tax to low-tax countries Long-Run Economic Consequences of a Capital Income Tax have triggered an intense public debate. These devel- Reduction opments have led to calls for more coordination of tax % policy both at the EU level and internationally. The re- 7 search group contributes to this debate by analyzing 6 tax competition and tax avoidance as well as proposals 5 for tax coordination, tax harmonization, and the intro- 4 duction of new tax instruments. 3 2 TAXATION, FISCAL POLICY, AND INEQUALITY 1 0 In recent years, the distribution of income and wealth -1 has attracted increasing attention in public debates. -2 The research group contributes to this debate by studying the incidence of taxation and the impact of taxes and public spending on inequality. The group also analyzes the regional distribution of income and its determinants in Germany. In this context, it exam- Notes: The figure shows the estimated long-/2+"ƛ" 10,#!" /"0"&+1%" -&1) ines issues such as the impact of globalization on the income tax rate on selected macroeconomic aggregates. income distribution, as well as the eff ects of economic Source: Calculations of the ifo Institute. © ifo Institute policy reforms. In addition, the research group studies various aspects of the economic, political, and social In this study, the authors analyzed the long-term consequences of inequality. consequences of a capital income tax reduction on A dynamic simulation economic activity in Sweden. Using a dynamic sim- model FISCAL POLICY AND GOVERNANCE IN THE ulation model that takes the behavioral responses of EUROPEAN MONETARY UNION economic agents and the interdependencies between The recent economic and fi nancial crisis has put public the diff erent sectors of the economy into account, they fi nances in several EU member states under tremen- estimated the eff ect of a 10 percentage point cut in the dous pressure and raised concerns about the solvency capital income tax rate on important macroeconomic

ifo Annual Report 2019 81 RESEARCH GROUP TAXATION AND FISCAL POLICY

aggregates, including GDP, investment, and employ- The Concept of a German Citizens’ Fund ment, as well as tax revenues. Their results suggest C. Fuest, V. Meier in cooperation with the ifo Center for that a reduction of the capital income tax rate would International Institutional Comparisons and Migration boost economic activity in Sweden: the capital income Research and M. Werding, University of Bochum, Feb- tax cut would lead to an increase in GDP by about 3.1 ruary 2019 to May 2019, publication as ifo Studie, ifo In- percent in the long run. The main driver behind this rise stitute, Munich 2019. in GDP is an increase in private investment by roughly 6.5 percent. In addition, employment rises modestly by The world economy faces a period of low interest rates, about 0.7 percent. which has led to favorable debt conditions for Germa- ny. The debt ratio is falling below the threshold stated With regard to the fi scal consequences, the authors in the Maastricht treaty of 60 percent of GDP in 2019. found that the fi scal costs associated with a capital in- The specifi c situation that international investors con- come tax reduction tend to be low. Due to the boost in sider Germany as a safe haven within the eurozone is economic activity, the decrease in revenues from the expected to continue provided that the German econo- capital income tax is partly off set by an increase in rev- my keeps growing and that fi scal policy remains solid. enues from other taxes, especially the labor income tax At the same time, German investors fi nd it increasing and the value-added tax. Overall, the drop in total tax diff icult to provide for their old age in view of low inter- revenues amounts to roughly 0.2 percent. est rates. Therefore, the government may use the interest spread by issuing debt and investing the amounts Evaluation of Tax Concessions on the international capital market. This exploits the C. Fuest, L. Immel, F. Neumeier in cooperation with the situation that stocks and real estate still generate sub- ifo Center for Public Finance and Political Economy, FiFo stantial return, though not in every year due to fl uctua- Institute, Köln, ZEW Mannheim, and Fraunhofer FIT for tions of market prices. the German Federal Ministry of Finance, June 2017 to October 2019, publication as Fifo-Berichte, Cologne 2019. Lump-Sum Benefits upon Retirement

€ (2020 prices) According to the guidelines for government subsidies 20000 (erweiterte subventionspolitische Leitlinien) of the Ger- 18000 man federal government, all government grants need 16000 to be evaluated on a regular basis. The aim of this proj- 14000 ect therefore was to evaluate 33 tax concessions with 12000 respect to several factors including their eff ectiveness, eff iciency, transparency, and sustainability as well as 10000 to quantify the associated losses in tax revenues. 8000 6000 From these 33 concessions, six measures received an 4000 overall rating of “good”. These benefi ts accounted for 2000 a total volume of EUR 2.7 billion in 2018. Seventeen tax 0 benefi ts accounting for a total volume of EUR 2.9 billion were rated as “suff icient”. This indicates that the Source: SIM.16. © ifo Institute benefi t in question “passed” the evaluation but that there is signifi cant room for improvement. Ten tax benefi ts accounting for a total volume of EUR 1.8 billion re- The project analyzed a model of the German citizens’ ceived an overall rating of “weak”. These tax benefi ts fund, which issues debt and invests in stocks, real es- were found to fall far short of their expected objectives tate, and bonds. Its surplus is used to fi nance a lump Compendium report and therefore to require urgent fi xing: such measures sum of each currently young individual when he or she covering all 33 tax must be redesigned completely or else discontinued. reaches the future statutory retirement age of 67. Sim- benefi ts The evaluation fi ndings and concomitant recommen- ulations with diff erent scenarios regarding assump- dations are pooled in a compendium report covering tions of yield diff erentials show that debt-fi nanced in- all 33 tax benefi ts. vestment at an annual rate of 0.5 percent of GDP and

82 ifo Annual Report 2019 RESEARCH GROUP TAXATION AND FISCAL POLICY

average diff erential of returns of 2 percentage points Current Projects yield a lump sum per capita at age 67 of EUR 16,000 in 2020 prices aft er participation throughout the working age. Should the interest diff erential lie at 3 percentage Analysis of the Distribution of Income and Wealth points, that lump sum would rise to around EUR 30,000. in Germany II. L. Immel, F. Neumeier in cooperation with the ifo Cen- All variations show that substantial wealth eff ects, spe- ter for Macroeconomics and Surveys, the ifo Center cifi cally improvements in providing for old age, can be for Labor and Demographic Economics, the IAW and achieved while at the same time respecting German M. Biewen, University of Tübingen, for the German and European debt rules. It is noticeable that this is Federal Ministry of Labour and Social Aff airs, January attained without additional contributions. Administra- 2019 – ongoing. tion of the citizens’ fund should not allow for political interventions and might be allocated to the Bundes- The fi ve previous “poverty and wealth reports” (Ar- bank. muts- und Reichtumsberichte) that were presented by the German government have contributed substantial- Understanding social How Will Brexit Aff ect Tax Competition and Tax ly to the understanding of social mobility and the allo- mobility Harmonization? The Role of Discriminatory cation of fi nancial resources in Germany. Taxation C. Fuest in cooperation with S. Sultan, University of Mu- Building on the existing framework, in preparation for nich, internal project, publication as ifo Working Paper the sixth edition of the poverty and wealth report, it No. 248, 2018. is essential to improve and enhance the current methodology. Important requirements concern, e.g., the In this paper, the authors have used a stylized model of temporal consistency with preparatory studies for tax competition to study the implications of a regime previous editions of the report as well as with other change where one of three countries gives up a com- preparatory studies for the upcoming edition. This in mon tax policy norm, the norm of levying uniform tax turn requires highly standardized data preparation rates on all sectors in the economy. It turns out that and cleaning. In contrast to previous editions, the this regime change increases tax policy heterogene- upcoming poverty and wealth report focuses more ity among the remaining countries, which continue to strongly on analyzing causal relationships. In scope of comply with the norm. They also show that the regime this, more focus is put on investigating the formation change discourages tax harmonization among the re- of the primary distribution than before. An addition- maining countries. If applied to the case of Brexit, these al focus lies on analyzing the income distribution and results question the widely held view that the remain- investigating driving forces. Another novelty concerns ing EU countries will be more likely to take steps to- the distribution of tasks between the participating wards enhanced corporate tax harmonization. preparatory studies, which is why this study also incorporates aspects regarding social mobility in the Political Economy of Redistribution between context of income mobility. Modern and Traditional Families V. Meier in cooperation with M. Rablen, University of The Development of Inequality and Poverty in Sheff ield, internal project, April 2018 to March 2019, Germany and France over the Last 25 Years publication as CESifo Working Paper No. 7658, 2019. C. Fuest, L. Immel, F. Neumeier in cooperation with the ifo Center for Macroeconomics and Surveys und and We consider an environment in which families may ei- the Institut d’Economie Publique for the German Fed- ther be “traditional” single-earner or “modern” dou- eral Ministry of Education and Research, January 2019 ble-earner households and voters determine subsidies to December 2021. paid to each group. Voters take both redistributive as well as eff iciency aspects into account. We discuss how The distribution of income and wealth has devel- the size of these subsidies is determined and how it var- oped diff erently in Germany and France over the past ies over the course of development when the share of 25 years. This project thus aims to give a detailed modern households is growing. country comparison between Germany and France,

ifo Annual Report 2019 83 RESEARCH GROUP TAXATION AND FISCAL POLICY

which can serve as a basis for the scientifi c and public Regional Inequality and Extremist Voting in debate. In the course of the project, the development Germany of the distribution of income and wealth in both coun- C. Fuest, L. Immel, F. Neumeier, F. Dorn, internal proj- tries will be systematically documented. Subsequent- ect, October 2016 – ongoing. ly, diff erent aspects of inequality will be examined more thoroughly. For example, we will analyze the ef- Over the past decades, many industrialized countries fects of reforms of the tax and transfer system as well have experienced both an increase in economic in- as labor market reforms on the distribution of income equality and an increase in the popularity of nation- and wealth in Germany and France. Special attention alist and left ist parties and movements. Many pundits will also be paid to inequality developments at the re- posit that these two phenomena are in fact closely gional level. Furthermore, we will focus on equality of linked. The economic strains many groups in society opportunity and investigate to what extent the pros- experience are believed to have fueled resentments pects of success in Germany and France are deter- against mainstream political parties as well as the po- mined by factors beyond individual infl uence (gender, litical order itself. While established parties are losing family background, etc.). the trust of their voters, many extremist and populist movements on both sides of the political spectrum Finally, the results from the individual analyses will be have gained popularity and support. According to the combined, diff erences and similarities between Germa- current narrative, the more unequal economic resourc- ny and France will be worked out, and evidence-based es are distributed, the greater the appeal of extrem- recommendations for action will be derived. ist and populist views. The extant empirical evidence suggests that inequality and political polarization are National Tax Revenue Eff ects of an International indeed correlated. Evidence on the causal relation- Reallocation of Taxing Rights ship between inequality and polarization is scarce, C. Fuest, F. Neumeier, D. Stöhlker in cooperation with though. The aim of this project is therefore to estimate F. Hugger, University of Munich, for the German Federal the causal impact of economic inequality on political Ministry of Finance, September 2019 to January 2020. polarization using IV estimation. To this end, we compute diff erent inequality measures between and within The increasing importance of multinational companies counties using the German Microcensus and combine and the advancing digitization of economic activities these with county-level election outcomes from feder- poses growing challenges to the system of interna- al and state elections. tional corporate taxation. For this reason, the member Growing importance states of the OECD are currently debating diff erent pro- Tax Cuts Starve the Beast! Evidence from of digital business posals to reform the international corporate tax sys- Germany models tem. These proposals aim to adapt the tax system to C. Fuest, F. Neumeier, D. Stöhlker, internal project, Oc- the growing importance of digital business models in tober 2016 – ongoing, publication as CESifo Working order to reduce the associated opportunities for profi t Paper No. 8009, 2019. shift ing. In the context of this research project we evaluate how The aim of this project is to quantify the eff ects of pos- fi scal policy reacts to exogenous changes in the gov- sible legal changes to the corporate tax system on the ernment’s fi scal situation. Utilizing panel data from national income tax revenue in Germany. In a fi rst step, the German states covering the period from 1992– the contribution of cross-border transactions between 2011, we assess to what extent exogenous changes in aff iliated companies to the income tax revenue in Ger- tax revenues aff ect total public revenues, aggregate many will be determined. In a second step, the fi scal ef- public expenditure as well as specifi c subcategories of fects of a full allocation of such revenues to the market government spending in fi elds that the German states state will be calculated. Subsequently, the fi scal eff ects hold major competencies. Establishing a causal link of three diff erent reform proposals for the redistribu- between resources and spending turns out to be a tion of taxation rights will to be quantifi ed. Based on challenging exercise due to reverse causality issues. In the results of these analyses, recommendations for order to overcome this problem, we apply the narrative policy action will be derived. approach pioneered by Romer and Romer (2010) in or-

84 ifo Annual Report 2019 RESEARCH GROUP TAXATION AND FISCAL POLICY

der to construct a measure of exogenous tax shocks, to be traded more frequently in the future, the decline which eventually allows us to identify the causal eff ect in its price can exceed the increase in the tax burden. of tax changes on fi scal policy. Moreover, larger price eff ects can be explained by higher bargaining power of sellers. Our fi ndings indicate that tax changes trigger expenditure adjustments in the same direction aft er 2–3 years, How Does Inequality Aff ect Local Fiscal Policy in specifi cally with respect to spending on governmental Germany? administration and health expenditures. L. Immel, F. Neumeier in cooperation with S. Sultan, University of Munich, internal project, December 2018 – The panel data set that we construct together with the ongoing. exogenous tax shock series allows us to test several other hypotheses in the empirical public economics This paper studies the eff ect of income inequality on lo- literature such as the so-called “war of attrition”. It is cal fi scal policy in Germany over the time period 1992– usually argued in these types of models that coalition 2014. The authors combine administrative panel data Local fi scal policy governments have an incentive to delay the stabili- on the universe of German municipalities with income zation and adjustment process in response to fi scal inequality data from the German Microcensus in order shocks because each member of the coalition seeks to analyze the eff ect of diff erent inequality measures to transfer the political costs of the adjustment to the on both municipalities’ expenditures and their tax poli- others. Despite leaving the economy in an unstable and cy using an instrumental variables approach. fi scally unsustainable mode aft er the negative revenue shock, both parties will not give in until the fi rst player, Economic and Demographic Diff erences and the i.e., the “loser” of the game, accepts to bear a dispro- Development of the Gap between Urban and Rural portionally large share of the fi scal burden. Our results as well as Western and Eastern Regions – Regional do not provide empirical support for the phenomenon. Divergences in Germany The adjustment process among coalition governments C. Fuest, L. Immel, internal project, August 2019 – is neither initiated later nor smaller in size as compared ongoing, publication in ifo Schnelldienst 72(16), 2019. to non-coalition governments. Income Gaps between the Richest and Poorest Counties Who Bears the Burden of Real Estate Transfer Richest and poorest 10% Taxes? Evidence from the German Housing Market Richest and poorest 20% C. Fuest, F. Neumeier, M. Dolls, C. Krolage, internal proj- In % of mean income of the poorest counties ect, February 2019 – ongoing, publication as ifo Work- 60 ing Paper No. 308, 2019. 50 In this project, the authors examine the eff ects of the 40 real estate transfer taxes (RETT) on house prices using a rich micro dataset on German properties covering the 30 period 2005–2018. The authors exploit a 2006 constitutional reform that allowed states to set their own RETT 20 rates, leading to frequent increases in states’ tax rates 10 in subsequent years. Their monthly event study estimates indicate a price response that strongly exceeds 0 the change in the tax burden for single transactions, 1994 2006 2016 i.e., 12 months aft er a reform, a 1 percentage point in- Source: German Microsensus; authors' calculations. © ifo Institute crease in the tax rate reduces property prices by on average 3.5 percent. Eff ects are stronger for apartments and apartment buildings than for single family houses. Regional diff erences are becoming increasingly im- The authors interpret these results in the context of a portant in the public debate and demands for political theoretical model that accounts for the eff ects of RETT measures to contain regional diff erences are gaining on a property’s resale value. If a property is expected support. For the design of such measures, it is import-

ifo Annual Report 2019 85 RESEARCH GROUP TAXATION AND FISCAL POLICY

ant to correctly identify the nature of the divergences. The analysis of the diﬀ erent economic and demographic developments in German regions shows that the inequality of disposable household incomes between regions has declined in recent decades.

This applies both to the income gap between urban and rural areas as well as to the gap between western and eastern German regions. At the same time, however, there is an increasing demographic urban-rural gap. The population in rural regions is declining and ageing faster than the population in the city. This is particularly true for rural regions in eastern Germany.

Quality of Local Public Goods Provision and Electoral Support D. Stöhlker, internal project, January 2019 – ongoing.

Do voters value the quality of local public goods, such as whether pavements are clean, whether benches in the park need repair, or whether local roads are in good shape? Using almost 600,000 geo-located complaints that were posted on the complaints platform FixMyStreet.com between May 2007 and 2015, I compute quality indicators for all 8,500 local wards that comprise the whole of England. The results provide compelling evidence for both a strong rewarding and a punishment eff ect in local council elections: in wards with positive quality indicators, such as a large frac- tion of complaints that are solved within 30 days, the incumbent party has statistically and economically signifi cantly higher chances of being reelected. On the contrary, if the local area features a large share of complaints that are solved only aft er twelve months or never, the probability that the incumbent party is voted out of off ice is increased by up to 9 percentage points.

86 ifo Annual Report 2019 Library

The library of the ifo Institute is primarily a service central off ice of the Common Library Network (VZG) is provider for ifo and CESifo, visiting researchers, and the service center for the libraries of the GBV; it has con- students of the Munich universities. With more than cluded a cooperation agreement with the Library Ser- 140,500 bibliographical units, some 270 periodicals, vice Centre of Baden-Württemberg (BSZ), the technical Broad network of and 30 statistical reports, the ifo library is one of the operator for the Southwest German Library Network libraries and research largest libraries for economics in southern Germany. (SWB), under the name K10plus. BSZ and VZG have op- institutions erated a joint database with over 200 million records of In addition to the core tasks of a scientifi c library, the printed and digital media since March 25, 2019. central task of the library is the documentation of the Institute publications and all other publications of the K10plus is thus based on the library data of the major- employees. ity of German state universities and colleges from ten federal states, the Prussian Cultural Heritage Founda- Thanks to its literature and database research, along tion, and renowned research institutions such as the with its procurement of data and information on se- Leibniz Institutes, Helmholtz Centers, Max Planck In- lected economic and economic-political areas, the li- stitutes, etc. brary fulfi lls an important service function. The library of the ifo Institute cooperates closely with The ifo Institute’s library is a member of the library the German National Library of Economics (ZBW) in association of the northern German Länder, GBV. The Kiel and Hamburg.

ifo Annual Report 2019 87 Communications

Research at the ifo Institute combines academic excel- (LMU – https://www.en.ces.econ.uni-muenchen.de). lence with economic policy relevance. ifo’s activities in The aim of the relaunch was to make the people at ifo the fi eld of information and services provide import- more visible, to make ifo more visually appealing as a ant data for researchers, policy advisors, and the pub- premium brand, to serve the diff erent needs of our var- Disseminating lic. Making the fi ndings from the research areas acces- ious stakeholders through clear user guidance, and to research fi ndings sible to as many stakeholders as possible is the task of duly prepare and present our topics. the Communications department. The department’s employees are responsible for communicating the ifo In the years prior to the relaunch, ifo held workshops Institute’s content and its public image. They create and partnered with external agencies to overhaul the content for the ifo website, oversee social media chan- website’s content and structure, develop the design, nels, maintain contacts with the press, produce the and defi ne a new technical environment. While operat- Institute’s publications, and organize Institute-wide ing on an ambitious schedule, the teams implemented events. basic functionalities and adopted essential content. In May 2019, the ifo Institute’s new website went live. The Dr. Cornelia Geißler took over as Head of Communica- Institute plans to continuously develop it, focusing on tions in January 2019. new functionalities, improved visual presentation, and enhanced technical performance. In 2019, a strategy was developed for the Communi- cations department for the fi rst time, based on the ifo Through its structured and visually appealing design, Institute’s overall strategy (ifo 2025). For the purposes the ifo home page communicates the Institute’s claim of this strategy, the department has been even more of “Shaping the Economic Debate.” Research results closely interlinked with the Institute’s scientifi c activi- are bundled into six topic dossiers and disseminated ties. The cross-divisional central topics of research de- via other topics to lay a foundation for a fact-based defi ned in the overall strategy also serve as the strategic bate on current economic issues. guideposts for communications work. In implementing the strategy, the ifo Institute pursues an integrated ap- Page elements such as quotes and video interviews in- proach: in a central planning process, consideration is crease the visibility of the ifo experts. The Newsroom given to how these topics can be linked to the political brings together the press, social media, and video agenda and then disseminated at the appropriate time communication channels. The ifo Media Center has via suitable formats and channels; for example, as topic been repositioned and now contains only its own video dossiers on the website, through the press, in ifo Insti- content, e.g., expert interviews and live streams, which tute publications, and in the content design of events. can be viewed there directly. Recordings of major The strategy’s content objective is to raise the ifo In- events are posted aft erward to be viewed on demand. stitute’s profi le by communicating the entire spectrum of its central topics of research – not just the economic topics for which it is already known. Eff orts in this area also aim to deliberately expand the circle of experts who speak in public on the ifo Institute’s various topics. Regarding channels, digital options are moving to center stage, as they allow for more agile communication and take into account the changing user habits of many (especially younger) stakeholders.

WEBSITE RELAUNCH In 2019, the most important milestones were the relaunch of the website and the splitting of the CESifo Group into two separate websites: www.ifo.de and www.CESifo.org. The Center for Economic Studies (CES), meanwhile, moved to Ludwig-Maximilians-Universität www.ifo.de: ifo home page

88 ifo Annual Report 2019 COMMUNICATIONS

SOCIAL MEDIA ACTIVITIES and the general public. In 2019, the ifo Institute issued around 220 press releases on research fi ndings, cur- The ifo Institute is active on selected social media chan- rent survey results, economic policy statements, new nels. On its Twitter account (@ifo_Institut), the Institute publications, and events. The Press Off ice sees itself disseminates fi ndings in German. With over 10,000 fol- primarily as a service provider for interested journal- lowers, the Institute reaches a large number of stake- ists. It arranges interviews with people from within the holders. The CESifo account (@CESifoGroup) addresses Institute, organizes press conferences, and answers almost 5,000 English-speaking followers. Additional ac- inquiries. It also provides the general public with infor- counts are operated by the ifo Center for the Economics mation and materials. of Education (@ifo_Bildung and @ifo_education), as these allow it to serve its target group of those interested in education economics topics in line with their Such continuous and dedicated press relations work needs. helps to ensure that the ifo Institute has a strong presence in the media. In 2019, the ifo Institute was even Networking, interaction, and community-building on able to expand its leading position as the most fre- ifo topics take place primarily via personal accounts. quently cited economic research institute compared to ifo President Clemens Fuest, department head Andreas its competitors. This achievement was due in no small Peichl, doctoral students, postdocs, and former ifo part to the monthly publication of the Business Climate President Hans-Werner Sinn all have personal Twitter Index, the ifo Export Expectations, the ifo Employment accounts in which they tweet about current research Barometer, and especially the ifo Institute’s economic fi ndings (their own or those of key external researchers) policy statements and the ifo forecasts on economic or about policy recommendations. Their activities here development. bring them into direct dialogue with other Twitter users. Clemens Fuest, the President of the ifo Institute, also According to the blog Makronom, in 2019 the ifo In- played a large role in 2019 regarding the ifo Institute’s stitute ranked third among German-language #Econ- enormous media presence. Since taking off ice in the Germany’s Twitter accounts. ifo President Fuest took fi rst place second quarter of 2016, Fuest has become Germany’s most-quoted among economists. Since 2019, this evaluation has most-quoted economist. In 2019, he was able to in- economist also been included in the economist ranking conduct- crease his lead over the person holding second place. ed by Frankfurter Allgemeine Zeitung (FAZ) newspaper. With numerous interviews and articles for national This development shows the increasing importance print media, television, and radio, the ifo President is of digital channels for the transfer of scientifi c knowl- constantly providing stimulus for the economic policy edge to the public. debate. He comments on current economic policy issues in his regular column for Wirtschaft sWoche mag- Thus far, the ifo Institute has used XING and LinkedIn azine, has articles printed in important national daily primarily to advertise job opportunities. Fuest has newspapers worldwide, and is in demand throughout been a LinkedIn Infl uencer since fall 2019, which lends Europe as an interview partner for radio, television, him even greater visibility for stakeholders in the busi- and daily papers. In 2019, Fuest drew particular atten- ness world. The platform is also suitable as a place to tion with his comments on industrial policy proposals, re-feature articles that have already been published. In a supplement to old-age provision in the form of a citi- addition, ifo produces a monthly interview on the busi- zens’ fund, international corporate taxation, populism, ness climate exclusively for LinkedIn. an EU-wide minimum wage, European public goods, and the debt brake. Select photos and videos will continue to be available on Flickr and YouTube. Of the other topics that the ifo economists highlighted in numerous interviews, their statements on short- time work and the situation in industry are particularly PRESS RELATIONS noteworthy. Other statements that met with great in- The Press Off ice is responsible for ensuring that the terest in 2019 were those by Andreas Peichl, Director results produced by ifo Institute research are commu- of the ifo Center for Macroeconomics and Surveys, on nicated in a way that is understandable to the media inequality and equal opportunities, as well as those by

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Niklas Potrafke, Director of the ifo Center for Public Fi- For several years now, the ifo Institute has maintained nance and Political Economy, on the subjects of redis- an in-depth and direct exchange with the members of tribution, public fi nances, and the public debt burden. the German Bundestag. Two “Parliamentary Break- Overall, ifo published some 60 interviews and 70 arti- fasts” were held in 2019 at the Bavarian Representation cles in national print media and roughly 200 radio and in Berlin, to which members of selected parliamentary television interviews in 2019. committees were invited. At the March breakfast, Cle- mens Fuest, Marcel Thum, and Joachim Ragnitz joined Thanks to the television studio at the ifo Institute, the members of parliament in discussing current chal- which was fi rst set up in August 2018, the number of lenges in economic and European policy with a focus live interviews grew signifi cantly in 2019. The studio on ifo’s proposal for reforming basic social security also makes the ifo Institute unique among economic (Hartz IV). In October, Karen Pittel presented the Flex- research institutes. cap model to further the climate policy debate, while Fuest presented the citizens’ fund concept. Relationship with the In the fourth quarter of 2017, ifo began sending out press media releases in French to increase its reach in French-speak- On June 6, 2019, the ifo Institute held its 70th Annual ing areas. The mailing list includes some 600 franco- Meeting at Ludwig-Maximilians-Universität (LMU) in phone journalists and is being continuously expanded. Munich. The theme of the Annual Meeting was “70th Anniversary of the Social Market Economy – What Will Live streams of events are regularly embedded on me- Be the Future of Our Economic Order?” dia websites. Besides the ifo Media Center, they can be accessed on the websites of Frankfurter Allgemeine ifo President Fuest spoke about the signifi cance of Zeitung, Handelsblatt, Wirtschaft sWoche, and other the social market economy as an economic and so- media outlets. In addition, interviews with lecturers cial model. The core goal of this form of economy – to from the Munich Seminars are conducted regularly and combine prosperity and social equality – enjoys broad posted in the Media Center and on YouTube. The inter- consensus in Germany. He also named future chal- view with Professor Sinn on the climate crisis achieved lenges: promoting growth in an aging and shrinking the greatest reach, with a viewer count of 83,000. population; safeguarding competition in an economy dominated by digital platforms and network eff ects; The ifo Hands-On High-Quality Journalism Days series protecting the environment; and looking out for Ger- took place in January 2019. About 15 young journalists many’s international interests as its economic impor- from the German School of Journalism and four editors tance in the world declines. from Bavarian Broadcasting took part. The series aims to transmit economic and journalistic expertise with an emphasis on practical aspects, as well as to improve participants’ understanding of economic interrelationships. Leading economists from all ifo departments presented their work and research results, and typical errors in economic reporting were illustrated by means of real-life examples.

EVENTS The Communications department is responsible for organizing and holding Institute-wide events, presenting the Institute at external meetings and conferences such as the annual conference of the German Economic Association, and looking aft er visitor groups. The public events are usually broadcast live on the internet and then posted in the ifo Institute’s Media Center to include stakeholders who are unable to attend. Clemens Fuest, President of the ifo Institute

90 ifo Annual Report 2019 COMMUNICATIONS

Annegret Kramp-Karrenbauer, Chairwoman of Ger- velopment, and Energy. The colloquium serves as a many’s CDU party, said in her keynote speech that the platform for debate on current developments from social market economy was the right answer to the dis- an industry-specifi c perspective. In its four sector ruption that followed the Second World War. Now, 70 forums – Industry, Trade, Construction, and the Ser- years later, the social market economy is still the right vice Sector – experts from companies, associations, answer to today’s social challenges. politics, and research discuss current industry developments, trends, and challenges. Detailed reports Panelists included Ralf Stegner, Deputy Leader of the on the event are available in the Industrial Econom- SPD, Hans J. Langer, CEO and Chairman of the EOS ics and New Technologies section and in ifo Schnell- GROUP, as well as Oliver Falck and Karen Pittel, both dienst 73(1), 2020. from the ifo Institute. They discussed challenges for the social market economy with a particular emphasis on TRAINING COURSES FOR BUSINESS EDUCATORS climate change, digitalization, and social inclusion. With its ifo Klassenzimmer newsletter, the ifo Institute provides teachers with current information grouped Pictures and video from the event are available in the by topic. It contains opinion pieces by ifo experts and ifo Media Center (https://www.ifo.de/en/node/42399). research articles on a specifi c topic and supplements these with data and editable graphics. Another special perk ifo off ers teachers is a protected area on its website, where they can access all the newsletter content and where existing data is regularly updated.

The ifo Institute views teacher training and continuing education as a means of keeping business educators up to speed with fi rsthand information on current research and debates. To this end, it launched the ifo Hands-On Modern Economics Teaching Days training series in 2017 and held the event again in 2019. The series is recognized by the Dillingen Academy for Annegret Kramp-Karrenbauer, keynote speaker at the ifo Annual Teacher Training and Personnel Management (ALP), Meeting 2019 as an off icial further training course and is aimed at teachers from Bavaria who teach business studies at At the Annual Meeting in the aft ernoon, Clemens Fuest general and vocational schools. In 2019, the Center for reported on the Institute’s activities for the year 2018. Economics Education in Siegen (ZöBiS) will provide The fi nancial statements for the year ending December additional support for teaching the contents of this 31, 2018, which were presented by ifo Executive Board advanced training course, which is conducted in co- member Dr. Stephanie Dittmer, were unanimously ad- operation with the Association of Bavarian Business opted and the actions of the Executive Board unani- Philologists (wpv). mously approved. Following the election of the Board of Trustees, the Annual Meeting closed with the presen- Another ifo Institute training initiative focuses on the tation of the award from the Society for the Promotion practical implementation in classrooms of econom- of Economic Research (Friends of the ifo Institute) e.V. A ic policy research results and scientifi c methodology. detailed report of the award ceremony can be found in A two-pronged cooperation agreement with ALP has Two-pronged the Personnel Development section and in ifo Schnell- been in place since 2018. It governs the provision of cooperation with ALP dienst 72(11), 2019. ifo instructors for the training program in Dillingen as well as the organization and implementation of joint On November 6, 2019, the ifo Institute held the 19th training events. The ifo Institute provides the special- ifo Industry Colloquium in cooperation with the ists, while ALP provides the facilities and organizes the Chamber of Commerce and Industry for Munich and events. Here, the transfer of knowledge to students is Upper Bavaria. The event is sponsored by the Bavar- paramount: small groups rework each lecture to make ian State Ministry of Economic Aff airs, Regional De- it suitable as teaching material, and the results are pre-

ifo Annual Report 2019 91 COMMUNICATIONS

sented and discussed aft erwards. The course is oﬀ ered tus-Magnus-Gymnasium Stuttgart (From Flight to Labor every year for use in grammar schools or in vocational Market – How Can the Integration of Refugees Suc- schools. ceed?) and the Gymnasium bei St. Michael Schwäbisch Hall (The Last-Mile Challenge – How Can the Economic Providing curriculum The ifo Institute returned to Passau, Germany with a Objectives of Delivery Services Be Reconciled with Re- support booth at the 40th Conference of Law and Economics source-Conserving Urban Development?). Both teams Educators. Being able to speak directly with the over took part in the national ﬁ nal on September 26 and 200 teachers in attendance has given ifo a major vis- 27 in Hamburg. There the Gymnasium bei St. Michael ibility boost as a provider of curriculum support ma- Schwäbisch Hall took third place with its “P-Box – For terial. Green Delivery” solution.

YES! SCHOOL COMPETITION EDITORIAL ACTIVITIES In the 2018/2019 school year, the ifo Institute part- All ifo Institute publications fall under the responsibil- nered with the Catholic University of Eichstätt-Ingol- ity of the Communications department. The depart- stadt to participate in YES! for the fi rst time. This na- ment edits articles and submissions and also oversees tional school competition on economic policy issues the design and layout, print preparation, typesetting, is a joint project of the Leibniz Information Centre for and dispatch of the text either for in-house printing or Economics (ZBW) and the Joachim Herz Foundation to a third-party printer. Statisticians, graphic artists, under the patronage of the German Federal Ministry typesetters, and printers implement the ideas of the of Economic Aff airs and Energy. YES! now has a num- editorial staff . They also work on projects within the ber of partners from the Leibniz Association. In view purview of other ifo departments. of the scope of the knowledge-transfer activities, participation in YES! is particularly attractive for the ifo In 2019, the ifo Institute published the following: Institute. – ifo Schnelldienst: Current policy issues and ifo re- ifo economists and specialists developed four topics search fi ndings (published twice a month in German) for which the student teams could apply: – ifo Konjunkturperspektiven: The latest results from – From Flight to Labor Market – How Can the Inte- ifo’s business surveys in the form of graphics, tables, gration of Refugees Succeed? and descriptive analyses that focus on select sec- Expert support provided by: Yvonne Giesing, Carla tors, rotating through them in a sequence that Rhode, Tanja Stitteneder, and Madhinee Valeyathee- repeats at periodic intervals (published monthly in pillay German) – The Last-Mile Challenge – How Can the Economic – ifo Dresden berichtet: A report on the economy, Objectives of Delivery Services Be Reconciled with economic policy, and structural change in eastern Resource-Conserving Urban Development? Germany (published six times a year in German un- Expert support provided by: Caroline Vogel and der the authority of ifo Dresden Branch) Sabine Rumscheidt – ifo World Economic Survey: Results of the ifo expert – Universal Basic Income in Germany – A Model for the poll on the world economy in the form of graphics, Future or a Utopian Fantasy? tables, and descriptive analyses (published quarter- Expert support provided by: Marc Stöckli ly in English) – Eff icient Energy Use: Your Role as an Agent of Change – CESifo Forum: Essays focusing on current economic Expert support provided by: Markus Zimmer topics of global interest by well-known international authors as well as data and information from the ifo Institute (published quarterly in English in co- On July 12, 2019, more than 100 participants convened operation with CESifo GmbH) at the ifo Institute for the South-East regional fi nal. Teams representing the ifo Institute and the Catholic – ifo DICE Report: Articles on institutional regulations University Eichstätt-Ingolstadt presented their solu- and economic policy measures that off er country tions. The students chose the teams from the Alber- comparative analyses (published quarterly in English)

92 ifo Annual Report 2019 COMMUNICATIONS

– CESifo Economic Studies: Results from economic ifo Konjunkturperspektiven was completely redesigned research and policy issues. CESifo Economic Studies from the ground up. The print edition was discontin- is published by Oxford University Press, and the ued; in the future, ifo Konjunkturperspektiven will ap- managing editor is Panu Poutvaara, Director of the pear as a PDF ﬁ le on the ifo Institute website. Texts ifo Center for International Institutional Compari- on the economic sectors will also be dropped, so that sons and Migration Research (published quarterly in starting in 2020, the journal will consist of ﬁ gures and English, uses a referee system) graphics on the sectors. A more detailed version of the sector reports and analyses will appear in ifo Schnell- dienst as of 2020. Added to this is a book series:

– ifo Beiträge zur Wirtschaft sforschung: Major research Publication frequency will also change this year, with studies conducted by the ifo Institute ifo Schnelldienst to appear monthly. In addition to twelve regular issues, ifo Economic Forecasts will also ifo Schnelldienst, CESifo Forum, and ifo DICE Report are publish special issues in June and December. The Joint also available in the EPUB format. Economic Forecast is available free of charge on the ifo website at https://www.ifo.de/en/economic-forecasts. In addition, the ifo Institute publishes the ifo For- schungsberichte at irregular intervals, containing the These changes aim to improve the way ifo publications results of expert reports that are not otherwise pre- inform the economic policy debate and to increase the sented in book form. It also publishes the ifo Dresden involvement of ifo authors. In addition to its long-es- Studien, which – under the authority of ifo Dresden tablished research and survey fi ndings, which will be Branch – address mainly issues pertaining to the retained, ifo Schnelldienst will provide regular reports eastern German Länder and their neighbors to the on developments in selected sectors. east. To continue responding quickly to the latest develop- New Schnelldienst The free ifo Newsletter is sent at the end of every ments, ifo is off ering a new publication format, Schnell- digital month. It provides reports in German on new research dienst digital, in which one article will be posted in ad- fi ndings, selected publications and events, personal vance on the ifo website as a PDF. profi les, deadlines, and much more about ifo Insti- tute activities. A service of ifo Dresden Branch, the ifo With the discontinuation of the World Economic Survey Dresden Newsletter provides regular reports on the at the end of 2019, the ifo World Economic Survey jour- branch’s latest publications and events. Newsletters, nal was discontinued in 2020. complete with tables of contents and download options, also accompany the publication of new issues of CESifo Forum, ifo DICE Report, and ifo World Economic Survey.

Some of the periodicals are made available to well-established online service providers for global distribution. A complete overview of the ifo Institute’s publications and their availability can be found at https:// www.ifo.de/en/publications.

As part of a knowledge-transfer project, ifo asked readers of its publications about their reading habits and what they expect from materials that present specialist economic information. The Institute took those ﬁ ndings and adjusted its publication program to reﬂ ect them over the course of 2019.

ifo Annual Report 2019 93 ifo Dresden ifo Dresden Branch

The Dresden Branch of ifo Institute, established in The journal ifo Dresden berichtet has been published 1993, conducts empirical economic research that fo- every two months since 1994. In this journal, ifo Dres- cuses on the special conditions in the new Länder, es- den Branch researchers and external authors publish pecially in the Free State of Saxony. ifo Dresden Branch their current research fi ndings on the economic situ- provides economic analyses dealing with the econom- ation in the new Länder for a wider public in politics, ic developments in the Free State of Saxony and east- business, and academia. The results of more compre- ern Germany. It focuses on policy-relevant issues using hensive research projects are published in the series ifo methods of applied or empirical economic research. Dresden Studien. In 2019, two issues were released: No. In addition, ifo Dresden Branch is involved to a large 83 “Betrachtung und Analyse von Regionalindikatoren extent in economic policy advice through expert opin- zur Vorbereitung des GRW-Fördergebietes ab 2021 (Ra- ions, lectures, and discussions with representatives of umbeobachtung)” and No. 84 “Wachstum und Produk- politics and administration. It off ers policy advice and tivität 2035 – Innovations- und Produktivitätslücken information to the public. The branch receives fi nan- auf Ebene der Bundesländer.” cial support from the Free State of Saxony and draws on the experience of the ifo Institute, its parent insti- Conferences and workshops regularly take place on the tute in Munich. premises of ifo Dresden Branch. Workshops in 2019 included the 13th ifo Dresden Workshop on “Macroeco- ifo Dresden Branch currently works in the following nomics and Business Cycle Research” (January 25–26, research areas: 2019), the 9th ifo Dresden Workshop on “Labor Econom- Workshop series ics and Social Policy” in cooperation with TU Dresden – business cycle and growth in Saxony and the new (May 16–17, 2019), the 9th ifo Dresden Workshop on “Re- Länder gional Economics” together with TU Braunschweig (Sep- – human capital, structural change, and the position tember 12–13, 2019) and the 13th ifo Dresden Workshop of Saxony and the new Länder in locational com- on “Political Economy” (November 29–30, 2019) togeth- petition er with CESifo, TU Dresden, and TU Braunschweig. – labor market and social policy in Saxony and the new Länder In the series Dresdner Vorträge zur Wirtschaft spolitik, prominent economists present their latest research – integration of Saxony and the other new Länder fi ndings in economics and fi nance. In 2018, four lectures into the international division of labor (especially were held in this series. Friedrich Breyer of Universität with central and eastern Europe) Konstanz, Michael Thöne of Universität zu Köln, Jens – public fi nance and support of economic develop- Südekum of Heinrich-Heine-Universität Düsseldorf, ment in Saxony and the new Länder and C. Katharina Spieß of the German Institute for Economic Research (DIW Berlin) and the FU Berlin discussed their views on current policy issues with the au- ifo Dresden Branch is also working on the general topic dience from science, policy, and public administration. of implications of demographic change on economic development. The shrinking and aging of the popula- Under the management of Marcel Thum and Joachim tion will have a signifi cant impact on nearly all fi elds Ragnitz, 14 economists currently engage in research at of social and economic development and thereby pose the branch, of which nine are doctoral candidates. The new challenges to economic policy. team is completed by two non-scientifi c staff members and a number of student research assistants. ifo Dresden In addition to economic research, ifo Dresden Branch Branch closely cooperates with Technische Universität off ers extensive services. Analyses oriented toward (TU) Dresden and the Statistical Off ice of the Free State of economic policy are published in the journal ifo Dres- Saxony. Cooperation agreements cover in particular visit- den berichtet and in the book series ifo Dresden Studien. ing fellowships of researchers, joint activities, and presen- ifo Dresden Branch provides information and advice tations. ifo Dresden Branch off ers project-related work on current economic policy issues to policymakers and experience to interested students of economics. Further- the business community. It also organizes workshops more, the branch is also directly linked to academic re- and conferences. search through the appointment of research professors.

ifo Annual Report 2019 97 IFO DRESDEN BRANCH

BUSINESS CYCLE AND GROWTH IN SAXONY AND THE The results are published as a press release as well as NEW LÄNDER in ifo Dresden berichtet (issues 01/2019 and 04/2019). They are also presented to the professional public in One research focus of ifo Dresden Branch is the moni- a press conference and at the ifo working group “Kon- toring and forecasting of the business cycle in Saxony junkturbeobachtung Sachsen.” In this working group, and Germany’s new federal states. For this purpose, members of ifo Dresden Branch discuss business cy- the branch carries out monthly evaluations of the ifo cle developments in eastern Germany and the Free Business Climate Index as well as semiannual business State of Saxony with representatives of ifo Institute in cycle forecasts for the Free State of Saxony and eastern Munich, the German Federal Employment Agency, the Germany as a whole. Additionally, the branch conducts Regional Employment Agency of the Free State of Sax- research at the intersection of business cycles and growth policy. ony, the Statistical Bureau of the Free State of Saxony, representatives from various Saxon ministries, Cred- Eastern German In 2019, ifo Dresden carried out the study “Strukturan- itreform, the Dresden Chamber of Craft s, the Cham- chemical industry alyse der ostdeutschen Chemieindustrie” on behalf of ber of Trade and Commerce, and other associations. the German chemical industry association Verband der This year the working group met for the 43rd and 44th Chemischen Industrie e.V. (VCI), Landesverband Nor- time. dost and Arbeitgeberverband Nordostchemie. The branch hosts the annual ifo Dresden Workshop Besides third-party funded projects, ifo Dresden “Macroeconomics and Business Cycle Research,” which Branch also creates the monthly, regionalized eval- is focused on the research output of junior researchers. uation of the ifo Business Climate Survey for eastern This year the 13th workshop took place January 25–26. Germany and the Free State of Saxony. The results are published as a press release and as a regular contri- HUMAN CAPITAL, STRUCTURAL CHANGE, AND THE bution in the magazine “Wirtschaft in Sachsen – Das POSITION OF SAXONY AND THE NEW LÄNDER IN Entscheidermagazin der sächsischen Zeitung” to ad- LOCATIONAL COMPETITION dress a large audience of media, companies, and pol- This ﬁ eld of work analyzes regional and sectoral disag- iticians. gregated growth and convergence processes. The focus is on comparative analyses of eastern and western Ger- ifo Business Climate Eastern Germanyɭ many as well as of rural and urban areas. The research "0,+))6 !'201"! group’s aim is to propose policy options for adjusting ifo Business Climate +!"5ǾǗǕǖǚʲǖǕǕ Assessment of business situation the living conditions in economically lagging regions. 110 Business expectations

Population density 105 East in % of west Wage level 100 90 82% 80 100 70 60 55% 50 50% 43% 95 40 2015 2016 2017 2018 2019 30 ɭ+2# 12/&+$Ǿ0"/3& " 0" 1,/Ǿ1/!"Ǿ+! ,+01/2 1&,+ǽ 20 ,2/ "ǿ&#,20&+"002/3"6Ǿ" "* "/ 2019ǽ © ifo Institute 10 0 In addition to the monthly business cycle surveys, in 1990 1995 2000 2005 2010 2015 2020 June and December ifo Dresden Branch forecasts eco- Note: The figure shows the wage level (gross wages per employee) and the population density (inhabitants per km²) of East Germany in percent of the West nomic development in eastern Germany and the Free German value. Berlin is not included. State of Saxony for the current and the following year. ,2/ "ǿ "!"/)11&01& )ƛ& "Ȁ-/"0"+11&,+,#1%"&#, +01itute. Ȫ&#, +01&121"

98 ifo Annual Report 2019 IFO DRESDEN BRANCH

The 9th ifo Dresden Workshop on “Regional Economics” Julia Sonnenburg, together with Friederika Boehme, took place September 12–13, 2019. The workshop was analyzed the supply of kindergarten places in Dresden jointly organized by Felix Rösel and Christian Leßmann in an article published in ifo Dresden berichtet 4/2019. from the Technische Universität Braunschweig. Their results show that there are enough kindergarten places available for children from the age of three On behalf of the German Environment Agency (UBA), in Dresden, when measured against the resident pop- ifo Dresden Branch – together with the Wuppertal In- ulation. However, an undersupply of childcare places stitut für Klima, Umwelt, Energie gGmbH and TU Dres- becomes apparent when looking at the city districts: in den – worked on a case study on the structural change one in two districts, there is an undersupply of kinder- of the Saxon region of Lusatia. This case study, which garten places when compared to local demand. was started in November 2016, examines the causes and eff ects of structural change processes. Previously LABOR MARKET AND SOCIAL POLICY IN SAXONY implemented measures aimed at mitigating or foster- AND EASTERN GERMANY ing the structural change of Lusatia will also be evalu- In this research area, ifo Dresden Branch focuses on ated. The study was completed in August 2019. how education policy and demographic trends aff ect labor market outcomes. In 2019, ifo Dresden Branch continued working on the project “Innovationswerkstatt Dresden” (Innovation On May 16 and 17, 2019, the ifo Dresden Workshop on Workshop Dresden), which is on behalf of the German “Labor Economics and Social Policy” took place for the Federal Ministry of Economic Aff airs and Energy. The ninth time. It was organized by Antje Fanghänel, Mona project is conducted in cooperation with the Helm- Förtsch, Katharina Heisig, Alexander Kemnitz, Julia holtz-Zentrum Dresden-Rossendorf (HZDR), University Sonnenburg, and Michael Weber. of Applied Sciences (HTW) Dresden, and TU Dresden. Its main goal is to strengthen cooperation between In an article in ifo Dresden berichtet 2/2019, Kathari- fundamental research institutions and small and me- na Heisig summarized current studies on the topic of Gender-neutral dium-sized enterprises. Katharina Heisig and Joachim gender-neutral upbringing and education. Existing upbringing Ragnitz are in charge of the economic analysis and studies show that the development of children and ad- the evaluation of new instruments. The project will be olescents is negatively aff ected if they are exposed to completed by May 2020. unequal treatment based on gender. Accordingly, it is recommended that measures are taken in childhood to Initial results from this project were discussed in ifo counteract the gender-specifi c disadvantages of wom- Dresden berichtet 4/2019. Since small and medium-sized en and men. enterprises oft en do not have suff icient skills and resources to successfully initiate or implement innova- In an article by Antje Fanghänel, Joachim Ragnitz, and tion projects, a more promising approach is to work in Marcel Thum, it was shown that the basic pension as structured cooperative innovation projects, in which in- originally planned by the German Federal Ministry of dividual innovation functions are taken over by various Labour and Social Aff airs set adverse incentives due to project partners. However, this requires suff icient inno- high transfer withdrawal rates. The coalition compro- vative cooperation capabilities. If these are insuff iciently mise on the basic pension adopted in November also available, one solution is to initiate targeted measures to shows a number of problems, especially with regard strengthen innovative and cooperation skills. to the lack of needs-based fairness. An analysis of this issue will be published in the magazine ORDO at the be- In ifo Dresden berichtet 3/2019, Julia Sonnenburg in- ginning of 2020. vestigated the diff erence between urban and rural transition rates from primary to secondary school. In an article published in ifo Dresden berichtet 3/2019, The proportion of pupils who change to a secondary Xenia Frei and Marcel Thum gave an overview of preschool aft er primary school is still signifi cantly lower in vious studies on the relocation of public authorities rural areas than in urban regions. This is mainly due to and labor market structure. The analysis shows that school-related factors, teacher’s age, and the economic empirical evidence for positive employment eff ects is conditions in which educational processes take place. scarce and that the eff ects on the local labor market

ifo Annual Report 2019 99 IFO DRESDEN BRANCH

are mainly structural. The increase in employment in ble government measures. ifo Dresden Branch dis- the public sector is accompanied by job losses in the cussed this topic in several contributions in ifo Dresden manufacturing sector. berichtet, in particular with regard to divergence in population development in eastern and western Germany Together with Larissa Zierow of the ifo Center for the since 1945 (“Die Wucht der deutschen Teilung wird Economics of Education, Katharina Heisig investigat- völlig unterschätzt”), location of public administra- ed the long-term eff ects of the parental leave reform tion (“Behördenverlagerungen verändern die Arbeit- of 1986 in the GDR. The main result shows that the re- smarktstruktur”) or hospital locations (“Krankenhäus- form led to higher life satisfaction of children in adult- er auf dem Land: Bürger sind gegen längere Wege”). hood. The study was published as CESifo Working Pa- Felix Rösel and Niklas Potrafke published a study in the per No. 7806 and as SOEPpaper 1059. journal Regional Studies according to which left -wing governments provide more hospital beds for their core INTEGRATION OF SAXONY AND EASTERN GERMANY constituency in big cities. Increasingly, the discussion INTO THE INTERNATIONAL DIVISION OF LABOR also focuses on questions of political participation in rural areas. In 2019, researchers from ifo Dresden Impact of Brexit and The Free State of Saxony is in active trade with other Branch investigated the link between local identity and Russian sanctions states. In the year under review, no major analyses voluntary commitment on behalf of the Friedrich Nau- were carried out in this fi eld; rather, the activities of mann Foundation for Freedom. The study “Stärkung ifo Dresden Branch concentrated on a series of state- kommunaler Identität” was able to show that a strong ments on the impacts of Brexit and the Russian sanc- local connection is associated with a higher level of tions on the Saxon economy. volunteer involvement. However, large-area mergers of municipalities reduces local identity. PUBLIC FINANCE AND THE SUPPORT OF ECONOMIC DEVELOPMENT IN SAXONY Moreover, fi nances of municipalities and federal states have been an important focus of ifo Dresden Branch for The staff of ifo Dresden Branch has been dealing inten- years. In a study on behalf of the Saxon State Ministry sively with various aspects of public fi nance and eco- of Finance the sustainability of the Saxon budget was nomic development for years. The public sector and investigated. It turns out that by the year 2030, reve- structural aid are still of particular importance, espe- nues in the Free State of Saxony are not expected to be cially for the structurally weak regions of eastern Ger- suff icient to cover expected expenditures. By the end many. Thirty years aft er the fall of the Berlin Wall, the of the decade, the gap is expected to amount to around discussion surrounding the realignment of German re- EUR 1 billion. In order to balance expenditures and rev- gional policy was therefore a key research focus for the branch. Examples for current ifo Dresden studies on enues, expenditure cuts have to be made, especially in this topic are a report for the preparation of an all-Ger- the area of personnel. man regional aid policy on behalf of the Thuringian Ministry of Economic Aff airs, Science, and Digital So- Studies published in the journals International Tax and ciety, an analysis of the funding budget on behalf of Public Finance and Public Choice showed eff iciency the Kommission zur Vereinfachung und Verbesserung gains for municipalities through the direct election of von Förderverfahren in Sachsen, as well as several politicians, whereas they found no measurable fi scal or contributions by Joachim Ragnitz to the discussion on eff iciency-related improvements due to the new dou- the equivalence of living conditions or funding criteria ble-entry bookkeeping accounting system in munici- in ifo Dresden berichtet (e.g., “Eignung von Regionalin- palities. dikatoren zur Bestimmung der GRW-Fördergebiete ab 2021” or “Zur Debatte um die Gleichwertigkeit der Leb- Moreover, political-economy issues are becoming in- ensverhältnisse: Was soll man tun und was nicht?”) or creasingly relevant in society and research. Felix Rösel in Wirtschaft sdienst (“Strukturhilfen für Braunkohlere- is conducting a project concerning political extremism, gionen: Hilft viel auch viel?”). which is fi nanced by the German Research Founda- tion (DFG). The project started in June 2018 and has Another question closely related to funding measures a duration of three years. Felix Rösel examines causal is the debate on the future of rural areas and possi- relationships between social cohesion and the rise of

100 ifo Annual Report 2019 IFO DRESDEN BRANCH

right-wing populism in Europe. The project addresses Science, Economics, and Digitalization of Saxony-An- the question whether associations foster or prevent halt. The calculation combines off icial GVA data with populism. One open question, for example, is whether quarterly and monthly time series using the Chow-Lin and under what conditions associations, such as sport method. The same method is employed by Eurostat for clubs, promote cohesion and democracy or contrib- GDP data in European regions and by the ifo Institute to ute to the spread of populist tendencies. In 2019, ifo generate quarterly GDP and GVA data for the Free State Dresden Branch published studies on populist voting of Saxony. The Quarterly Business Cycle Report for Sax- behavior in the journals Kyklos, Public Choice, and Re- ony-Anhalt is published on the ifo website. gional Science and Urban Economics, among others. Furthermore, investigations concerning the party preferences of former East Germans living in western Research Area Human Capital, Structural Germany and the splitting of fi rst and second vote in Change, and the Position of Saxony and the new elections have been published in ifo Dresden berichtet. Länder in Locational Competition (Human- kapital, Strukturwandel und die Position im On the occasion of the anniversary of the fall of the Ber- Standortwettbewerb) lin Wall in 2019, ifo Dresden Branch conducted a more in-depth analysis of the diff erences in attitudes be- Demographic Development of the Associations of tween former East and West Germans (“Schlechter als Municipalities Linz on the Rhine and Bad Hönningen erwartet, besser als gedacht: Die wirtschafl iche Situa- R. Nitschke, J. Ragnitz, F. Rösel for the Association of tion in Ostdeutschland 30 Jahre nach dem Mauerfall”). Municipalities Linz on the Rhine (Verbandsgemeinde Here it became apparent that the negative assessment Linz am Rhein), June 2019 to July 2019. of German unifi cation and the situation in eastern Ger- many can hardly be explained by objective facts. The On behalf of the Association of Municipalities Linz on results can rather be attributed to deeper psycholog- the Rhine and Bad Hönningen, ifo Dresden Branch in- ical causes (such as an insuff icient appreciation of the vestigates the future demographic development of the eff orts made by former East Germans to adjust aft er associations of municipalities Linz on the Rhine and reunifi cation). Partly, this could also be an explanation Bad Hönningen. The study is based on population data for the voting behavior in eastern Germany. from the Statistical Off ice of Rhineland-Palatinate and KommWis Ltd. for 2018 and 2019.

The study shows the future development of the pop- Projects Completed in 2019 ulation size and the demographic composition of the associations of municipalities Linz on the Rhine and Bad Hönningen up to 2035. We analyze the infl uence of Research Area Business Cycle and Growth in diff erent migration scenarios on population develop- Infl uence of diff erent Saxony and the new Länder (Konjunktur und ment. The assumptions regarding the future migration migration scenarios Wachstum) balance, birth rates, and mortality rates are based on the methodological approach of the Statistical Off ice Quarterly Business Cycle Report for Saxony-Anhalt of Rhineland-Palatinate. In contrast to the calculations J. A. Nauerth, J. Ragnitz, M. Weber for the Ministry of of the Statistical Off ice of Rhineland-Palatinate, our Science, Economics, and Digitalization of Saxony-An- population projection is based on population size data halt, January 2016 to March 2019. from KommWis Ltd. (2019).

German off icial statistics provide data on the develop- Our calculations at municipal level show a more opment of gross domestic product (GDP) and gross val- timistic picture than the projections of the “Fift h Re- ue added (GVA) for Germany and each of its 16 states. gionalized Population Projection” from the Statistical German data is published at a quarterly frequency, but Off ice of Rhineland-Palatinate. The study shows that state-level time series are released only once a year. ifo the future demographic development at municipal lev- Dresden Branch calculates quarterly GDP and GVA data el is strongly dependent on assumptions about future for the state Saxony-Anhalt on behalf of the Ministry of trends in migration fl ows. But these assumptions are

ifo Annual Report 2019 101 IFO DRESDEN BRANCH

associated with large uncertainty. Therefore, we con- For eastern Germany, the highest density of the chem- clude that for political decisions small-scale popula- ical industry in terms of establishments and employ- tion projections should be used with caution. ment is located in the south-east of Saxony-Anhalt (Central German Chemical Triangle). Further important Alternative Indicators to Measure Area Eff iciency locations are Saxony, Thuringia, and the greater Berlin J. Ragnitz for the Chamber of Commerce and Industry area. The pharmaceutical industry is mainly clustered for Munich and Upper Bavaria, June 2019 to October around Berlin. 2019. A comparison of the chemical and pharmaceutical in- The study was conducted under a framework agree- dustries in eastern Germany with their western Ger- ment with the Chamber of Commerce and Industry man counterparts shows no substantial diff erences for Munich and Upper Bavaria to provide objective, for most economic and business indicators: in terms of scientifi cally-based economic advisory work. The sales, revenues, or employment, both German regions study deals with the goal of reducing the utilization of have shown the same development in recent years. new land for the purposes of human settlement and However, substantial diff erences emerge in research transport to less than 30 ha per day by the year 2030, and development (R&D) intensity. The chemical indus- which is fi xed in the German federal government’s try in eastern Germany in particular lacks substantial sustainability strategy. However, as it seems unlikely R&D investment. Increasing R&D expenditures are that this objective can be reached in time, there are highly recommended to defend the industry’s strong increasing calls for strict quantitative instruments to international market position. The pharmaceutical reduce land use. The study primarily focuses on the industry in eastern Germany shows relatively high in- development of a new eff iciency indicator of land use vestments in R&D, even though it is still lagging behind that seems more suitable for the assessment of land western Germany. use than merely the increase in settlement and transport area. For this purpose, a distinction is made between growth-related demand for land on the one Research Area Public Finance and Support of hand and improvement in the eff iciency of land use Economic Development in Saxony and the new on the other hand. Furthermore, the study takes a Länder (Öff entliche Finanzen und Wirtschaft s- critical look at the currently discussed instruments förderung) of land use policy. The publication of the analysis is planned for 2020. Evaluation of the Operational Program of the Free State of Saxony for the European Regional Develop- Analysis of the Eastern German Chemical Industry ment Fund in the Funding Period from 2014 to 2020 N. Gillmann, J. A. Nauerth, R. Nitschke, J. Ragnitz for J. Ragnitz for the GEFRA for the Saxon State Ministry the German chemical industry association Verband der for Economic Aff airs, Labor, and Transport, November Chemischen Industrie e.V. (VCI), Landesverband Nor- 2016 to August 2019. dost and Arbeitgeberverband Nordostchemie, August 2019 to October 2019. From 2014 to 2020, the Free State of Saxony will receive EUR 2.1 billion from the European Regional Develop- Chemical This project includes a comprehensive review of the ment Fund (ERDF). According to the European Union’s and pharmaceutical chemical and pharmaceutical industry in eastern Ger- guidelines, the program has to be evaluated with re- industry many. Furthermore, it compares these two economic gard to its eff ectiveness, eff iciency, and impact. This sectors with their western German counterparts. Both evaluation is the subject of the project at hand. Addi- the chemical and pharmaceutical industries are es- tionally, the project provides ad hoc assessments of sential for the German economy. Measured by their proposed amendments to the operational program. domestic and international sales, the two industry sectors rank among the largest in Germany. In addition, The project is carried out jointly by ifo Dresden Branch, the chemical industry is a very important player for the the Institute for Financial and Regional Analyses (GE- whole economy due to its upstream position for other FRA), the Joanneum Reseach Forschungsgesellschaft , industries. and Stefan Meyer of Kovalis. The ifo Institute is primar-

102 ifo Annual Report 2019 IFO DRESDEN BRANCH

ily responsible for the planned ad hoc analyses. In the Analysis of the Funding Budget on Behalf of the period under review, no requirements were made by Commission for Simpliﬁ cation and Improvement of the client. Funding Procedures J. Ragnitz for the Commission for Simpliﬁ cation and Report on the Preparation of an All-German Re- Improvement of Funding Procedures, Saxon State Min- gional Funding Program istry of Finance (Kommission zur Vereinfachung und J. Ragnitz for the Thuringian Ministry of Economy, Sci- Verbesserung von Förderverfahren, Sächsisches Staats- ence, and the Digital Society (Thüringer Ministerium ministerium der Finanzen), November 2018 to February für Wirtschaft , Wissenschaft und Digitale Gesellschaft , 2019, publication as Final Report of the Funding Com- TMWWDG), January 2019. mission, 2019.

This project aimed to identify regional indicators to The “Funding Commission” of the Free State of Saxony defi ne development areas. For further information, commissioned the ifo Institute to analyze economic see project “Betrachtung und Analyse von Regionalin- promotion in the Free State of Saxony. The ifo Institute dikatoren zur Vorbereitung des GRW-Fördergebietes received access to detailed budget data. The objec- ab 2021 (Raumbeobachtung)” and ifo Dresden Studien tive was to identify the expenditures that can be clas- No. 83. The work mainly served to inform the contract- sifi ed as measures of economic promotion. This was ing ministry and did not lead to any independent pub- achieved by developing various classifi cation schemes. lication. It became apparent that the budget statistics were in- Promoting Local Identity adequate to accomplish the required task. Therefore, M. Förtsch, F. Rösel, J. Sonnenburg, M. Thum for the the project was stopped; the Funding Commission’s Friedrich-Naumann-Stift ung für die Freiheit, February report critically evaluated the Free States’ budget sta- 2019 to May 2019, publication in ifo Dresden berichtet tistics and called for their future adjustment. 6/2019; 1/2020. Development of the Saxon Budget – Risks in Public On behalf of the Friedrich Naumann Foundation for Staff Area? Freedom, ifo Dresden Branch investigates the emotion- D. Bauer, J. Ragnitz, J. Sonnenburg for the Saxon State al attachment of citizens to their own local community Ministry of Finance (Sächsisches Staatsministerium der (“local identity”) and the signifi cance of local identi- Finanzen), March 2019 to June 2019. ty for political attitudes and social commitment. The study is based on representative surveys of the German The consequences of demographic change present population between 1981 and 2017. specifi c challenges for the Free State of Saxony. An aging and shrinking population contains the risk of de- The study shows the development of local identity in clining employment potential and decreasing econom- Germany over time. It compares local identity with re- ic performance, which will lead to smaller public reve- Development of gional and national identity in Germany and in some nues. However, expenditures are likely to remain more Saxony’s budget European countries. We analyze diff erences in local or less constant over time. Against this background, we identity according to place of residence, socio-eco- examine the development of the Saxon budget over the nomic characteristics, and party preference. We use period to 2030. The project addresses the question of regression analysis to examine the role of local identity what fi nancial options the Free State of Saxony has for in social and political activities and attitudes. In addi- dealing with the described challenges. tion, we identify factors that go along with higher local identity. We predict the Free State of Saxony’s revenues and expenditures separately for the key budget items based Four out of ten citizens in Germany have a high local on the regional development up to the year 2030. identity. Socio-economic and institutional factors have an infl uence on this identity, and local identity plays an The results indicate a budget defi cit for the Free State important role in local social engagement and political of Saxony of nearly EUR 1.0 billion by 2030. Although attitudes. public revenues are expected to increase signifi cantly

ifo Annual Report 2019 103 IFO DRESDEN BRANCH

in the following years, expenditures may grow more Innovation Workshop Dresden – Joint Project: strongly. This is primarily due to the fact that the expen- Strengthening the Cooperation of Fundamental diture level in the base year (2020) can be fi nanced only Research Institutions and Small and Medium-Sized by drawing on reserves. As the possibility of fi nancing Enterprises (SMEs) – Subproject: Economic Analysis public expenditures by reserves disappears in 2021, and Evaluation of New Instruments there will be a coverage gap to the extent mentioned K. Heisig, J. Ragnitz in cooperation with the German above. Hence, the Free State of Saxony will be faced Aerospace Center (DLR), Helmholtz-Zentrum Dres- with the challenge of identifying potential fi scal sav- den-Rossendorf (HZDR), Hochschule für Technik und ings to ensure a balanced budgetary result. One pos- Wirtschaft (HTW) Dresden, and TU Dresden for the sibility is a reduction in human resources or voluntary German Federal Ministry of Education and Research, expenditures for investment and economic promotion. March 2017 to February 2020, publication of fi rst results in ifo Dresden berichtet 4/2019.

Entrepreneurial innovation is crucial for a country’s Current Projects successful economic activity. In Germany, the majority of businesses are small and medium-sized enterprises (SME), whose overall innovation activity is declining. Research Area Human Capital, Structural The major obstacles to investing in research and devel- Change, and the Position of Saxony and the New opment (R&D) for SMEs are problems in hiring qualifi ed Länder in Locational Competition (Human- personnel, in implementing an innovation manage- kapital, Strukturwandel und die Position im ment, and high economic risk. R&D expenditures by Standortwettbewerb) publicly fi nanced fundamental research institutions in Germany, by contrast, have been increasing in recent Structural Change in Coal Regions as a Process of years. Research institutions are increasingly showing Economic and Socioeconomic Transitions – eff orts to improve the transfer of knowledge to enter- Opportunities for a Socially Compatible Structural prises. However, SMEs are still underrepresented in Change in the Light of Climate Policy Goals these joint R&D activities. The focus of this project lies J. A. Nauerth, J. Ragnitz for the Wuppertal Institute on SMEs in Dresden and its surrounding area. It aims for the German Environment Agency (UBA), November to implement strategies for giving SMEs access to the 2016 to August 2019, extended to January 2020. R&D know-how of fundamental research institutions and universities. The project seeks to encourage SMEs The economic and industrial structure of Lusatia, a to use the existing research infrastructure, qualifi ed region in southern Brandenburg and eastern Saxony, personnel, and expertise in market development. is characterized by the mining and energy sectors. Changes in the mining Before German reunifi cation, more than half of the Industry Reports and energy sectors employees of Lusatia worked in these sectors. With C. Boede, U. Mandalka for the Volks- und Raiff eisenban- the collapse of the former GDR, employment in this ken, ongoing since 2006. region dropped sharply. Structural change in Lusatia is an ongoing process. Climate policy measures have As part of the “Branchen special” project, analyses speeded up the decommissioning of coal-fi red power and forecasts are provided for the structure of various plants, thus triggering further structural changes. On industry branches, their business prospects, profi ts, behalf of the German Environment Agency (UBA), ifo and competitiveness. The information in these spe- Dresden Branch – together with the Wuppertal Insti- cial reports can indicate the medium-term prospects tut für Klima, Umwelt, Energie gGmbH – works on a for the respective branches as well as opportunities case study of the historical structural change in Lusa- and risks within the structural transformation. The tia. It examines the causes and impacts of structural “Branchen special” reports are employed primarily change processes and evaluates previously imple- by co-operative banks in their lending and consult- mented measures that aim to mitigate/foster struc- ing business. Company consultants are provided with tural change in Lusatia. UBA plans to publish the fi nal a survey of prospects and risk profi les of individual study in 2020. branches.

104 ifo Annual Report 2019 IFO DRESDEN BRANCH

Research Area Public Finance and Support of Economic Development in Saxony and the New Länder (Öﬀ entliche Finanzen und Wirtschaft s- förderung)

Local Social Capital and the Rise of Right-Wing Populism F. Rösel for the German Research Foundation (DFG), June 2018 to June 2021.

Western societies have seen a rapid surge in right-wing populism in recent years. Studies show that voters in once booming but now declining industrial “rust belts” are particularly supportive of populist movements. In times of rapid change, strong and reliable local networks, and identities (social capital) may provide sol- idarity and eliminate breeding grounds for populism. However, if associations such as sports clubs are closely knit and exclusive, they may also foster and spread populism even more rapidly. Evidence supporting or contradicting this hypothesis is scarce, especially when it comes to causal eff ects. This project aims to investigate the relationship between social capital and right-wing populism. Felix Rösel exploits quasi-natural experiments in several European countries using modern econometric identifi cation strategies (dif- ference-in-diff erences estimations, fuzzy and sharp regression discontinuity design, and an instrumental variable approach).

Evaluating the Economic Eligibility of Subsidy Ap- plications on Behalf of the Federal State of Brandenburg D. Bauer, J. Ragnitz, F. Rösel for the Ministry for Eco- nomic Aﬀ airs and Energy (MWE) of the Federal State Brandenburg, March 2016 to March 2020.

On behalf of the Ministry for Economic Aﬀ airs and En- ergy of the Federal State of Brandenburg, ifo Dresden Branch evaluates the economic eligibility of applications for ﬁ nancial support. The relevance of the ap- plicant company is evaluated in terms of gross value added, local labor market relevance, and productivity.

ifo Annual Report 2019 105

Munich Society for the Promotion of Economic Research – CESifo GmbH

CESifo GmbH (off icial name: Münchener Gesellschaft their respective fi eld and who have been invited to visit zur Förderung der Wirtschaft swissenschaft – CESifo CES or the ifo Institute as a guest researcher based on GmbH, i.e., Munich Society for the Promotion of Eco- a refereed selection procedure. The CESifo Research nomic Research) links the Department of Economics of Network continued to expand in 2019 and totaled 1,653 One of the largest the University of Munich (LMU Munich) and the ifo Insti- members as at December 31, 2019, making it one of the networks in the world tute with the international economic research commu- biggest networks of this kind in the world. nity. CESifo GmbH is a private corporation founded in 1999 and owned in equal parts by the ifo Institute and The CESifo Research Network’s members consist of LMU Munich. The main tasks of CESifo GmbH include 1,347 fellows and 306 aff iliates. Fellows are senior the: researchers who typically hold a full professorship at a university, while aff iliates are ambitious young re- – support of exchanges between LMU and the ifo searchers who wish to join the network at the early Institute, and the development of junior economists stages of their career. Most of the fellows come from – administration of the worldwide CESifo Research Europe and North America. However, the network also Network has members in many countries, which ensures that – analysis of economic events in the European Union CESifo products are well known and used worldwide. and stimulation of the debate over European eco- The network members come from over 40 countries nomic policy and their fi elds of expertise span most areas of economics. – publication of economic research

– organization of conferences and seminars CESifo Research Network Members by Region

North America

EXCHANGES BETWEEN LMU AND THE Germany IFO INSTITUTE 4% 1% 9% West and South Europe CESifo GmbH supports the active participation of re- 32% Central and East Europe searchers from LMU and the ifo Institute in various academic conferences. North America Other The joint appointment of professors, who work both 33% at the ifo Institute and also have a chair at the LMU, remains particularly important. These endowed pro- 21% fessorships are a key way of attracting outstanding researchers to become center directors at the ifo Insti- tute and take up chairs at the LMU. These joint appoint- ments not only strengthen the links between the ifo Institute and the LMU in research, but also in the teach- Source: CESifo. © ifo Institute ing and promotion of Ph.D. students. A total of eight endowed professorships have been jointly established by To promote an intensive exchange of ideas between its the ifo Institute and the LMU to date, with CESifo GmbH members, the network is subdivided into several areas. contributing to the ﬁ nancing of two of them. These are headed by internationally renowned economists, or “area directors,” who contribute to the net- RESEARCH NETWORK work with their international standing and expertise. The CESifo Research Network aims to bring research- The network’s area directors are: ers with common research interests into contact with – Christian Gollier, University of Toulouse, Area Director Ten area directors one another and to promote collaboration between for Applied Microeconomics network members and Munich-based researchers via events and publications. The network is primarily – Ernst Fehr, University of Zurich, and Klaus Schmidt, composed of economists with a proven track record in LMU, Area Directors for Behavioral Economics

ifo Annual Report 2019 109 CESIFO GMBH

– Stephen P. Ryan, Washington University in St. Louis, prize is to identify promising young researchers and to Area Director for Economics of Digitization establish early links to the CESifo Network. – Eric A. Hanushek, Stanford University, Area Director The CESifo Distinguished Aﬀ iliates of 2019 were: for Economics of Education – Applied Microeconomics: – Kai A. Konrad, Max Planck Institute for Tax Law and Raul Sanchez de la Sierra, University of Chicago Public Finance, Munich, Area Director for Employ- ment and Social Protection – Behavioral Economics: Matthew Lowe, University of British Columbia – Michael Hoel, University of Oslo, Area Director for Energy and Climate Economics – Economics of Digitization: Daniel Ershov, Toulouse School of Economics – Peter H. Egger, ETH Zurich, Area Director for Global Benjamin T. Leyden, Cornell University Economy – Economics of Education: – Markus K. Brunnermeier, Princeton University, Area Camille Terrier, University of Lausanne Director for Macro, Money, and International Finance – Employment and Social Protection: – Rick van der Ploeg, University of Oxford, Area Di- Christopher Roth, Institute on Behavior and Ine- rector for Public Sector Economics quality (briq)

The international reputation of the area directors has – Energy and Climate Economics: boosted the attractiveness of the CESifo Research Net- Paige Weber, University of California, Santa Barbara work, which is reﬂ ected in its growing number of mem- – Global Economy: bers. David Krisztian Nagy, Centre de Recerca en Economia Internacional

CESifo Research Network Members – Macro, Money, and International Finance:

Applied Microeconomics Paymon Khorrami, Imperial College Business School Jonathan Payne, New York University Behavioral Economics – Public Sector Economics: 7% Economics of Digitization Arthur Seibold, University of Mannheim 22% 9% Economics of Education 6% The close links between Munich-based researchers Employment and Social and external researchers are further strengthened by Protection 7% Energy and Climate the visitor program. In 2019, the ifo Institute welcomed Economics 17% 51 international researchers to initiate or continue joint Global Economy 11% projects with Munich-based researchers. The program Macro, Money, and is closely linked to the evolution of the research net- 13% 8% International Finance work, as a successful visit is typically a prerequisite for Public Sector Economics any invitation to join the network.

Source: CESifo. © ifo Institute ANALYSIS OF ECONOMIC DEVELOPMENTS IN THE EU AND PARTICIPATION IN THE EUROPEAN ECONOMIC POLICY DEBATE CESifo GmbH provides network members with CESifo publications. It organizes numerous international con- EU topics are becoming increasingly important to the Annual prize ferences. The annual area conferences provide a plat- future of Europe’s citizens. The discourse at the Euro- form for lively discussions among network members. pean level, which centers on Brussels, is leading to a As part of each of the area conferences, the “CESifo new political reality that is changing Europe. It is im- Distinguished Aﬀ iliate” prize has been awarded to a portant that economists participate in this discourse, young economist annually since 2008. The aim of this as much of what happens has an economic dimension,

110 ifo Annual Report 2019 CESIFO GMBH

costs a lot of money, and leads to fi scal redistribution A preview of the results of the EEAG Report 2020 was in Europe. CESifo GmbH was founded to provide eco- presented at the EconPol Europe Annual Conference in nomic policy impetus at the European level and the lat- Brussels, November 7–8. This event brought together ter’s importance is growing steadily. around 200 high-profi le researchers, politicians, experts, and journalists to exchange their ideas on the As part of CESifo’s activities, numerous documents economic and institutional development of the EU and have already been released in past years that engage the eurozone. The conference is supported by CESifo. critically with possible developments in the EU, and especially in the euro area. Network members, as well as CES and ifo staff , have engaged intensively in the Eu- 2020 Vol. 19 ropean debate, which is gradually shaping a new form for the state.

A particularly important role in this debate has been played by the European Economic Advisory Group at Fair Taxation in a Mobile World

CESifo. The EEAG is a European council of economic Macroeconomic Conditions and Outlook experts that provides policymakers and the general Digital and Technological Transformation public with an independent and scientiﬁ cally based Taxing Multinational Companies assessment of current economic developments in the Taxing Mobile Jobs and People EU. The EEAG is unique in both its composition and its Taxing Immobile Factors and Wealth focus. This year’s council members are outstanding economists from several European countries and the USA, namely: – Torben Andersen, Aarhus University – Giuseppe Bertola, EDHEC Business School, University of Turin – Clemens Fuest, ifo Institut and LMU – Cecilia Garcia-Penalosa, Aix-Marseille Université

European Economic @ – Harold James, Princeton University Advisory Group – Jan-Egbert Sturm, KOF, ETH Zürich – Branko Urosevic, University of Belgrade Various ifo research centers provide background research for the report as well as contributing to the editing and typesetting process. The European economic The EEAG releases an annual report in which it not only forecast is prepared almost entirely by the ifo Institute. analyzes the current state of the European economy, but also provides an in-depth evaluation of several The Munich Seminars, jointly organized by CESifo and the other economic policy issues of topical importance for Süddeutsche Zeitung, one of Germany’s leading dailies, Europe. are also part of the regular event calendar. Their popularity among guests from business, public administration, As in previous years, the EEAG Report was presented academia, and the press demonstrates the overwhelm- at press conferences in many European cities (Brussels, ing demand for accessible discussion of economic prob- Berlin, Paris, Stockholm, and Zurich). Detailed articles lems and solutions. In 2019, a total of 11 Munich Seminars 11 Munich Seminars in leading European newspapers and interviews on ma- were organized. Full reports on most Munich Seminar jor TV channels refl ect the need for scientifi cally based lectures are published in the Süddeutsche Zeitung, mak- economic policy analyses. Like every year, the report ing their fi ndings accessible to a wide readership. This, in was also sent to policymakers and experts in science, turn, enhances the standing of the Munich Seminars and economics, and politics across Europe. helps to attract renowned personalities as speakers.

ifo Annual Report 2019 111 CESIFO GMBH

CONFERENCES AND EVENTS – “Banking and Institutions,” jointly organized with the ifo Institute As in past years, a major focus of CESifo GmbH’s activities was the organization and administration of aca- – “Doctoral Workshop on the Economics of Digitiza- 23 conferences and demic conferences. With the goal of strengthening Mu- tion,” jointly organized with ParisTech, University events nich’s standing as a science and research location and of Toulouse, University of Liège, and University of supporting empirical and theoretical research in eco- Leuven nomics, CESifo (co)organized 23 scientifi c conferences – “CESifo Delphi Conference,” jointly organized with and events in 2019. University of Athens CESifo hosts two diff erent types of conferences. In ad- – “CEMIR Workshop,” jointly organized with the ifo dition to the nine established annual area conferences Institute relating to the individual areas of the CESifo Research Network, CESifo also hosts conferences that are initiat- – Annual Meeting of the Health Economics Program ed and supported by network members and deal with by the German Economic Association topical issues in the fi eld of economic research. These – “Workshop on Political Economy,” jointly organized include, for example, the CESifo Venice Summer Insti- with Technical University of Dresden and the ifo tute. Institute (Dresden Branch)

The CESifo Venice Summer Institute has become a – “Predictive People Analytics,” jointly organized with LMU Munich permanent fi xture in the CESifo event calendar and has earned a solid reputation among international econo- – “Norwegian German Seminar on Public Economics,” mists. In 2019, the Venice Summer Institute comprised jointly organized with the Norwegian Center for Ta- fi ve workshops, dealing with the following topics: xation at NHH and Oslo Fiscal Studies at UiO – “Economics of the Gig Economy,” organized by Oliver These international conferences off er Munich-based Falck and Justus Haucap researchers an opportunity to interact with research- – “Taxation in the Digital Economy,” organized by ers from all over the world and establish collabora- Marko Köthenbürger and David Agrawal tions. Furthermore, the events promote the inter- – “The Future of Europe,” organized by Jan-Egbert national reputation of Munich as economic research Sturm, Balazs Egert, and Nauro Campos location.

– “Poverty, Inequality and their Association with PUBLICATIONS Disasters and Climate Change,” organized by Ilan Noy and Jasmin Gröschl CESifo has developed a number of publications aimed at contributing to the discussion of economic issues – “Gender in the Developed and Developing World,” in Europe. An important role is played by the CESifo organized by Basit Zafar and Seema Jayachandran Working Paper Series, which disseminates the early-phase fi ndings of academic research conducted by network members, making them available for profes- The Musgrave Lecture in honor of Richard Musgrave sional discussion. was a special highlight in 2019. The associated prize is awarded to an internationally renowned economist In 2019, 598 papers were published in this series. All working in the area of public fi nance, following selection papers are distributed electronically via the CESifo by the President of the ifo Institute and the President Group’s website and various online databases includ- and Vice Presidents of the International Institute of Pub- ing SSRN (Social Sciences Research Network), RePEc lic Finance (IIPF). Professor Roger H. Gordon, University (Research Papers in Economics), and Econstor (Open of California, San Diego, was awarded the prize in 2019. Access server of the German National Library of Eco- nomics – Leibniz Information Centre for Economics). In addition, CESifo organized or assisted partner organizations with several of their scientifi c events, in- The CESifo Forum is a nonpartisan journal with a truly cluding: European perspective. It refl ects the scope of activities

112 ifo Annual Report 2019 CESIFO GMBH

undertaken by CES and ifo, from scholarly academic In short, the research collaboration between the ifo research to up-to-date business data. The journal con- Institute, LMU, and the international scientiﬁ c commu- tains short and incisive articles on economic problems nity continued to ﬂ ourish in 2019. The CESifo research written by academics and politicians from various network provides a unique platform in Europe for ex- countries. change among economists and for public discourse. It has now secured an outstanding international repu- The CESifo Newsletter, distributed electronically, pro- tation that extends well beyond European borders. In vides up-to-date information and commentary for a light of the epochal changes that are taking place in the wide spectrum of readers, ranging from academics to EU, this kind of platform is now more important than members of the European Commission and the media. ever before. It also reports on CESifo events and provides articles on selected CESifo Working Papers in a form that is eas- Further details of CESifo’s activities can be found in the ily accessible to the nonspecialist reader. German online version of the Annual Report on pages 199–217 (http://www.ifo.de/Jahresbericht). CESifo has two book series with MIT Press: the CESifo Seminar Series and the CESifo Book Series. All books cover a topical policy issue in economics and are sub- jected to a careful, multistage refereeing process. In 2019, two new books were published on “Disrupted Economic Relationships” and “The WTO and Economic Development.”

The CESifo website is a portal of choice in its ﬁ eld. It was relaunched in 2019 with new content and design.

CESifo Website: https://cesifo.org

ifo Annual Report 2019 113 Conferences, Publications, and External Relations of the ifo Institute

Information on the ifo Institute’s events, publications, – CEMIR Junior Economist Workshop on Migration Re- teaching activities, and links to institutions/individu- search als, as well as further details of CESifo’s activities, can – Workshop “Opportunities, Mobility, and Well-Being” be found in the German online version of the Annual Report on pages 143–217 (http://www.ifo.de/Jahres- – Munich Inequality Workshop bericht). – SEEM – Seminar on Energy and Environmental Eco- nomics “Using Tradeable Permits to Manage Urban CONFERENCES Traff ic Congestion” Besides regular events, like the Annual Meeting, EURO- – ifo CEMIR Seminar “Immigration Trumps Poverty: CONSTRUCT, ifo Industry Colloquium (ifo Branchen-Di- Causal Impact on Demand for Redistribution in a alog), a number of special conferences, workshops Survey Experiment” and press conferences were held during 2019. These included: – SEEM – Seminar on Energy and Environmental Eco- nomics “Market Design Considerations for Scarcity – SEEM – Seminar on Energy and Environmental Pricing: A Stochastic Programming Framework” Economics “How Consumers Trade Off Supply Se- curity and Green Electricity: Evidence from Germany – “1. Industry – Academia Summit: Predictive People and Great Britain” Analytics” – Workshop on “Macroeconomics und Business Cycle” – Workshop “Political Economy” – ifo CEMIR Seminar “Self-Selection and Human Ca- – SEEM – Seminar on Energy and Environmental Eco- pital of Refugees” nomics “Buy Coal, Tax Gas! Supply- and Demand- Side Climate Policies when Fuel Emission Intensities – ifo-Seminar “Towards an Empirically Founded Be- Diff er” havioural Macro – Exploiting the Internet as a Data Source for Social Science” Lunchtime Seminars are held on a weekly basis. They – SEEM – Seminar on Energy and Environmental Eco- serve the purpose of putting current research and new nomics “Pledge-and-Review Bargaining” economic developments up for discussion. Partici- – ifo CEMIR Seminar “Foreign Peer Eff ects and STEM pants are researchers from the ifo Institute, CES, the Major Choice” University of Munich, and CES visitors.

– ifo CEMIR Seminar “On the Anatomy of a Refugee In 2019, a large number of ifo staﬀ members gave 180 Dispersal Policy: Neighborhood Integration and Dy- papers and presentations at external conferences. namic Sorting”

– Workshop on “Banking and Institutions” PUBLICATIONS

– SEEM – Seminar on Energy and Environmental Eco- ifo publications include: nomics “Multi-Product Supply Function Equilibria” – ifo Schnelldienst – a journal on policy issues, re- – Research Seminar “Economics of Education” search results, and forecasts; twice monthly – ifo Konjunkturperspektiven – a monthly publication – Workshop “Labor Economics and Social Policy” presenting in detail the results of the ifo Business – SEEM – Seminar on Energy and Environmental Eco- Survey nomics “Dynamic Pricing of Electricity: Money on – ifo Dresden berichtet – a bi-monthly report on the the Table” economy, structure, and economic policy in the State – Workshop on “Economics of Violence against Wo- of Saxony men” – CESifo Forum – a quarterly English-language ma- – SEEM – Seminar on Energy and Environmental Eco- gazine focusing on major current topics of interna- nomics “The Informational Value of Environmental tional interest, including European policy issues and Taxes” economic trends

114 ifo Annual Report 2019 CONFERENCES, PUBLICATIONS, AND EXTERNAL RELATIONS OF THE IFO INSTITUTE

– ifo DICE Report – a quarterly English-language jour- Christina Littlejohn, University of Munich nal for institutional comparisons Prof. Dr. Volker Meier, University of Munich – ifo World Economic Survey – a quarterly English- Dr. Lukas Mergele, University of Munich language journal publishing the results of the ifo Institute’s quarterly poll of international economic Prof. Dr. Chang Woon Nam, University of Applied Sci- activity ences, Ismaning – CESifo Economic Studies – a quarterly refereed jour- Dr. Florian Neumeier, University of Munich nal in economics Dr. Till Nikolka, Macromedia University of Applied Sci- – ifo Beiträge zur Wirtschaft sforschung – a series in ences, Munich which important research projects of the ifo Insti- Prof. Dr. Karen Pittel, University of Munich tute are published Prof. Dr. Niklas Potrafke, University of Munich – ifo Forschungsberichte – other studies of the In- stitute are documented in this series and made Prof. Panu Poutvaara, Ph.D., University of Munich available to the public Prof. Dr. Joachim Ragnitz, Dresden University of Te- – ifo Dresden Studien – studies of the ifo Dresden chnology branch that deal primarily with topics aff ecting Prof. Helmut Rainer, Ph.D., University of Munich the new German federal states and their eastern neighbors Sarah Reiter, University of Munich – ifo Working Papers Dr. Sven Resnjanskij, University of Munich Dr. Felix Rösel, Dresden University of Technology Lectures at German TEACHING AND EXTERNAL RELATIONS universities Britta Rude, University of Munich A number of ifo staff taught or presented lectures at Alex Schmitt, Ph.D., University of Munich universities in 2019: Dr. Simone Schüller, University of Munich David Bauer, Dresden University of Technology Suphi Sen, Ph.D., University of Munich Dr. Markus Drometer, University of Munich Marc Stöckli, University of Munich Dr. Thomas Fackler, University of Munich Daniel Stöhlker, University of Munich Prof. Dr. Oliver Falck, University of Munich Prof. Dr. Marcel Thum, Dresden University of Technology Xenia Frei, Dresden International University Dr. Katharina Werner, University of Munich Prof. Dr. Dr. h.c. Clemens Fuest, University of Munich Dr. Klaus Wohlrabe, University of Munich Dr. Cornelia Geißler, University of Augsburg Dr. Larissa Zierow, University of Munich Dr. Yvonne Giesing, University of Munich Dr. Klaus Gründler, University of Munich The ifo Institute was host to 68 visiting researchers Dr. Christa Hainz, University of Munich and University from a variety of countries, and provided 58 students of Applied Sciences, Munich in Munich and fi ve students in Dresden with their fi rst Lea Immel, University of Munich opportunities in empirical economic research. Lavinia Kinne, University of Munich Dr. Robert Lehmann, Deggendorf Institute of Techno- logy Philipp Lergetporer, Ph.D., University of Munich Valentin Lindlacher, University of Munich

ifo Annual Report 2019 115

Personnel, Finances, and Organizational Bodies

Personnel Development

In spring of 2019, Prof. Gabriel Felbermayr, Director of tasks include promoting the acquisition of contract the ifo Center for International Economics, left the In- studies and providing advice and support on topics re- stitute to take over as President of the Institute for the lated to contract-based activities. World Economy in Kiel. The search for his successor, conducted in cooperation with University of Munich The number of fi xed-term contracts fell by nine to 80, (LMU), has been completed. With the appointment of due primarily to the decline in the number of doctoral Dr. Lisandra Flach, another woman will become the students. Thus, the proportion of the entire workforce head of an ifo center. with such contracts decreased to 39.8% (2018: 41.9%). In general, fi xed-term contracts are mainly found in the In January 2019, Dr. Cornelia Geißler took over man- areas of research and service. In the area of infrastruc- agement of the Press, Publications, Conferences de- ture, they apply to staff that have been hired to tempo- partment, which was renamed Communications at the rarily replace employees on parental leave. same time. Under her leadership, the ifo website was relaunched in the fi rst half of 2019. Halfway through the As the total number of employees fell, the number of year, Mr. Kumar Subramani took over management of women also fell by a total of six (−5.2%). However, the the IT department. proportion of women in the overall workforce held steady at 54.7%. The number of women remained Niko Jaakola, a research associate in the Center for En- unchanged among scientifi c staff , decreased by two ergy, Climate, and Resources, joined the University of among doctoral students, and rose by one person each Larger proportion Bologna in summer 2019 as a senior assistant profes- among specialists, technical staff , and assistants. Nev- of female doctoral sor. In spring 2019, Alexander Sandkamp received an ertheless, the proportion of female doctoral students students off er to be a junior professor at Kiel University directly rose from 48% in 2018 to precisely 50%. In addition, aft er earning his doctorate in the Center for Interna- staff on parental leave or other leave are not included tional Economics. in the statistics. When staff on leave are included in the calculation, the proportion of female doctoral stu- TRENDS IN EMPLOYEE NUMBERS dents goes up to 52%. This high proportion increases the chances of recruiting women who have successfully As of December 31, 2019, the number of staff at the In- completed their doctorates to continue their academic stitute fell by 11 (–5.2%) to 201. The number of scien- careers by doing research at the ifo Institute. The share tifi c staff decreased by one person, while the number of women among scientifi c staff increased slightly in of doctoral students decreased by six, the number of 2019, up from 24.6% in 2018 to its current level of 25%. specialists remained unchanged, and the number of The very high proportion of women among non-scien- technical staff /assistants increased by one. Special- tifi c staff fell from 68.3% to 64.3%. ists are academically trained staff who are appointed to key positions at the interface between research and The Institute’s personnel policy goals include gradual- service. The number of non-scientifi c staff decreased by four people, and the number of trainees by one. ly increasing the share of research associates with doctorates in the total number of scientifi c staff to 100%. In Despite the marked decline in headcount, the number of the year under review, that fi gure rose to 87.5% (2018: part-time staff fell by just two people down to 93 (−2.1%). 86%). If doctoral students are included in the fi gure, a This decrease did not aff ect the non-scientifi c area. total of 93% of scientifi c staff either held a doctorate or were working on their doctorates as of December Doctoral students and scientifi c staff (postdocs) em- 31, 2019 (2018: 92.5%). The share of professors and ployed by the ifo Institute are always given fi xed-term researchers with habilitation degrees decreased from contracts on the basis of the Academic Fixed-Term 28.1% in the previous year to 25% in 2019. Contract Law. Only under special circumstances, which are defi ned in the ifo Institute’s career guidelines, can ifo’s international orientation is also refl ected in the the time limits on researcher contracts be removed. In fact that a signifi cant share of scientifi c staff are either 2019, contract term limits were partially removed for non-German nationals or Germans who have previously a scientifi c staff member who took a position heading held positions abroad or who completed their studies up the new contract studies service team. The team’s abroad and returned to Germany to work at the Insti-

ifo Annual Report 2019 119 PERSONNEL DEVELOPMENT

tute. As of December 31, 2019, their number fell by two ideal conditions for research excellence is essential. to 27. Of the heads of ifo research centers, two are for- Creating a productive environment for top researchers eign nationals and one held a position at a foreign uni- is a comprehensive strategic task. This involves, for ex- versity before being appointed by the ifo Institute. There ample, close cooperation with universities, which is a were seven non-German nationals (2018: 10) and three precondition for the joint appointment of ifo research “returnees” among the scientifi c staff (2018: 3). As in the center heads as mentioned earlier, intensive use of previous year, eight doctoral students are non-German the CESifo Research Network, international orienta- nationals and another nine (2018: 8) are German nation- tion and also the recognition of special achievements. als who studied abroad before being appointed by the The Institute off ers ongoing support in developing the ifo Institute. As of December 31, 2019, 27% of scientifi c scientifi c profi le of the researchers it employs at all staff were non-German nationals or Germans who had levels, which includes networking with international worked at a foreign university or who had completed researchers and promoting a culture of discussion at a their studies abroad (2018: 27.1%) prior to joining ifo. very high scientifi c level within the Institute. The princi- ples of the strategy for scientifi c and continued professional qualifi cation at the ifo Institute are stipulated in Number of Staff at Year-End 2019 and 2018 an agreement with the Works Council. Total staff Women

2019 2018 2019 2018 To highlight the importance of excellent framework Research and service Scientific staff 56 57 14 14 conditions for attracting researchers from Germany Doctoral students* 44 50 22 24 and abroad and supporting their further qualifi ca- Specialists 22 22 16 15 tion, in 2016 the ifo Institute signed up to the European Technical staff/assistants 22 21 21 20 Charter for Researchers passed by the European Com- Infrastructure Non-scientific staff 56 60 36 41 mission, which is linked to the Code of Conduct for the of which staff with management Recruitment of Researchers. The personnel policy and responsibilities** 14 15 8 10 Trainees 1 2 1 2 organizational conditions for the activities of research- Total 201 212 110 116 ers at the ifo Institute are continuously being developed in line with the targets set out in the European Part-time Fixed-term workers contracts Charter for Researchers. 2019 2018 2019 2018

Research and service Support of junior economists – especially the training Scientific staff 12 10 33 33 of doctoral students – is particularly important. ifo’s Doctoral students* 38 44 44 50 doctoral program serves the general development of Specialists 11 8 1 1 Technical staff/assistants 12 11 0 0 junior economists in the fi eld of empirical economic Infrastructure research. This training lays the foundations both for Non-scientific staff 20 22 1 3 an academic career and for a role in business or pub- of which staff with management lic administration. Only a small percentage of doctoral responsibilities** 4 5 1 1 Trainees 0 0 1 2 students have the opportunity to continue their profes- Total 93 95 80 89 sional career at the ifo Institute. The Executive Board

Post-docs/ women continues to oﬀer strong support to doctoral candi- habilitations, dates completing their studies at ifo, helping them in professors planning their next career move. 2019 2018 2019 2018

Scientific staff 49/14 49/16 9/1 9/1 The very high level of graduate training offered by the * Without guest doctoral students. – **Non-scientific staff compensated according to TV-L E13 and upward ifo Institute is refl ected in the signifi cant volume of peer-reviewed scientifi c publications that ifo doctoral students produce year aft er year. A series of DFG FURTHER EDUCATION FOR RESEARCHERS projects, successful bids in the competitive process The ifo Institute endeavors to be a very attractive em- of the Leibniz Association (SAW projects) and projects ployer for policy-oriented research economists. In the fi nanced by private foundations (including Deutsche race to attract outstanding researchers, providing the Telekom Foundation and Thyssen Foundation) is what

120 ifo Annual Report 2019 PERSONNEL DEVELOPMENT

makes it fi nancially possible for the ifo Institute to em- training measures. Nine male ifo researchers and ploy a large number of doctoral students. In 2019, the eight female researchers were working on their habil- Friends of the ifo Institute awarded a Roland Berger itation in 2019. doctoral fellowship for three years in honor of Prof. Dr. h.c. Roland Berger, Chairman of the Executive Board In 2017, in order to support doctoral students, the Insti- of the Friends of the ifo Institute. Doctoral students tute was granted membership to the group of institutes receive support not only from their respective depart- supported by the Bernt-Rohrer Foundation. The Foun- ment heads and postdocs, but also from the “doctor- dation’s objective is to support excellent students and al-student officers” with cross-departmental respon- doctoral candidates in their study and/or academic ca- sibilities. Dr. Marc Piopiunik and Dr. Katharina Werner, reers. In 2017, the Foundation awarded two publication both of whom themselves completed ifo’s doctoral fellowships to doctoral students at the ifo Institute; students program, once again performed this task with these were to support the recipients in the publication great commitment in 2019. of a top scholarly paper with them as sole authors. In 2018, two doctoral students won fellowships abroad Integrating doctoral students into applied research that enabled them to plan and cofi nance a research and into work on policy-oriented projects strengthens stay of several months each in the US. The Institute the empirical side of their economics education. As a was honored again in 2019, with one female doctoral rule, they complete their doctorates at the LMU’s De- student receiving a publication fellowship and another partment of Economics, become members of the Mu- winning a fellowship for a research stay in London. nich Graduate School of Economics, and also attend graduate courses there. In addition to many other in- Another initiative of the Executive Board is the special terested members of ifo staff , its doctoral students all promotion of the group of postdocs. The more eff ec- attend the Lunchtime Seminars run by the Center for tively they can communicate their scientifi c fi ndings Economic Studies and the ifo Institute. The regular re- and contribute them to consulting and service activi- search seminars held within each department also play ties, the more actively and specifi cally they can shape Amassadors for the an important role for doctoral students. their own careers and at the same time establish and “ifo brand” disseminate the “ifo brand.” For this reason, the In- The joint appointment of all departmental heads as stitute and LMU together established a postdoctoral professors at LMU has made it possible for almost all program (Junior Development Program) that not only ifo doctoral students’ work to be supervised by their provides a mentoring framework but also supports the department heads. The situation is similar at the Dres- participants with a variety of off ers, e.g., in planning den Branch: Its Director, Prof. Marcel Thum, holds a their own careers, developing leadership skills, or com- chair at the Technical University of Dresden (TUD) and municating their research results to the public. Four his deputy, Prof. Joachim Ragnitz, holds an honorary fi reside chats and a junior faculty retreat were held in professorship there. 2019, with another two leadership workshops planned for 2020. Supported by department heads and experienced postdocs, the doctoral students are introduced ear- Numerous researchers at the ifo Institute teach at uni- ly on to presenting research fi ndings at international versities with which ifo cooperates closely, which gives forums. Presentations at high-level economic confer- them the opportunity to constantly revise and expand ences with selection procedures prepare the junior their own expert knowledge base. In the summer se- economists at an early stage of their career to pre- mester 2019 and in the winter semester 2019/2020, ifo pare to publish articles in internationally renowned scientists off ered 67 courses. This is of particular ben- peer-reviewed journals. In the year under review, ifo efi t to empirically oriented subjects. Additionally, all researchers gave 180 presentations at international researchers at the Institute are given the opportunity conferences. The further education of doctoral stu- to keep abreast of research developments by attend- dents is also supported by internal training seminars, ing the appropriate lectures and seminars at the LMU. professional editing of English-language papers and The weekly lunchtime seminars are also of great help participation in external summer schools and work- in promoting the exchange of new research ideas. They shops. Of course, ifo also off ers individual further serve as a forum for the discussion of current research

ifo Annual Report 2019 121 PERSONNEL DEVELOPMENT

and research fi ndings as well as new developments in To this end, the Personnel and Law department sys- economics. Speakers and attendees are primarily from tematically surveys the qualifi cation requirements of the ifo staff and LMU. Workshops lasting several days all staff members at the beginning of each year. Over- at which ifo research teams can exchange information all, 243 further training measures were approved in on current projects are also organized outside the In- 2019, of which 201 were also conducted in that year. stitute and make a signifi cant contribution to further Most of the remaining measures are to be completed in scientifi c training. 2020. Some training courses could not be attended due to the high number of research stays in Germany and Academic prowess is developed primarily in research abroad. A large share of the training measures request- projects. Here, internal ifo expertise is extended in co- ed are usually in the fi eld of IT, where the focus lies on operation with external experts. Guest researchers at training for the specifi c IT requirements of individual the Institute therefore play a special role. The number employees. In addition, many SharePoint training ses- of guest researcher stays totaled 83 in 2019 (2018: 54). sions were held in 2019 due to the Institute’s switch to a In recent years, it has also become established prac- SharePoint-based intranet. Sessions on academic writ- tice for ifo researchers to spend several months on ing and data protection were also well attended. These research leave abroad. In 2019, there were a total of measures were complemented by customized cours- 30 guest stays around 30 guest stays, 17 of which lasted several months and es to deal with challenges encountered in individual the world were completed at top universities in the US, Paraguay, tasks. These are usually integrated directly into the im- Israel, and Europe (the UK, Sweden, Norway, Belgium, mediate fi eld of activity and thus have a high degree of France). Research stays at top universities benefi t the efficiency. The Institute’s strategy includes increasing academic performance of ifo’s research departments, the number of in-house courses as a way of strength- since the academics on leave can further deepen their ening staff networking within the Institute at the same academic expertise during their research stays abroad, time as providing further education. can pave the way for new joint projects with international co-authors and, at the same, can continue to The Institute also endeavors to develop junior staff in work on their ongoing projects. the non-scientifi c area. It regularly off ers an Off ice Com- munication Trainee Program. One junior economist The development of junior economists begins in the successfully completed this program in June 2019 and ifo Institute with the employment of interns. Their im- took on a specialist position in the Personnel and Law portance for the Institute is signifi cant, since former department. Currently, one trainee position has been interns oft en apply and are accepted for posts as doc- fi lled, with a second to be added in September 2020. toral students. A total of 63 interns gained their fi rst experience of empirical economic research at the ifo AWARDS Institute in 2019 (2018: 56). Of this total, 39.7% were The Friends of the ifo Institute awards annual prizes women (2018: 53.6%). Unfortunately, on account of to researchers at the Institute who have attracted at- the applications received, the Institute was far short tention thanks to their outstanding scientifi c achieve- of meeting its target gender ratio in 2019; however, it ments. A prize can be awarded only if a scientifi c article continues to pursue its goal of maintaining an approxi- was published in an internationally renowned peer-re- mately 50% share of female interns. viewed journal. Since 2018, the focus has been on young scientifi c talent. In 2019, the award went to Dr. FURTHER EDUCATION FOR NON-RESEARCHERS Marc Piopiunik from the ifo Center for the Economics of Education for his paper entitled “Africa’s Skill Tragedy: The further education of staff working in the non-re- Does Teachers’ Lack of Knowledge Lead to Low Stu- search areas also has a high priority for the Institute. dent Performance?” He published it together with Jan The above-mentioned agreement with the Works Bietenbeck and Prof. Simon Wiederhold in the Journal Council also regulates all aspects of the professional of Human Resources. education of non-research personnel. The aim is to provide non-scientifi c staff with the ideal qualifi cations The ifo Institute prize for outstanding success in the for managing their current tasks and to open up further management of contract studies went to the interde- career options. partmental team of Anita Fichtl, Victoria Endl-Geyer,

122 ifo Annual Report 2019 PERSONNEL DEVELOPMENT

Clara Albrecht, Prof. Helmut Rainer, and Dr. Joachim Institutional Comparisons and Migration Research, is Ragnitz. They won for their report entitled “Germany the mentor for the female doctoral students and helps 2017 – Study on the Mindsets and Behavior of Citizens ifo’s Executive Board improve the general conditions in Post-Reunifi cation Germany,” conducted on behalf for these staff members. She is their contact person of the German Federal Ministry for Economic Aff airs and takes care of the special concerns of young female and Energy. In addition, two special awards were given scientists, such as qualifi cation events that so far have in conjunction with a dinner for all the members of the been directed exclusively at female doctoral students. winning project team. The fi rst went to the business Overall, the share of women among scientifi c staff , in- survey team to commemorate 70 years of ifo Business cluding doctoral students, saw a slight rise from 35.5% Surveys, which were established the same year the In- to 36% in 2019. However, if all staff on leave were institute was founded. A second prize went to the entire cluded, the proportion of women would be 38.7%. CESifo GmbH team, which was created exactly 20 years ago and supports the ifo Institute mainly in conference Aft er a test phase, in fall 2019 the Institute changed its management. rules governing working hours. Economists and doctoral students no longer book their time electronically EQUAL OPPORTUNITIES AT THE IFO INSTITUTE and do not need to adhere to the aft ernoon core working hours. This change went a long way toward making The ifo Institute actively promotes equal opportunities scientifi c work more fl exible. One group in particular for women and men. In this important task, the Exec- that stands to benefi t from this is all staff who have to utive Board is supported by two women: an Equal Op- balance their work with family responsibilities. portunity Officer at its Munich location and a Women’s Representative at its Dresden Branch. The Institute’s The availability of part-time positions is another im- equal opportunities plan has the primary objective of portant element of the family-friendly organization of gradually reducing the underrepresentation of women work at the ifo Institute. In the year under review, the at all levels of the scientifi c career ladder. The working conditions and development opportunities for women proportion of women among part-time staff slipped are ideally designed in such a way that work at the ifo slightly from 69.4% to 68.8%. If doctoral students are Institute is attractive to female researchers and that excluded from this calculation, the proportion of wom- the share of women on the research staff is further in- en fell slightly to 80% compared to the previous year creased. ifo’s internal rules on equality are also part of (86.3%). The ifo Institute will continue to offer and pro- the Institute’s certifi ed management system, which is mote part-time employment to advance and achieve a annually audited by external auditors. This means that positive work-life balance; in doing so, it aims to take the continued certifi cation of ifo’s management system an employee’s individual preferences into consider- also depends on the strict observation and continuous ation as far as possible. further development of gender equality regulations. Other family-friendly aspects of work organization The promotion of equal opportunities for men and at the ifo Institute include the option of teleworking, women in scientifi c positions also involves the setting the framework conditions for which are laid out in an of fl exible target quotas along the lines of the cascade agreement with the Works Council, as well as the op- principle of research-oriented equality standards es- tion for staff on parental leave to continue to use the tablished by the German Research Foundation (DFG). further training opportunities offered by the Institute The ifo Institute has anchored such fl exible target quo- during their leave of absence. The intranet, relaunched Family-friendly tas for the compensation levels of senior scientifi c staff in 2019, is not only constantly available to all telecom- working in its Program Budget, which is the basis for institution- muters for remote working, but is also accessible for al support from Germany’s federal and state govern- all staff on leave. In the future, staff on leave will be ments. The time frame for these target quotas extends assigned a contact, a kind of “sponsor,” in their depart- until the year 2025. ment who can keep track of information that concerns them and will help reintegrate them when they return. In 2019, the share of female researchers increased The idea is to make that reintegration as smooth and again, as mentioned above. Dr. Christa Hainz, an expe- convenient as possible by off ering customized options. rienced researcher from the ifo Center for International When staff are on leave, the ifo Institute allows them to

ifo Annual Report 2019 123 PERSONNEL DEVELOPMENT

collaborate on projects at a reduced number of hours, should they so desire. ifo covers the costs of attending academic conferences during a staﬀ member’s leave, and will also cover the cost of childcare if necessary.

Because language inﬂ uences thinking, the ifo Institute Gender-neutral implemented guidelines on gender-neutral language in language fall 2019. In addition, the Institute’s management aims to take appropriate action to raise awareness of gender equality issues among the staﬀ .

More eﬀ ort is to be given in the future to ensuring that due consideration is given to all genders when extending invitations to guest researchers and speakers. The contract studies service team, formed in 2019, systematically maps funding pools and contract-based funding explicitly aimed at female researchers and informs female employees about them.

Another contribution to equal opportunity at the In- stitute is that women are increasingly being appointed to ifo’s various off icial bodies. In the Administrative Council, the Institute has little infl uence over this as the majority of seats are linked to an external function. Of the members elected to the Administrative Council, currently just under 43% are women. Of the twelve members of the Scientifi c Advisory Council, four are female academics. Two of the nine members of the ifo User Advisory Council are women, as are 15 of the 69 members of the ifo Institute Board of Trustees.

The Institute’s cooperation with the Dual Career Oﬀices of the two major Munich universities is important for both women and men. This service is becoming increasingly signiﬁ cant in terms of attracting renowned researchers to the Institute. The cooperation with both universities has already met with great success.

124 ifo Annual Report 2019 Financial Development

The ifo Institute is a non-profi t institution that aims to sum was added, in accordance with the ifo statutes serve academia and research. Its objective is to pro- (Art. 4. Sec. 2), to the earmarked reserves, which to- vide research and services as public goods, and not taled 839,000 euros. This increased the Institute’s as- to generate fi nancial profi ts. This also applies to con- sets to a total of 2.694 million euros by December 31, tract research conducted on behalf of state or private 2019. institutions. ifo’s fi ndings are also made public, which strengthens the foundations of all of its work. The In- Liquid funds were available at all times throughout stitute’s fi nancial strategy aims to achieve a balanced 2019. The stock of liquid assets fell by 1.600 million long-term cost and earnings structure that permits euros from the previous year’s level to 5.548 million a large service and research output that benefi ts the euros. Cash fl ow from current operations was negative general public. Suff icient fi nancial reserves help off set (−1.521 million euros) in 2019, as was cash fl ow from in- income fl uctuations and allow a fl exible response to vestment activity (−79,000 euros). special demands. Balance Sheet of the ifo Institute for 2019 SUMMARY OF KEY DEVELOPMENTS in EUR Thousand (abridged version) The Institute’s fi nancial statement for 2019 shows a Dec. 31, 2019 Dec. 31, 2018 surplus of 195,000 euros. This was channeled into re- Assets Fixed assets serves, increasing the Institute’s assets to a total of 76 81 Current assets 2.694 million euros as of December 31, 2019. Inventory 1,369 1,532 In 2019, the ifo Institute received public funds totaling Receivables and accruals 2,068 704 Liquid funds 5,548 7,148 10.863 million euros as part of joint research funding Total assets 9,061 9,465 based on Art. 91b of the Basic Law (German constitution). Of this amount, 10.548 million euros was used for Liabilities Net worth current operations and 315,000 euros was used for in- Earmarked funds 839 828 vestment. A cash balance from the previous year was not withdrawals/ 0 0 available to the ifo Institute in the 2019 fi nancial year. additions 11 11 Research reserves 1,855 1,671 ASSETS AND FINANCES withdrawals/ 0 0 additions 184 115 The balance sheet total fell by 404,000 euros (−4.3%) Short-term debt versus the previous year to 9.061 million euros. On the Reserves 3,536 3,879 asset side, this was due to the fact that within the fl oat- Liabilities vis-à-vis banks 0 0 Down payments received 2,292 2,665 ing assets, inventory rose by 162,000 euros and liquid Other liabilities 539 422 funds rose by 1.600 million euros, while short-term re- Total liabilities 9,061 9,465 ceivables and other assets fell by 1.418 million euros. Accruals and deferred income decreased by 54,000 euros, while fi xed assets also fell by 5,000 euros. PROFIT AND LOSS STATEMENT On the liabilities side, the Institute’s assets in- Operating income shrank by 530,000 euros compared creased by 195,000 euors. Down payments decreased to the previous year to reach a total of 18.597 million (−373,000 euros) as did accruals (−344,000 euros). By euros. A large part of that decrease was due to the re- contrast, there were increases in trade accounts pay- duction in public grants (−496,000 euros). able (110,000 euros) and other liabilities (7,000 euros). Income from contract-based activities, comprising From the annual surplus of 195,000 euros cited above, earmarked subsidies, revenue from publications, da- 184,000 euros was channeled into research reserves, tabase services, and events, income from contract bringing the latter up to a total of 1.855 million euros studies (contract-based research), and other revenue, by December 31, 2019. Voluntary payments beyond as well as the corresponding changes in inventory, de- membership fees, which are managed by the ifo Ad- creased by 30,000 euros from 6.642 million euros in ministrative Council, amounted to 11,000 euros. This 2018 to 6.612 million euros in 2019.

ifo Annual Report 2019 125 FINANCIAL DEVELOPMENT

The number of Society members fell from 314 in 2018 to Profit and Loss Statement of the ifo Institute for 2019 306 as of December 31, 2019. As a result, income from in EUR Thousand (abridged version) membership fees (obligatory and voluntary) decreased Dec. 31, 2019 Dec. 31, 2018 by 5,000 euros from 129,000 euros to 124,000 euros. Public grants 11,860 12,356 Earmarked financial support 3,004 2,717 The slight reduction in third-party funding corresponds Obligatory membership fees 113 118 to a decline in the cost of materials and contract stud- Voluntary membership fees 11 11 Income from publications, database ies associated with third-party funding activities of services, conferences 240 380 128,000 euros compared with the previous year. Income from commissioned activities 3,400 3,203 Other revenues 124 118 Change in stocks of non-invoiced Personnel expenses decreased by 318,000 euros services –156 224 (−2.3%) to 13.662 million euros. The main reason for Operating income 18,596 19,127 this is the decrease in the average number of staff , down Expenditure for material and purchased services 1,706 1,834 from 226 in 2018 to 214 in the 2019 fi nancial year. Collec- Personnel expenditure 13,662 13,980 tively agreed remuneration rose by 3.01% in 2019. Regular depreciation 5 7 Unplanned depreciation 165 198 Regular depreciation (5,000 euros) refers to fi xed as- Other operating expenses minus income 2,918 3,045 Operating expenses 18,480 19,064 sets fi nanced out of the Institute’s own funds, while Operating profit 16 63 unplanned depreciation (165,000 euros) corresponds to Financial profit –16 –13 the investment subsidies for fi xed assets received in the Taxes on income and profit –26 –2 Neutral income and income unrelated year under review from public research funding bodies. to the accounting period 94 78 Other operating expenses (balanced by other operating Annual profit 195 126 income) fell by 103,000 euros to 2.942 million euros. Withdrawals from research reserves 0 0 Additions to research reserves 184 115 Withdrawals from statutory reserves 0 0 This means that income exceeded costs by 16,000 eu- Additions to statutory reserves 11 11 ros (income from current operations). Owing to nega- Profit brought forward 0 0 tive interest rates, fi nancial profi t was negative at EUR −16,000. In addition, the Institute posted 118,000 euros in positive neutral and out-of-period results due to a In addition to this basic public support, the Dresden change in provisions from previous years. The Institute Branch receives separate institutional support from also had to pay taxes of 26,000 euros, giving it an annu- the Free State of Saxony according to Art. 91b of the al profi t of 195,000 euros. Basic Law. Institutional support of the Dresden Branch by the Saxon State Ministry of Finance amounted to For the output that the ifo Institute produces in re- 741,500 euros (of the 750,000 euros in funding original- search, policy advice, and services as an institution of ly granted, 8,500 euros was not used). Joint research the Leibniz Association, it receives institutional support funding from the German federal government and the Länder The Institute’s fi nancial statements were audited by as part of joint research funding according to Art. 91b of KPMG AG Wirtschaft sprüfungsgesellschaft and re- the Basic Law. Institutional support from the Bavarian ceived unreserved certifi cation. State Ministry of Economic Aff airs, Regional Develop- ment, and Energy as well as from the Federal Ministry for Economic Aff airs and Energy amounted to 10.863 million euros. In addition, there was a withdrawal of 256,000 euros from the repayment from the German federal and state retirement fund (VBL). Of the overall sum of 11.119 million euros in available funds, 10.635 million euros was used for day-to-day operations and 485,000 euros was spent on investments, including in forward-looking IT services and fi rst-year licenses for new soft ware.

126 ifo Annual Report 2019 ifo Institute Poschingerstr. 5, 81679 Munich Postbox 860460, 81631 Munich Organization Chart Phone +49 89 9224 - 0 May 1, 2020 Fax +49 89 98 53 69 http://www.ifo.de Email: [email protected]

Prof. Dr. Dr. h.c. Clemens Fuest (President) Executive Board Dr. Stephanie Dittmer ifo Centers for Macroeconomics and Surveys Public Finance and Political Economy Labor and Demographic Economics The Economics of Education

Prof. Dr. Andreas Peichl Prof. Dr. Niklas Potrafke Prof. Helmut Rainer, Ph.D. Prof. Dr. Ludger Wößmann Economic policy analyses &0 )#"!"/)&0*+!), )Ɯ++ "0 Economic uncertainty and the family Education and individual outcomes: Forecasting 3)21&,+,#Ɯ0 )+!151&,+-,)& 6 Immigrant integration Labor markets and lifecycles Inequality and redistribution Government debt in Germany and Europe Social policy and domestic violence Education and long-term development: Survey data and methodological expertise Political economy Social impact of environmental pollution Economic growth and prosperity Business cycle indicators and macroeconomic Determinants of education: Culture, forecasts resources, and institutions ,3"/++ ",#"!2 1&,+ǿƛ& &"+ 6 and equity

Industrial Organization and Energy, ClimateǾ and Resources International Economics International Institutional Comparisons New Technologies and Migration Research

Prof. Dr. Oliver Falck Prof. Dr. Karen Pittel N. N. Prof. Panu Poutvaara, Ph.D. Competitiveness, institutions, and regulation )&*1"+!"+"/$6-,)& 6ǿƛ& &"+ 6Ǿ Globalization and labor markets Research on institutions and Innovation "ƛ" 1&3"+"00+!&+01/2*"+1!"0&$+ Trade costs and trade policy international comparisons Digitization Energy system modelling and analysis Trade and environmental policy Research on migration and coordination LMU-ifo Economics and Business Data Center of energy system transformation of the Center of Excellence for Migration (EBDC) Resource markets: and Integration Research Dynamics and strategic behavior Database for Institutional Comparisons Environmental policy analysis and eco-industry In Europe (DICE) Publication of the CESifo Forum Research Director Prof. Dr. Christian Traeger

Executive Departments 5" 21&3"2--,/11ƛ Quality Management Research Group Taxation and Fiscal Policy Dresden Branch Personal Assistants: Przemyslaw Brandt Leader: Prof. Dr. Dr. h.c. Clemens Fuest Prof. Dr. Marcel Thum Susanne Crefeld Stefan Sauer (Director) Franca Fogli-Götz Prof. Dr. Joachim Ragnitz Advisors: (Managing Director) Controlling/Equal Opportunity AGG Data Protection Dr. Wolfgang Auer Dr. Dorothea Pohlmann Dr. Thomas Wirth (external) Florian Dorn Barbara Hebele

Central Departments Human Resources and Law Finances and Centralized Services Information Technology Library Communications Angela Wagner Thomas Walter Kumar Subramani Dr. Cornelia Geißler

Ombudsman Prof. Dr. Heinrich Ursprung (external)