Ifo Annual Report 2018

2018 A n n u a l R e p o r t

Presented at the 70th ifo Annual Meeting on 6 June 2019 Published in 2019 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.cesifo-group.de; email: [email protected] ISSN: 2194-928X

Editor: Marga Jennewein Translations: Lisa Giani Contini Printing: ifo Institute ifo Annual Report 2018

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 ...... 23 ifo Center for Labour and Demographic Economics ...... 30 ifo Center for the Economics of Education ...... 33 ifo Center for Industrial Organisation and New Technologies ...... 44 ifo Center for Energy, Climate and Resources ...... 56 ifo Center for International Economics ...... 64 ifo Center for Macroeconomics and Surveys ...... 74 ifo Center for International Institutional Comparisons and Migration Research ...... 89 ifo Center of Excellence for Migration and Integration Research – CEMIR ...... 95

Research Group Taxation an Fiscal Policy ...... 96

Library ...... 101

Press, Publications, Conferences ...... 102

Dresden Branch ...... 113

Munich Society for the Promotion of Economic Research – CESifo GmbH ...... 125

Conferences, Publications and External Relations of the ifo Institute ...... 131

Personnel, Finances and Organisational Bodies

Personnel Development ...... 137

Financial Development ...... 143

Organisation of the ifo Institute ...... 146

ifo Annual Report 2018 3

The ifo Institute 2018

The Goals and Tasks of the ifo Institute

Information and Research: Since its foundation in the context of this topic, the ifo Institute deals with the January 1949 ifo has provided both information and following fi ve fi elds of research: research, hence its name ifo = Information and For- 1. Economic growth and sustainability schung (research). Its legal form is that of a registered, non-profi t association. As a member of the Leibniz As- 2. Equal opportunities and integration sociation, the ifo Institute – formally the Leibniz Insti- 3. Public tasks, taxation and political economy tute for Economic Research at the University of Munich e.V. – is an institution that receives public funding from 4. Digitalisation of the economy the federal and state governments pursuant to Article 5. European integration, globalisation and “third system 91b of the German Constitution. A cooperation agree- competition” ment links ifo closely with Ludwig Maximilian Univer- sity of Munich (LMU), and in 2002 ifo was officially pro- The ifo Institute, CES at the LMU and CESifo GmbH claimed an “Institute at the University of Munich”. pool their resources as the CESifo Group to form an internationally active research association. The aim The ifo Institute is one of the leading economic re- is to enrich the public debate on the basis of excellent search institutes in Europe. Through its fi ve fi elds of economic research, to support economic policy deci- action – research, the promotion of junior economists, sion-making processes with high-quality policy advice, policy advice, participation in public debates, and in- and to support the public with high-profi le economic formation/services – it helps maintain and increase information, such as the ifo Business Climate Index. sustainable economic prosperity and social participa- The ifo Institute cooperates closely with the LMU, es- tion under constantly changing conditions. pecially 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- Recommendations relevant issues at the highest scientifi c level and with an py nine professorships at the LMU, making up part of of action for international reputation, developing research-based the Faculty of Economics. government, business recommendations for action for government, business and society and society. Economic data and information collected The CESifo Group focuses on the ifo Institute’s nation- systematically and over long time horizons provide al, European and international scientifi c networking impetus for political and public debates, which in turn and on economic research at the LMU. At the heart of generate new research tasks. In this way, ifo plays an these activities is its research network, consisting of important part in the development of appropriate eco- former guest researchers at CES and the ifo Institute. nomic policy decisions as a basis for innovation and EconPol Europe – The European Network for Econom- social development. ic and Fiscal Policy Research is also of central importance for European networking. EconPol Europe is The ifo Institute’s economic policy model is the social a unique network of policy-oriented university and market economy, i.e. the combination of economic suc- non-university research institutes from various Euro- cess with social balance as championed by Ludwig Er- pean countries that combine their expertise to build hard, who was one of ifo’s founders. The central topic of bridges between national and European economic research at ifo is the importance of government action policy debates and contribute to the further develop- for maintaining and increasing economic prosperity, ment of the European Union. economic stability and social cohesion. Government action should promote the creation of wealth, support ifo’s eight research centers – for Public Finance and stability and sustainability of economic development, Political Economy, for Labour and Demographic Eco- ensure social security, and ensure that as many people nomics, The Economics of Education, for Industrial as possible are able to take advantage of the opportuni- Organisation and New Technologies, for Energy, Cli- ties available to them in an open and free society. mate and Resources, for International Economics, for International Institutional Comparisons and Migra- The central topic of research at ifo is the analysis of the tion Research, and for Macroeconomics and Surveys role of government action in sustainably maintaining and – cover research topics that are also highly relevant increasing economic prosperity and social cohesion. In for policy advice. The ifo Dresden Branch, founded

ifo Annual Report 2018 7 THE GOALS AND TASKS OF THE IFO INSTITUTE

in 1993, works in areas that are of special interest to the ifo World Economic Survey (WES) in 2002. Since its the Free State of Saxony, from which it receives its launch in 1999, the Database for Institutional Compari- funding. sons in Europe (DICE), which currently contains around 3,800 tables, graphs and short reports, has grown sig- ifo’s junior research staff benefi t tremendously from nifi cantly and enriched the range of services provided network eff ects within the CESifo Group. ifo employs by the ifo Institute. more than 40 doctoral students, most of whom participate in the Institute’s graduate programme and are ifo also off ers a broad range of information via the in- also members of the Munich Graduate School of Eco- ternet, available in German and English, and publishes nomics (MGSE) at the LMU. ifo’s doctoral programme several journals and book series. International publica- is particularly attractive thanks to the fact that it com- tions are becoming increasingly important. bines academic research with the Institute’s practical policy orientation. Every year the CESifo Group organises a number of international conferences at the ifo Institute, and has be- The economic research carried out at the ifo Institute is come the second largest economics research network subject to the “Rules of good scientifi c practice” draft - worldwide with over 1,500 researchers in 43 countries. ed by the German Research Foundation (DFG), as well The CESifo Working Papers written by members of this as to the gender equality standards also established research 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 under-representation 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 characterised by its cooperation with Politics and the general public benefi t from the close universities and renowned researchers in Germany link between the ifo Institute and the LMU, as this link and abroad. Its cooperation with the LMU occupies a Expert opinions on reinforces the Institute’s academic performance and special place in ifo’s work. ifo and the LMU jointly cre- current economic fi rst-class research is the foundation for the policy ated the “Economics & Business Data Center” (EBDC), policy issues work that the Institute sees as its core task. As part of whose main task is to supply a continuously updated its policy advice, ifo produces a large number of expert dataset of German companies to feed new areas of re- opinions on current economic policy issues on behalf search in economics and business administration. The of public and private clients. ifo was among the insti- EBDC provides researchers with corporate data, a com- tutes to submit a successful bid for the joint economic bination 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 ifo Business and other services. This takes place primarily in connec- and policy advice in line with international standards. Climate Index - an tion with its project-related and regular surveys of na- To this end, it signed up to the “European Charter for internationally tional and international business. Every month, the ifo Researchers” issued by the European Commission, recognised indicator Business Climate Index, an internationally recognised which is linked to the “Code of Conduct for the Recruit- indicator of economic development derived from the ment of Researchers”. ifo Business Survey, is awaited with great anticipation by the media, investors, and business leaders. The In- Cooperation with other partners – in particular the Uni- stitute began publishing the results of its quarterly poll versities of Augsburg, Dresden, Konstanz, Münster, Pas- of international economic activity in 120 countries as sau and Regensburg – enriches the Institute’s work. In

8 ifo Annual Report 2018 THE GOALS AND TASKS OF THE IFO INSTITUTE

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

The ifo Institute cooperates closely with external economists and other established experts to assure the quality of its research. This particularly applies to its 54 research professors and ten research aﬀ iliates, research associates and senior research associates (as of 31 December 2018) 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 2018 9 Report of the Executive Board

The main focus of 2018 was on preparing for the evalu- In September, Prof. Gabriel Felbermayr – Director of ation of the ifo Institute by the Senate of the Leibniz As- the ifo Center for International Economics – accept- sociation in 2019. This gave major impetus to the further ed the appointment as President of the Institute for development of the research agenda and of all the ifo the World Economy (IfW) and the associated profes- Institute’s other fi elds of action. In the course of 2018, the sorship for Economics at the University of Kiel. He ifo Institute reviewed the content of its research and in- will take up the position in Kiel from March 2019. The tensively discussed its orientation for the coming years. ifo Institute regrets the departure of Gabriel Felber- This led to a reformulation of the Institute’s central topic mayr, but also sees this honourable appointment as of research and to the identifi cation of fi ve fi elds of re- a success for the ifo Institute. To succeed him, the ifo search for ifo in the coming years. The new central topic Institute together with Ludwig Maximilian University of research does not involve a fundamental reorientation of Munich (LMU) has announced a professorship for of research, but rather builds on the Institute’s existing economics that will be known as the Economics of strengths and takes up current economic and political Globalisation. developments in order to set new thematic priorities. Below are the central developments of 2018 in research, The central topic of research at ifo is the analysis of the the promotion of junior economists, policy advice and role of government action in sustainably maintaining scientifi c service. and increasing economic prosperity and social cohesion. Focus on fi ve fi elds of In the context of this topic, over the coming years the RESEARCH AND THE PROMOTION OF JUNIOR research ifo Institute will focus its eff orts on the following fi ve ECONOMISTS fi elds of research: Publications in international journals that are peer-re- 1. Economic growth and sustainability viewed with an external referee process are a central 2. Equal opportunities and integration indicator of scientifi c achievement. The year 2018 was another outstanding year in terms of the output of 3. Public tasks, taxation and political economy ifo’s research staff. A total of 60 papers submitted by 4. Digitalisation of the economy ifo economists to internationally recognised refereed journals were accepted for publication; 22 of these ar- 5. European integration, globalisation and “third system ticles were published in high-ranking category A+ to C competition” journals. In addition, ifo staff presented their research results by delivering 246 papers at international con- Networking between the ifo Centers and the interdisci- ferences with a referee system. plinary treatment of these topics will play a central role. Table 1: Further changes were made to ifo’s off icial bodies with Publications in Peer-Reviewed Journals from 2012 the departure of Prof. Jürgen Stark from the Board of to 2018 Trustees and the Administrative Council. Prof. Stark 2012 2013 2014 2015 2016 2017 2018 Outstanding year had been a member of the Board of Trustees and Ad- Articles in peer-reviewed journals 68 63 57 56 58 74 60 of which in categories A+ to B; for publications ministrative Council of the ifo Institute since 1995. In from 2017 A+ to C 31 32 22 28 22 29 22 in peer-reviewed June 1998 he was elected Vice-Chairman of the Board journals of Trustees and thus also of the Administrative Council. The following researchers successfully published articles We owe Prof. Stark our sincere thanks and utmost ap- in top academic journals in the A+/A categories in 2018: preciation for his extremely reliable and expert cooper- – Clemens Fuest, Andreas Peichl (with Sebastian Sieg- ation in ifo’s off icial bodies over the past 23 years. His loch), “Do Higher Corporate Taxes Reduce Wages? successor is Nina Hugendubel, who has been a member Micro Evidence from Germany”, American Economic of both bodies since 2009. Dr. Carsten Pillath, General Review 108 (2), 393–418. Director of the European Council in Brussels, was newly appointed to the Administrative Council and the Board – Natalia Danzer (with Victor Lavy), “Paid Parental Leave of Trustees. There were also further changes in the and Children’s Schooling Outcomes”, The Economic Board of Trustees. Overviews of all the off icial bodies Journal 128 (608), 81–117. can be found at www.ifo.de/gremien.

10 ifo Annual Report 2018 REPORT OF THE EXECUTIVE BOARD

– Rahel Aichele (with Inga Heiland), “Where is the Table 2: Value Added? Trade Liberalization and Production Economic Research Institutes and Economics Networks”, Journal of International Economics 115, Faculties in the RePEc Ranking in December 2018 130–144 Ranking Institution Average Ranking – Marc Piopiunik, Simon Wiederhold (with Jan Bieten- 1 ECB, Frankfurt/Main 1.59 beck), “Africa’s Skill Tragedy: Does Teachers’ Lack 2 IZA, Bonn 1.76 of Knowledge Lead to Low Student Performance?”, 3 ifo Institute, Munich 3.89 ifo ranks highly Journal of Human Resources 53 (3), 553–578. 4 DIW, Berlin 4.32 among economic 5 CESifo, Munich 4.77 research institutes – Ludger Wößmann (with Sascha O. Becker), “Social Cohesion, Religious Beliefs, and the Eff ect of Pro- 6 LMU, Munich 6.88 testantism on Suicide”, Review of Economics and 7 University of Frankfurt/Main 7.90 Statistics 100(3), 377–391. 8 University of Mannheim 9.16 9 Deutsche Bundesbank 9.37 – Jens Ruhose (with Tim Krieger, Laura Renner), “Long- 10 University of Bonn 10.40 Term Relatedness between Countries and Inter- ZEW, Mannheim 10.90 national Migrant Selection”, Journal of International 11 Economics 113, 35–54. 15 IfW, Kiel 16.94 24 RWI, Essen 29.18 – Michele Battisti, Gabriel Felbermayr, Panu Poutvaara 29 IWH, Halle 33.40 (with Giovanni Peri), “Immigration, Search, and Re- distribution: A Quantitative Assessment of Native Welfare”, Journal of the European Economic Association Table 3: 16 (4), 1137–1188. Individual Researchers in the RePEc Ranking of December 2018 for Germany – Gabriel Felbermayr (with Giammario Impullitti, Ranking Person* Institution Average Ranking Julien Prat), “Firm Dynamics and Residual Inequality 1 Luc Laeven ECB, Frankfurt/Main 2.47 in Open Economies”, Journal of the European Econo- 2 Urs Fischbacher University of Konstanz 4.91 3 Armin Falk University of Bonn 5.51 mic Association 16(5), 1476–1539. 4 Hans-Werner Sinn ifo Institute 5.73 5 Ludger Wößmann ifo Institute 6.54 Three books – “Developments in Global Sourcing”, 6 Marcel Fratzscher DIW, Berlin 8.1 “The Taxation of Pensions” and “The Economics of 7 Klaus M. Schmidt LMU 11.6 8 Martin F. Hellwig MPI, Bonn 11.72 Philanthropy” – were published in 2018 in the CESifo 9 Andrew J. Oswald IZA, Bonn 12.13 Seminar Series published by MIT Press. In this series, 10 Kai Konrad Max Planck Institute 14.73 for Tax Law and the research results from joint projects of CESifo re- Public Finance searchers and designated external scientists are pub- 29 Clemens Fuest ifo Institute 36.26 lished. The aim is to provide an overview of the level of 42 Gabriel J. Felbermayr ifo Institute 47.36 research on a wide range of economic topics and thus 47 Andreas Peichl ifo Institute 54.79 55 Niklas Potrafke ifo Institute 66.69 contribute to the current policy debate. 62 Reint E. Gropp IWH, Halle 71.23 63 Christoph M. Schmidt RWI, Essen 71.53 The publication successes of ifo economists are 92 Panu Poutvaara ifo Institute 103.81 93 Oliver Falck ifo Institute 104.5 also reflected in the scientific rankings of the RePEc 138 Dennis Snower IfW, Kiel 144.52 network (RePEc – Research Papers in Economics). In 223 Helmut Rainer ifo Institute 229.27 the RePEc ranking of international scientific cita- 266 Achim Wambach ZEW, Mannheim 277.19 840 Karen Pittel ifo Institute 853.7 tions of institutions based in Germany, the Munich * Bold font: Presidents of economic research institutes, italic type: Department economists once again ranked highly at the end of heads at the ifo Institute (2018). 2018: ifo Institute (3), CESifo (5) and the LMU (6). At the top are the European Central Bank (based in Frankfurt am Main) and the network of the IZA – In the corresponding RePEc ranking of scientifi c cita- Institut für die Zukunft der Arbeit – (Bonn), which tions by individual researchers, ifo researchers ranked comprises well over a thousand researchers from all highly. Hans-Werner Sinn is fourth among German econ- over the world. omists, and Ludger Wößmann is fi ft h, while ifo President

ifo Annual Report 2018 11 REPORT OF THE EXECUTIVE BOARD

Clemens Fuest is 29th. In addition, fi ve other ifo depart- its members. The “Multidimensional Equality of Oppor- ment heads – Gabriel Felbermayr (42), Andreas Peichl tunity” project, funded by the German Research Founda- (47), Niklas Potrafke (55), Panu Poutvaara (92) and tion (DFG) and carried out by economists at the ifo Center Oliver Falck (93) – are placed among the top 100 econo- for Macroeconomics and Surveys, is concerned with the mists in this ranking (see Table 3). development of suitable measures for multidimensional equal opportunities. In contrast to pure measures of The ifo Institute’s European and international position inequality, the measurement of equal opportunities is also strong. This is demonstrated by the fact that in should take individual responsibility for the diff erences the RePEc ranking for the period 2016–2018 it ranked observed into account. It also recognises that well-be- 16th in Europe and 42nd worldwide among all eco- ing is a multidimensional concept that includes not only nomic research institutions. Since the last evaluation income but also health, education and political partici- period, ifo has signifi cantly enhanced its international pation. If an equal opportunity society is to be created, profi le (see Figure 1). In Europe, its rank improved from appropriate measures must be provided to this end. The 25 to 16, while worldwide it rose from 73 to 42. ifo econ- project will help develop appropriate measures. Signifi cantly omists are also prominently represented in the indi- enhanced vidual researcher rankings. For example, Hans-Werner In the project “How Does Reducing the Intensity of international profi le Sinn is ranked 21st, Ludger Wößmann 53rd, and Clem- Tracking Aff ect Student Achievement and Equity? Ev- ens Fuest 248th in a European comparison. idence from German State Reforms”, funded by the German Research Foundation (DFG) as part of the Pri- ifo Rank in the RePEc Ranking ority Programme 1646, economists at the ifo Center for Median of respective time periods the Economics of Education are investigating the eff ects RePEc ranking in Europe of a reduction in the intensity of school tracking on stu-

RePEc-Rank RePEc ranking worldwide dent performance and equal opportunities in German 0 school systems. To this end, the reforms carried out by 10 20 16 some Länder are analysed on the basis of National Edu- 25 30 cational Panel Study data on the fi ft h- and ninth-grade 40 42 cohorts. The study focuses on the impact on competen- 50 60 cy measures, tenth-grade attendance, school leaving 70 73 qualifi cations and class repetitions. 80 2009Ȗ2011 2016Ȗ2018 Source: RePEc. © ifo Institute In connection with research, the promotion of junior economists is a core task of the ifo Institute. As of 31 December 2018, the ifo Institute employed 50 doc- Promoting junior The ifo Institute’s strong scientifi c achievements are toral students. A total of 11 doctoral students (in- economists also refl ected in its success in the scientifi c compe- cluding three from the Dresden Branch) completed tition for research grants. Research funding raised their doctorates at ifo in 2018: Anna Sophia Ciesiels- in scientifi c competition in 2018 has a double eff ect ki, Thomas Fackler, Carolin Fritzsche, Alexandra Hei- for the ifo Institute: On the one hand, it increases the misch, Natalie Obergruber, Christian Ochsner, Judith scope for theoretical basic research; on the other hand, Saurer, Bastian Schulz, Lars Vandrei, Katharina Wer- it enables fundamental policy-oriented issues to be ad- ner and Sebastian Wichert. dressed and thus improves the basis for policy advice provided by the ifo Institute. This is illustrated by the In February 2018, the ifo Institute hosted the 1st Econ- following two examples: Pol Europe CESifo Ph.D. Workshop on “Economic and Fiscal Policy in Europe”, organised for the EconPol For some time now, there has been a public discussion network for young researchers described below. The in Germany surrounding the topics of social justice and workshop saw 30 doctoral students from institu- inequality, in particular the development of income (in) tions belonging to the EconPol network and a further equality. But this debate falls short of answering the 13 doctoral students from the ifo Institute participat- question of social justice. The extent to which a society is ing, presenting and discussing their work on econom- fair is shown above all by the equal opportunities it off ers ic and fi nancial policy at the European level.

12 ifo Annual Report 2018 REPORT OF THE EXECUTIVE BOARD

The Junior Development Program, jointly developed Each year, the CESifo Group organises numerous con- by the ifo Institute and the LMU’s Faculty of Econom- ferences, workshops and seminars that ideally pro- ics, supports the individual professional development mote the exchange of ideas between economists and of young academics (postdoctoral level) and advises help to expand their networks. Particularly notewor- on all questions concerning the development of a ca- thy are the Area Conferences and the CESifo Venice reer (national or international). The programme com- Summer Institute. In total, the CESifo Group organised bines structured mentoring with a multi-level series 25 international economics conferences in the year of development workshops, seminars and networking under review, most of which were held in the confer- activities. In addition, funds are available for research ence rooms of the ifo Institute. The following fi ve work- projects. shops were held at the CESifo Venice Summer Institute: “Country Clubs”, “Globalisation and Populism – Past All postdocs at the ifo Institute can apply to become and Present”, “International Tax Reform – Challenges a member of the Junior Development Program. In for Trade Integration and Implications for Internation- December 2018, 22 ifo postdocs took part in the pro- al Tax Coordination”, “Evidence-Based Policy Advice: gramme. The ifo Institute contributes to this pro- How it is Produced and Used” and “Expectation For- gramme both through mentoring and by organising mation”. These conferences and workshops primarily workshops and seminars. In December 2018, the fi rst serve scientifi c exchange between the members of the workshop organised by ifo on the topic of “Commu- CESifo Research Network, but at the same time they nication with Interest Groups from Science and the off er ifo economists the opportunity to establish con- CESifo researcher Public” took place. It was a two-day workshop with ex- tacts and discuss their academic work with the mem- network: ternal trainers. In addition, various fi reside chats were bers of the CESifo Research Network. By the end of 1,546 members from organised on topics such as appointment procedures 2018, the network had grown to 1,546 members from 43 countries or the procurement of third-party funding, in which 43 countries. postdocs from the LMU and ifo were able to exchange ideas with ifo alumni and ifo professors. Two important events in 2018 were the conference in honour of the 75th birthday of Eric A. Hanushek, ifo economists also help to promote junior econo- which took place immediately before the CESifo Area mists by holding courses. In the year under review, ifo Conference on Economics of Education and brought economists held 87 teaching positions and supervised the world’s most renowned educational economists 81 Bachelor’s and Master’s theses, 64 dissertations and to Munich, and the scientifi c symposium “The Federal 18 habilitations. Republic of Germany aft er 70 Years: Chiemsee Dialogue between Science and Business” on the occasion of The Institute’s scientifi c performance is also infl uenced the 70th birthday of Hans Werner Sinn. The Chiemsee by the intensive involvement of external researchers. Conference focused on the challenges facing Germa- In 2018, Gordon B. Dahl (University of California, San ny ten years on from the euro crisis. Among the issues Diego), Natalia Danzer (Freie Universität Berlin), Georg discussed were the dangers for Germany’s economic Dürnecker (LMU), and Dominik Sachs (LMU) were re- future, how to assess the ongoing current account sur- cruited as new research professors, with the result that plus, and what regulatory framework Europe needs. a total of 54 external economists were associated with the ifo Institute as research professors on 31 December Several prizes were awarded at the 69th Annual Meet- 2018. In addition, ten research associates work togeth- ing of the ifo Institute. The Society for the Promotion of er with the Institute. Economic Research (Friends of the ifo Institute) awarded the prize for outstanding scientifi c achievements in Prizes for A particularly important element of international net- the fi eld of empirical economic research to Felix Rö- outstanding scientifi c working is the promotion of overseas research stays for sel, research associate at the ifo Dresden Branch, for achievements ifo economists, especially at top foreign universities. A his highly successful research work, which led to fi ve total of 17 research stays took place at Harvard Univer- publications in international peer-reviewed journals in sity, the University of Wellington, the National Bureau 2017, including the European Journal of Political Econo- of Economic Research, Cambridge, MA, and the Univer- my and Fiscal Studies. The annual prize for outstanding sity of California, San Diego, among others. achievement in managing third-party research pro-

ifo Annual Report 2018 13 REPORT OF THE EXECUTIVE BOARD

jects went to the project team comprising Prof. Ludger CONTRIBUTIONS TO POLICY ADVICE AND THE Wößmann (Director of the ifo Center for the Economics POLICY DEBATE of Education), Elisabeth Grewenig, Dr. Sarah Kersten, The ifo Institute is a think tank for economic policy and Franziska Kugler, Philipp Lergetporer, Laura Oestre- uses its research expertise and data to actively partic- ich, Lisa Simon and Katharina Werner (researchers at ipate in the public debate on the best economic policy the ifo Center for the Economics of Education) for their ideas and concepts. It aims to communicate its theoret- successful work on the project “The Political Economy ical and empirical fi ndings in economics to policy-mak- of Educational Policy: Insights from a Public Opinion ers and in turn, derives its research topics from the Survey”, which was funded by the Leibniz Association policy debate. In 2018, the ifo Institute was once again Driving the policy as part of the Leibniz Competition. heavily involved in policy advice and the policy debate. debate through press releases, interviews, Clemens Fuest, president of the ifo Institute, has also It pursued this goal both via the periodicals of the ifo press articles and been president of the International Institute of Public Institute as well as through an abundance of press republic events Finance (IIPF), the world organisation of public fi nance leases, interviews, press articles and public events. economists, since 24 August 2018. The IIPF’s approx- Among them were the ifo Viewpoints – brief commen- imately 800 members had elected him to the post taries on topical issues by Clemens Fuest. These ad- handover in 2017 for the term of off ice until August dressed the following topics in 2018: “Three-Step Plan 2021; the handover took place at the 2017 Annual for a Better European Monetary Fund”, “Hundred Year Meeting in Tokyo. Fuest succeeds Joel Slemrod, of the High Inequality in Germany? – A Fairy Tale Based on University of Michigan. Selective Perception”, “Is the Grand Coalition Leading Germany towards a Transfer Union? The Euro Junktim”, On 11 September 2018, Clemens Fuest was awarded “Why We Need to React to Trump”, “Germany Should the “Impulsrede zur Sozialen Marktwirtschaft ” prize Adopt an Area-Based Property Tax”, “Italy’s New Gov- by the Wirtschaft spolitischer Club Deutschland e.V. ernment: Transfer Union or Euro Exit”, “Trade Disputes: in Berlin. The speech in his honour was held by Oliver Why Trump’s Position Is Much Weaker against EU than Wittke, Parliamentary State Secretary at the German China”, “Tariff s on Cars”, “Tragedies Like Greece Must Federal Ministry for Economic Aff airs and Energy. Not Be Repeated” and “The Third Type of Inter-System Competition: Europe and the Rise of China”. Karen Pittel, Director of the ifo Center for Energy, Cli- mate and Resources and Professor of Economics, in The European Economic Advisory Group at CESifo particular Energy, Climate and Exhaustible Natural (EEAG), a CESifo-backed council of economic experts on Resources at the LMU, has taken over the chair of the the assessment of economic developments in Europe, Committee for Environmental and Resource Econom- published an annual report in February 2018 entitled ics of the Verein für Socialpolitik (German Economic “What Now, With Whom, Where To – The Future of the Association). EU”, which considers the challenges to integration in Europe in the face of the euro crisis, Brexit, general geo- Prof. Dr. h.c. Roland Berger, management consultant, political trends and divergences between EU member founder of the Roland Berger Foundation and Chair- states. Deeper integration within the European Union man of the Executive Board of the Friends of the ifo has largely come to a standstill – not least because of Institute, was appointed an honorary member of the UK’s decision to withdraw from the EU. The report the Society for the Promotion of Economic Research therefore focuses on a detailed analysis of the current (Friends of the ifo Institute) e.V. at the society’s Gen- obstacles to greater integration and identifi es ways out eral Meeting. Since his election as Chairman of the of the crisis. This includes, for example, the possibility Executive Board of the Friends of the ifo Institute in that member states, depending on their convictions and 2007, Prof. Berger has done a great deal to expand the willingness to integrate, would take part in only some EU society’s activities. It is thanks to his personal com- initiatives, thereby creating a “two-speed Europe”. mitment that the society has succeeded in getting numerous companies and leading fi gures from the The articles published in the periodicals of the ifo In- business world to become members and/or cooper- stitute regularly fi nd their way into the public debate. ate with the society. In the year under review, the publication programme

14 ifo Annual Report 2018 REPORT OF THE EXECUTIVE BOARD

comprised 24 issues of ifo Schnelldienst, which cele- The “ifo Branchen-Dialog” (ifo Industry Colloquium), brated its 70th anniversary in 2018, twelve issues of a series of conferences organised in cooperation with ifo Konjunkturperspektiven, six issues of ifo Dresden the Chamber of Industry and Commerce for Munich berichtet and four issues each of CESifo Forum, the and Upper Bavaria to analyse current economic de- ifo DICE Report and the ifo World Economic velopments, was also continued in 2018. More infor- Survey. Five ifo research reports, three ifo Dresden stud- mation is available in the chapter on the ifo Center for ies and three ifo contributions to economic research Industrial Organisation and New Technologies. were published as monographs, and 39 issues were published in the ifo Working Papers series. The ifo On the occasion of the 25th anniversary of the Dresden Institute also issues the quarterly scientifi c journal Branch, a scientifi c conference on “Disparities: Chal- CESifo Economic Studies, published by Oxford Uni- lenges for Economic and Social Policy” took place on versity Press. In addition, 600 issues have appeared 19 September 2018 in the Dreikönigskirche in Dres- in the series of CESifo Working Papers supervised by den. It highlighted the signifi cant diff erences between CESifo. This series is where essays by members of the eastern and western Germany, which persist almost CESifo Research Network are published. What is more, 30 years aft er the fall of the Berlin Wall, in terms of eco- 13 issues of the newly published series of EconPol Work- nomic strength, wages, private household wealth and ing Papers and fi ve issues of EconPol Policy Reports many other dimensions. Prof. Marcel Thum, Director of have been published. See below for details on the new the ifo Dresden Branch, opened the event. Dr. Matthias publication series under the EconPol logo. Haß, Saxon Minister of State for Finance, stressed in his welcoming address the importance of the ifo Dresden In 2018, events organised by the ifo Institute continued Branch for economic policy advice in the Free State of ifo events are to mark high points in the economic policy debate. Of Saxony. (See also chapter on the ifo Dresden Branch). high points in the particular note were the symposium on 6 March 2018 economic debate jointly organised with the Bayerischer Handwerkstag On 4 and 5 July 2018, aft er a two-year break, the Mu- under the title “Bubbling Revenues, Big Challeng- nich Economic Summit took place under the title “Re- es – Expectations of a Sustainable Tax and Financial shaping Europe” and under the patronage of Bavarian Policy”, the discussion round “Self- and Reinsurance Prime Minister Markus Söder. The topics covered in against Labour Market Shocks: A New Proposal for the this high-calibre conference were redefi ned in order Eurozone”, organised by the ifo Institute together with to work even more intensively for cohesion in Europe SPD MEP Jakob von Weizsäcker on 12 June 2018, and the and for the continent’s future. The aim of the confer- ifo Annual Meeting. The ifo Annual Meeting – which, as ence is to bring together high-ranking government in previous years, was held in cooperation with the LMU representatives, outstanding international econo- in the Great Hall of the LMU – was dedicated to the topic mists and decision-makers from business, media and “Digitalisation and Innovation and their Signifi cance for society to discuss important European policy issues Growth and Competitiveness”. More information is avail- face-to-face and with high international visibility. able in the “Press, Publications, Conferences” chapter. The Summit was also open to ifo’s junior economists. The topics covered at the Summit were manifold: Eu- The 14 “Munich Seminars” organised by CESifo togeth- rope’s role and competitiveness in a new world order; er with Süddeutsche Zeitung, in which renowned speak- the impact of Brexit; migration and digitalisation; the ers from business, science and politics talked about stability of the fi nancial sector; populist and authori- current economic topics, were very well received. tarian tendencies; and European Economic and Mon- Hans-Werner Sinn’s Christmas lecture on “The Impact etary Union. The conference’s 25 speakers, among of Brexit on Germany and Europe” also took place as them Sigmar Gabriel, Günther Oettinger, Thimoteus part of the Munich Seminars. Höttges and Anne Laure Delatte, exchanged their ap- Parliamentary proaches and reform ideas with each other and with Breakfasts in Berlin In March and October 2018, two further “Parliamenta- the audience in fi ve keynote speeches and four panel ry Breakfasts” were held at the Bavarian Representa- discussions. A detailed report on the conference can tion in Berlin. Together with parliamentarians, Clemens be found in the “Press, Publications, Conferences” Fuest discussed the need for economic, fi nancial and Eu- chapter. ropean policy action and addressed current challenges.

ifo Annual Report 2018 15 REPORT OF THE EXECUTIVE BOARD

In addition to initiating its own contributions to the The network EconPol Europe – European Network policy debate, the ifo Institute also provided policy for Economic and Fiscal Policy Research Europe, advice in the form of numerous commissioned reports. founded in 2017 on behalf of the German Federal Min- These projects are documented in the appropriate istry of Finance, is dedicated to the urgent fi nancial Addressing the sections of this annual report. Selected examples and economic policy issues of European integration urgent fi nancial and of commissioned reports laying the foundations for on an interdisciplinary basis. The network’s mission economic policy policy advice in 2018 are given here: is to step up the use of current research fi ndings for issues of European – Framework agreement on conducting economics the further development of European Economic and integration studies (Chamber of Industry and Commerce for Monetary Union through well-founded contributions. Munich and Upper Bavaria). Some of the projects EconPol Europe concentrates on four topics that the that came under this framework contract were: network believes are currently of particular relevance to Europe: sustainable growth and best practice; re- – Incentives for the elderly to remain in the labour form of EU policies and the EU budget; capital mar- force, kets and fi nancial sector regulation; and governance – Incentives for an increase in female employment, and macroeconomic policies in the European Mone- tary Union. Under the leadership of the ifo Institute, – Brexit and its economic consequences for the German state of Bavaria and Upper Bavaria, EconPol expanded its activities in 2018. Events that deserve special mention include the fi rst EconPol Eu- – Introduction of a tax incentive for research and rope CESifo Ph.D. Workshop, the EconPol Lab at the development – an assessment for Upper Bavaria, CEPSlab18 event in Brussels, the EconPol Panel at the – Development of a steering mechanism for potential- Munich Economic Summit, and a new parliamentary orientated migration of qualifi ed professionals. breakfast and lunch debate with MEPs in Brussels. The network also gained fi ve new members in 2018, includ- – Regional analysis of the economic impact of Brexit ing the KOF Konjunkturforschungsstelle in Zurich and on the German federal state of Hesse (Chamber of the Center for Economic Research and Graduate Edu- Industry and Commerce Frankfurt am Main), cation (CERGE-EI) in Prague. Further information can – Eff ects of EU customs measures on the German be found in the chapter on the Center for Macroeco- economy (Federal Ministry for Economic Aff airs and nomics and Surveys, which is in charge of the EconPol Energy), network. – Practical experience with the exemption provisions Sec. 2a – 2c VermAnlG of the Small Investor Protec- Table 4: tion Act since 1 June 2016 (Federal Ministry of Fi- Placements of ifo Scientists in the FAZ Overall Ranking nance), for 2018 Ranking Name Points – Economic benefi ts of the free movement of goods 2 Clemens Fuest 511 (European Parliament), 4 Hans-Werner Sinn 295 – Public staff ing through 2030 in the Free State of 7 Gabriel Felbermayr 135 Saxony until 2030 and competition with the private 15 Ludger Wößmann 102 sector (Saxon State Ministry of Finance), 35 Niklas Potrafke 50 – Report on reviewing the weighting of inhabitants in 37 Andreas Peichl 49 the system of the municipal fi scal equalization 52 Timo Wollmershäuser 35 scheme in North Rhine-Westphalia (Ministry of 73 Klaus Wohlrabe 22 Home Aff airs, Municipalities, Construction and Equal 94 Joachim Ragnitz 14 Treatment of the State of North Rhine-Westphalia),

– The German property tax: A public ﬁ nance analysis Media coverage is an important indicator of the rele- and reform options (Haus & Grund Deutschland; ZIA vance of academic papers for politics and society. Ac- Zentraler Immobilien Ausschuss e.V.), cording to Media Tenor, in the year under review the – Convergence in EMU: What and how? (European ifo Institute was again the economic research institute Parliament). most frequently mentioned in the German media. Ac-

16 ifo Annual Report 2018 REPORT OF THE EXECUTIVE BOARD

cording to an analysis by Media Tenor, the ifo Institute The ifo Institute also strives to invest in teacher training is also one of the economic research institutes most and further education. To this end, the “ifo Hands-On frequently cited in the media at the European level. Modern Economics Teaching Days” training series was Investing in launched in 2017 and continued in 2018. It is recognised teacher training The excellent results achieved by ifo economists in re- by the Akademie für Lehrerfortbildung und Person- for general and search and in the public policy debate also led to an alführung (ALP), the Dillingen Academy for Teacher vocational schools excellent result in the 2018 FAZ ranking of the most Training and Personnel Management, as an off icial infl uential economists working at universities or re- further training course and is aimed at teachers from search institutes: as Table 4 shows, in addition to ifo Bavaria who teach business studies at general and President Clemens Fuest in second place, the FAZ vocational schools. In 2019, the Center for Economics ranking features a number of other highly rated ifo Education in Siegen will provide additional support for scientists. teaching the contents of this advanced training course, which is conducted in cooperation with the Association of Bavarian Business Philologists. Another event takes SCIENTIFIC SERVICES place annually in cooperation with the ALP in Dillingen. The ifo Institute offers a wide range of services to all Since 2018, a cooperation agreement has stipulated groups in society interested in economic issues. The that the ifo Institute will provide the speakers and the services include the collection, preparation and deliv- ALP the premises and organisation for this joint event. Collecting, preparing ery of economic data and information, the compilation Entitled “Current Research Issues in Economics”, the and delivering of materials for international institutional comparison advanced training course has been designed for use in economic data to and the collection and preparation of additional mac- grammar schools or in vocational schools. society roeconomic data. In 2018 the range of services was extended to include the following: Work on building up a family business database, which was started in 2017 on behalf of the Foundation A survey to produce the ifo Education Barometer was for Family Businesses, was continued in 2018. The aim carried out for the fi ft h successive year. In the year un- is to develop this database into Germany’s leading, der review, particular emphasis was placed on gender internationally renowned data source for scientifi c issues, gender inequality and education policies for research relating to the activities of family compa- gender equality. A second part of the survey dealt with nies. As part of this project, the ifo Institute produc- the opinions of young people on various education es the “Annual Monitor of the Foundation for Family policy issues and compared them with those of adults. Businesses” every year. This sees a representative The survey showed that a clear majority of young peo- selection of companies interviewed on current and ple, as well as adults, are in favour of including #MeToo relevant issues, enabling the analysis of the econom- issues in school curricula. In addition, 82% of young ic developments of family companies. In 2018, around people and 86% of adults welcomed the treatment of 1,300 family and non-family companies from Germany equality between men and women in the classroom. were surveyed on international tax competition from a Looking at general education issues, there were simi- business perspective. The chapter on the ifo Center for larities and diff erences between the opinions of young Macroeconomics and Surveys, which is responsible for people and adults. For example, 60% of adults are in the database, contains details. favour of introducing an all-day school system through to 3 p.m. in Germany, whereas 64% of young people DEVELOPMENT OF THE IFO INSTITUTE AS AN are against it. ORGANISATION The 2018 event in “ifo Hands-On High-Quality Journal- Preparations are underway for the 70th anniversary ism Days” series launched in 2015 had to be postponed of the ifo Institute in 2019. ifo Schnelldienst 13/2018 to January 2019 for scheduling reasons. Fift een stu- published an article by the former ifo Executive Board dents from the German School of Journalism and six member Prof. Meinhard Knoche on the founding histo- editors from Bayerischer Rundfunk attended the event ry of the Institute and its close connection to Ludwig on this new date. More information is available in the Erhard. Further reports on the historical development “Press, Publications, Conferences” chapter. of the ifo Institute will be published in 2019.

ifo Annual Report 2018 17 REPORT OF THE EXECUTIVE BOARD

On 1 February 2018, the ifo Center for Energy, Climate CESifo GmbH also developed positively in the year un- and Exhaustible Resources was renamed the ifo Cen- der review. Founded in 1999, CESifo GmbH (full name: ter for Energy, Climate and Resources. The new name Munich Society for the Promotion of Economics – reﬂ ects an expansion of the department’s focus areas CESifo GmbH) serves to connect the LMU’s Faculty of and shows that renewable resources will play a stron- Economics and the ifo Institute with the international ger role in climate and energy policy. research community. CESifo GmbH supports the international CESifo Research Network, which continued to In January 2019, the central department of “Press, grow in 2018 and had 1,546 members by the end of the Publications, Conferences” was renamed “Communi- year. The members of the CESifo Research Network are cations” and Dr. Cornelia Geißler was entrusted with divided into a total of nine research areas, which are its management. In this newly created position, she led by internationally renowned academics, or Area will help to enhance the “ifo” brand with an integrated Directors. A separate chapter in this annual report is communication concept. devoted to the activities of CESifo GmbH.

Work on the project mentioned in previous years, “The In creating ideal conditions for top research, the fur- Development, Implementation and Professionalisation ther qualifi cation of researchers is important. This of Knowledge-Transfer Concepts in Non-University Eco- topic and its development has already been covered nomic Research”, funded by the German Federal Ministry in connection with research. The numerous research of Education and Research, continued in the year under stays at top American universities in 2018 were particu- review. In the course of the information services analysis larly pleasing. Other highlights included ifo researchers that began in 2016, optimisation potential has been iden- again being invited to present papers at international, tifi ed. In 2018, the focus of the work was on establishing refereed conferences (246), and numerous ifo doctoral internal knowledge-transfer processes and on evaluat- students expanding their expertise at summer schools. ing the needs of diff erent social groups, especially teach- In addition, ifo doctoral students are given the oppor- Knowledge transfer ers, as well as on the further development of transfer tunity to attend accompanying training courses. ifo’s geared to the needs of services. As a result, the ifo Institute has geared its broad non-academic staff is also offered ongoing training: the target groups range of transfer activities to the information needs of overall, 188 further training measures were approved the target groups. This has increased the eff iciency of in 2018, of which 125 were also conducted in that year. the current ifo knowledge-transfer system and opened up new potential for knowledge transfer. More informa- The orientation of the entire organisation of the ifo Insti- tion on the knowledge-transfer project is available in the tute towards excellent performance in all areas of work “Press, Publications, Conferences” chapter. is the objective of the ifo management system certifi ed according to DIN ISO 9001, the functionality of which is The protection of personal data is very important to checked annually by external auditors. A two-day re- the ifo Institute. We have adapted our data protection certifi cation audit was carried out in February 2018, for provisions to the legal provisions of the EU General which the ifo management system again received very ISO 9001 certifi ed Data Protection Regulation (“EU-GDPR”) in force since good marks. Implementation of all projects is support- quality management 25 May 2018 and published them on our website, togeth- ed and tracked by the tools provided. A special feature system er with the name and contact details of our external data of the certifi ed quality management system is that it in- protection off icer, a role that was established in 2018. cludes the ifo Institute’s gender equality policy and the rules of this policy. Compliance with these rules was ex- In 2018, the LMU-ifo Economics & Business Data Cen- amined and confi rmed in all external audits. In the year ter (EBDC) team, which has recently been strengthened under review, efforts to shape working conditions at the with new members, continued to work on establishing ifo Institute with a view to achieving a more balanced new strategic research partnerships and strengthening gender structure among academic staff paid off. While existing ones. Having stepped up its eff orts to this end the share of female doctoral students as of 31 Decem- last year, the team can now report initial successes in ber 2018 fell to 48% (51.9% if those doctoral students terms of content. These are set out in the chapter “In- who were on parental leave as of that date are includ- dustrial Organisation and New Technologies” on the ed), a balanced gender ratio among doctoral students EBDC within this annual report. has almost been reached.

18 ifo Annual Report 2018 REPORT OF THE EXECUTIVE BOARD

Personnel capacity reduced compared to the previous In 2018, the ifo Institute received public funds totalling year. As of 31 December 2018, the number of staff at the 10.756 million euros as part of joint research funding Institute fell by eight to 212. The number of scientifi c staff based on Art. 91b Basic Law (German constitution). Of employed in the research departments (researchers, this amount, 10.441 million euros was used for current doctoral students and specialists) fell by seven: the num- operations and 315,000 euros was used for investment. ber of researchers remained constant and the number of A cash balance of 850,000 euros, which was accumulat- doctoral students fell by eight, while the number of speed in 2017 and carried over into 2018, also remained at cialists increased by one. The number of non-scientifi c the disposal of the ifo Institute. This cash balance was staff decreased by one person. Details are presented in spent in the fi rst quarter of 2018. The ifo Institute there- the section on Personnel Development. fore had a total of 11.606 million euros at its disposal in 2018 from joint research funding and the balance fi gure Developments in fi nances in the year under review related to the use and appropriation of a cash balance. are presented in detail in the “Financial Develop- ment” chapter. The fi nancial situation of the ifo In- Finally, we would like to extend our thanks to all of the stitute remains solid. The Institute’s fi nancial state- ifo Institute’s staff. It is due to their high levels of exper- ment for 2018 shows a surplus of 126,000 euros. This tise and extraordinary commitment that the ifo Insti- was channelled into reserves, increasing the Insti- tute can look back on 2018 as being a very good year. tute’s assets to a total of 2.499 million euros as of 31 December 2018. Munich, April 2019

The Executive Board

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

ifo Annual Report 2018 19

Research and Service Departments ifo Center for Public Finance and Political Economy

The research activities of the ifo Center for Public Fi- In addition to these topics the Center’s work also ex- nance and Political Economy focus on fi scal policy, plores the implications of globalisation. Two projects the development of public budgets under conditions in 2018 examined the eff ects of globalisation on in- Eff ects of of high mobility at national and local levels and polit- come inequality and social expenditure. The Center globalisation ical economy. Its research includes model-based and also collaborated on the new KOF Globalisation Index empirical analyses, including an examination of inter- that distinguishes between de facto and de jure glo- national experiences. More specifi cally, the depart- balisation as well as considering fi nancial globalisa- ment’s activities focus on public debt in Germany and tion too. Europe, the assessment of fi scal and taxation policy, fi scal federalism and local fi nances. There is a special focus on the motives behind policy decision-makers’ actions from a public choice and political economics Projects Completed in 2018 viewpoint. The Regional Economic Implications of The Center was active in examining issues in regional Memmingen Airport economics. An encompassing project in 2018 dealt with The Regional Airport of Memmingen was opened on the the shortage of land, land use and land development former military air base of Memmingerberg, which was on behalf of the Chamber of Commerce and Industry closed down in 2003. Scheduled air services did not re- for Munich and Upper Bavaria. The shortage of land sume until 2007. To mark the tenth anniversary of the has become an important issue in Munich and Upper opening of the commercial airport in the Allgäu, this Bavaria. The Center has also analysed the regional eco- study, commissioned by the Bavarian Ministry for Eco- nomic impact of Memmingen airport on tourism and nomic Aff airs, Regional Development and Energy, analy- Economic impact of other economic outcomes as well as the fi scal equali- ses the regional economic impact of Memmingen airport. an airport sation scheme in North-Rhine Westphalia. The study is divided into three parts: the main study Another of the Center’s projects dealt with budget analyses the regional economic eff ect of incoming composition in Germany (federal, state and local lev- passengers arriving at Memmingen airport on regional el). The Center also compared budget composition in tourism in Bavaria. Short studies, conducted as supple- Germany with budget composition in other OECD coun- ments to the main study and partly based on business tries by using the data on Classifi cation of Functions of surveys, analyse the airport’s infl uence on the region- Government (COFOG). The study was descriptive. Its al quality of the location, as well as the operating and results showed, for example, that social expenditure economic activities of regional companies on the one in Germany (as a share of overall government expen- hand; and the implications of conversion duration and diture) was higher and investments were lower than in the type of subsequent use of the Memmingerberg air other OECD countries. Surprisingly, this was also the base compared to the subsequent use of other closed, case when compared to Scandinavian and the Benelux former military facilities on the other. countries too. Regional Economic Impact of Memmingen The Center conducts the bi-monthly ifo and Frank- Airport on Tourism furter Allgemeine Zeitung (FAZ) Economists Panel, F. Dorn, L. Dörr, S. Gäbler, M. Krause, M. Mosler, which surveys a representative group of economics H. Penzkofer, N. Potrafke in cooperation with the Mittel- professors at German universities on current econom- stands-Institut an der Hochschule Kempten for the Ba- ic policy issues. The panel’s aim is to off er the public a varian Ministry for Economic Aff airs, Regional Develop- diff erentiated perspective on economists’ views on key ment and Energy, February 2018 to December 2018. challenges facing Germany. Since 2007 it has been easier to access a number of The Center investigates how political institutions infl u- tourism regions in Bavaria faster or more cheaply. To ence economic performance. A new measure for polit- mark the tenth anniversary of Memmingen airport, ical institutions based on machine learning techniques this study explores the airport’s regional economic im- has been developed. pact on the regional tourism sector in Bavaria through

ifo Annual Report 2018 23 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

incoming passengers. It describes the development The passenger survey conducted at Memmingen air- of Memmingen airport and the tourism sector in the port between March and August 2018 shows that an selected Bavarian target regions of the Allgäu, Bavari- average of 40% of passengers at Memmingen airport an Swabia, Ammersee/Lech, the Starnberg Five Lakes were incoming passengers (i.a. arriving guests). Projec- Country, the Pfaff enwinkel, the Zugspitz region and tions show that around 294,700 incoming passengers Munich. A passenger survey shows diff erent types of are expected at Memmingen airport in 2018. Around Flight passengers incoming passengers and the reasons for their travel. two thirds of overnight stays by incoming passengers increase value It also provides insights into how much additional val- are made in Bavaria. Munich and the Allgäu account for creation ue creation and how many jobs directly and indirectly the largest shares of these passengers. Almost a third fl ow into the selected target regions through guests of all overnight stays by incoming guests via Memmin- arriving via Memmingen airport. The study evaluates gen airport happen in Bavaria’s state capital of Munich, the causal eff ects of the airport on regional develop- while around 21% take place in the tourism region of ments in tourism; and discusses how the regional air- the Allgäu (Bavaria). When polled on the motive for port’s value creation potential could be more eff icient- their travel, almost a third of incoming guests respond- ly tapped for tourism. ed that this was for private holidays. 45% of survey participants stated having visited friends or relatives, while 17% were travelling on business. Business people Memmingen Airport and the Study’s Target Tourism Regions and holidaymakers spent 195 euros and 178 euros per day respectively. This was signifi cantly more than travellers visiting friends/family, who spent just EUR 93 per day on average.

Reason for Travel

Travelling on business 17

Private holidays 32

Visiting friends or relatives 45

Others 6

0 1020304050 % N= 964 Source: Passenger survey at Memmingen airport 2018; Note: FMM: Memmingen airport, MUC: Munich airport, NUE: Nuremberg airport. Calculations by Mittelstands-Institut Kempten. © ifo Institute Source: ifo Institute. © ifo Institute

Based on conservative statistical projections, the The Memmingen commercial airport has seen a pos- expenditure and purchasing power eff ects of travel- itive and sustainable development in passengers. lers arriving via Memmingen airport were calculated While the airport had over 800,000 passengers back for 2018. Incoming travellers spent a projected to- in 2009, this number rose to 1.17 million by 2017, a de- tal of around 237.4 million euros in 2018. Of this sum, cade aft er its opening. The tourism sector in Bavaria 133.4 million euros were spent in the Free State of Ba- has been growing steadily for many years. A look at varia and 119.2 million euros in the target regions of the the past decade since the opening of the commercial Allgäu, Bavarian Swabia, Ammersee/Lech, Starnberg airport at Memmingen shows that arrivals and turn- Five Lakes Country, the Pfaff enwinkel, Zugspitz region over in the hotel and catering industry in Munich and and Munich. Each additional euro in expenditure by an the Allgäu have risen at higher rates than the average incoming traveller triggers purchasing power infl ows levels for Bavaria. of around 1.43 euros in the target regions. Overall, ex-

24 ifo Annual Report 2018 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

penditure by incoming passengers arriving at Memmin- which directly surrounds the location of the airport. By gen airport thus triggers direct and indirect purchasing contrast, for both Munich and the Oberallgäu district, power infl ows of 170 million euros in the study’s target which is the strongest tourism region in the Allgäu, areas. The biggest winners from the purchasing power Memmingen airport had no statistically signifi cant infl ows are hotel and catering fi rms (35% of all purchas- causal eff ect on trends in tourism in the time period ing power infl ows), as well as retailers (23%). Transport under consideration. services collected around 8% of purchasing power infl ows, while service providers in art, culture, sport and The results of the study suggest that Bavaria’s tourism entertainment accounted for around 7%. Economic regions would be able to tap more value-added poten- links also benefi tted regional producers, with 8% of tial for the region’s tourism sector by attracting more Development all purchasing power infl ows, which mainly came from private travellers with the regional airport. The report potential for tourism incoming guests. In view of the direct and indirect pur- shows development-potential measures in the area of marketing chasing power eff ects of incoming travellers by air via tourism marketing, as well as transport links to the air- Memmingen airport, 1,766 jobs are statistically linked port. to them in target regions in 2018. Memmingen Airport as a Location Factor for the Region: Results of a Business Survey Distribution of Direct Expenditure by all Incoming F. Dorn, L. Dörr, S. Gäbler, M. Krause, N. Potrafke, short Passengers in 2018, in Millions of Euros study in cooperation with the ifo Center for Macroeco- nomics and Surveys conducted on behalf of the Bavar- Total 237,397 ian Ministry for Economic Aff airs, Regional Develop- ment and Energy, August 2018 to October 2018. Germany 177,065 Airports as transport infrastructure facilities can infl u- ence local location, production and investment deci- Bavaria 133,432 sions, and signifi cantly impact regional developments in the economy and employment as a result. To mark Target regions 119,237 the tenth anniversary of the opening of Memmingen airport, companies in the wider region were surveyed 0 50 100 150 200 250 Millionsof Euros on the regional airport’s infl uence on the quality of the Airports infl uence Source: Calcualtions of the ifo Institute. © ifo Institute region as a business location, as well as the operational investment decisions and economic activities of regional companies. Over- all, 770 companies from 28 districts and independent To identify the actual causal eff ects of Memmingen towns in the vicinity of Memmingen airport were sur- airport on tourism in the target regions, the study uses veyed on their assessment of the regional airport in a econometric methods to compare actual develop- non-representative special survey conducted as part ments in tourism with the hypothetical development of the ifo Business Survey. The response rate to the that would probably have arisen without the opening special survey was 30.5%, i.e. 235 companies gave their of the commercial airport. The airport has a partic- assessments of Memmingen airport. ularly positive average eff ect on the counties and independent cities in the tourism region of the Allgäu. Among survey participants that regularly use air- Estimates indicate that on average around 14.9–17.8% ports, 12% frequently use Memmingen regional air- more guests arrived in the counties and independent port for business travel. This means that Memmingen cities of the Allgäu via Memmingen airport than would airport is as important to survey participants in the have been the case if the commercial airport had not region as Germany’s biggest airport in Frankfurt am been open in the time period under consideration of Main is. With 51% of responses, Munich airport was 2008 to 2016. The eff ect, however, is unequally distrib- cited as the top airport, followed by Stuttgart at 15%. uted among the counties in the Allgäu region. The air- 30% of all companies that responded in the region port has a particularly positive eff ect on the number of reported having already used Memmingen airport for registered arrivals in Memmingen and the Unterallgäu, business travel.

ifo Annual Report 2018 25 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

For 21% of survey participants the regional airport has Former Military Facilities and their Subsequent exerted a positive infl uence on the reach of their busi- Use: the Memmingerberg Air Base and its ness and customer relations. A good third of respon- Subsequent Use in a Case Study Comparison dents reported that Memmingen airport has positive- J. Blum, F. Dorn, M. Krause, M. Mosler, N. Potrafke, ly infl uenced the quality of their region as a business short study conducted on behalf of the Bavarian State location. Out of the region’s companies that rely on Ministry for Economic Aff airs, Regional Development qualifi ed foreign workers, around 31% said that fl ight and Energy, August 2018 to October 2018. connections to the regional Memmingen airport had a positive eff ect on attracting them. The closure of military facilities that are not subsequently used for civil purposes can negatively impact 20% of survey participants expect the already ap- the purchasing power and economic structure of the proved expansion of Memmingen airport to have a regions in question positive eff ect. Companies that expect the airport expansion to have a positive eff ect on their own company This short study compares the duration of the transfor- specifi cally expect improvements in their business and mation and subsequent use of the Memmingerberg air customer relations (41%). Several companies expect base in the Allgäu with three former military facilities of equally positive eff ects in terms of acquiring specialist a similar size; and also discusses developments in the workers (18 %), as well as employment in general (15%). respective neighbouring municipalities. The closure and subsequent use of the Laarbruch air base in North The survey shows that the importance of Memmin- Rhine Westphalia, the Leipheim air base in the Bavari- gen airport as a location depends on a company’s an district of Swabia, as well as the Hainberg barracks Eff ects stronger geographical proximity to the airport. Companies in in Mellrichstadt in Lower Franconia are used as a com- locally districts and independent towns close to the airport parison. These diff erent case studies show that the du- report that Memmingen airport had stronger positive ration and type of conversion play an important role in eff ects on their company and location than those situ- determining the regional economic eff ects, which may ated further away from the airport. also depend on the respective structural framework conditions in the region. In short, based on company surveys it can be seen that Memmingen airport has very positive eff ects on region- The Budget Composition of the Government in al companies. The airport is used by several companies Germany in the region for business travel and also exerts a pos- N. Potrafke, B. Kauder, F. Dorn, S. Gäbler, L. Lorenz, itive infl uence on business and customer relations, lo- M. Krause, M. Mosler for INSM Initiative Neue Soziale cation quality and attracting specialist workers from Marktwirtschaft GmbH, February 2018 to July 2018, abroad. publication as ifo Forschungsbericht 95, ifo Institute, Munich, 2018.

Airports’ Share of Regular Business Travel on Behalf of Budget composition is an important indicator of the Regional Companies politics of governments. Government decisions on Others Friedrichshafen the allocation of money for diﬀ erent tasks are dis- 4% 6% cretionary, but are also inﬂ uenced by economic and social factors. We examined the budget composition Memmingen in Germany at the federal, state and municipal level 12% over time and compared it with developments in other Frankfurt OECD countries. The results show that Germany has Munich 12% 51% had high expenditure on social tasks, especially since the mid-2000s. With regard to investments, Germany’s Stuttgart contributions were very low compared to other OECD 15% countries and highly developed European economies. N =172 The same holds true for education expenditure, al- Source: ifo Business Survey; Calculations of the ifo Institute. © ifo Institute though this did increase at the federal and state level.

26 ifo Annual Report 2018 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

In terms of expenditure on defence and development, solution with regard to cross-regional land use. Howev- Germany did not meet its internationally agreed tar- er, incentives for municipalities to operate nationwide gets – but this also holds true for many other countries. land management and to achieve more eﬀ icient land Nationwide land Remarkably, the public spending ratio has decreased use are scarce. Therefore, the study examines which ob- management at the federal, state and municipal level in Germany in stacles deter municipalities from cooperation and how recent years. intercommunal land development can be stimulated.

Shortage of Land, Land Use and Land Develop- Possible aspects that may generally be an obstacle in- ment clude the design of funding programmes, the structure N. Potrafke, B. Kauder, L. Dörr, F. Dorn, S. Gäbler, of municipal fi nancial compensation and the fear of M. Krause, M. Mosler for the Chamber of Commerce giving up fi scal autonomy. There are also non-fi scal ob- and Industry for Munich and Upper Bavaria, February stacles of cooperation obstacles such as lack of experi- 2018 to November 2018. ence with the legal framework or co-inhibition due to party aff iliation or personal antipathies. The study dis- This study will be conducted within a framework agree- cusses various economic, regulatory and informational ment with the Chamber of Commerce and Industry for instruments to stimulate intercommunal land develop- Munich and Upper Bavaria to provide objective, sci- ment. Informational instruments seem very suitable. ence-based economic advisory work. Their aim is to reduce the costs of obtaining information and to convey know-how for the implementation In the recent past, land use has moved into the centre of intercommunal commercial areas. The study rec- of Bavarian policy debate. Based on the demands of ommends constructing a website for inter-communal the national sustainability strategy, the main question land cooperation. Decision-makers should rely on the is what proportion of the area of a local authority or re- published information from as early as the planning gion should be sealed, but also how productively the and preparation phase. The website could be supple- area is used. The fi rst part of, the study examines how mented by information events. Munich and the region of Upper Bavaria compare with Bavaria, Germany and Europe in various dimensions of Empirical Essays on Fiscal Federalism and area policy. Political Economy in Germany M. Krause, completed doctoral project, publication as A key indicator of land use is the area of settlement and ifo Beiträge zur Wirtschaft sforschung in 2019. traff ic. The area of settlement and traff ic accounted for 14.2% of the total area of Germany in 2016, while the The dissertation consists of six self-contained chapters shares for Bavaria (12.2%) and Upper Bavaria (12.4%) that are related to selected incentives in fi scal federal- are slightly lower. ism by using the example of the federal system in Ger- many. Aft er an introduction to the topic, the fi rst part of To approximate the productivity and eff iciency of land the dissertation elaborates on political incentives while use, GDP per hectare of settlement and traff ic area is a the last two chapters also focus on fi scal incentives. potential indicator. There are substantial regional disparities between rural and urban areas. Throughout Chapters 2 and 3 examine election cycles, based on Germany, the average GDP per hectare of settlement political business cycle theories. Chapter 2 examines and traff ic area amounts to 617,000 euros. The city of whether election cycles exist in the fees charged by Munich (4.7 million euros per hectare of settlement and German municipalities. Fees are interesting to investi- traff ic area) is in the top German group along with Stutt- gate as they are levied according to the benefi t princi- gart and Frankfurt am Main. In a European comparison ple and have to be equivalent to the (expected) costs of Setting fees to of settlement and traff ic areas, Upper Bavaria, with a the public service that they are levied on. This should improve election share of 14% in 2015, ranks among the upper third. constrain governments. The results show, however, prospects that municipalities have leeway to decide on fees and Another part of the study deals with intercommunal use this leeway to improve their election prospects. area development. Municipal planning sovereignty Chapter 3 investigates election cycles in the salary in- in area policy does not necessarily lead to an eff icient creases of German state MPs, for which the states have

ifo Annual Report 2018 27 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

the decision-making authority. The results do not show Current Projects that electoral motives infl uence MP salary increases. Politicians can, by contrast, increase their salaries at any point in time. Evaluation of Tax Concessions C. Fuest, F. Neumeier, B. Kauder, L. Immel, S. Gäbler in Chapters 4 and 5 investigate how government ideology cooperation with FiFo, Cologne, Centre for European infl uences economic policy-making. Chapter 4 analy- Economic Research (ZEW), Mannheim, and Fraunhofer ses whether government ideology infl uences income Institute of Applied Information Technology (FIT), Sankt inequality in the public sector of the German states by Augustin, for German Federal Ministry of Finance, June using data on the salaries of civil servants. The results 2017 to March 2019. do not show that left -wing governments were more active in decreasing income inequality in the public According to the guidelines for government subsidies sector than centre or right-wing governments. Chap- (“erweiterte subventionspolitische Leitlinien”) of the ter 5 analyses whether government ideology predicts German federal government, all government grants the tax policies of German states. A reform of the fi s- need to be evaluated on a regular basis. This applies to cal constitution in 2006 allowed the states to set the direct subsidies as well as tax concessions. In 2007 and rates of the real-estate transfer tax. Aft er investigating 2008, 20 of the most important tax concessions were the tax rate increases of the German states, the results evaluated. Now, the remaining 32 concessions current- show that left -wing governments were more active in ly eff ective are to be examined. The aim is to quantify increasing tax rates than right-wing governments. Left - and to evaluate those concessions with respect to sev- wing and right-wing governments may thus well diff er eral factors including their eff ectiveness, eff iciency, in their policies. transparency and sustainability.

Chapters 6 and 7 investigate fi scal incentives within the Report on Reviewing the Weighting of federal system in Germany by analysing whether the Inhabitants in the System of the Municipal Fiscal equalisation institutional setting also provides incentives for states’ Fiscal Equalisation Scheme in North scheme tax policies. The German fi scal equalisation scheme re- Rhine-Westphalia distributes revenues among the federal and state lev- N. Potrafke, B. Kauder, L. Dörr, S. Gäbler, M. Krause for els and between states equalising funds for the states. the Ministry of Homeland, Municipal Aff airs, Construc- The devolution of tax setting powers to the states in tion and Equality of the State of North Rhine-Westpha- 2006 provides an interesting set-up to investigate the lia, May 2018 to February 2019. combination of tax autonomy and fi scal equalisation. The descriptive results in Chapter 6 and the empirical This project evauates the so-called “Hauptansatz- analysis in Chapter 7 show that equalisation substan- staff el” for municipal spending in the horizontal fi scal tially infl uences the tax policies of the states. The redis- equalisation scheme in North Rhine-Westphalia. The tribution of revenues within the equalisation scheme Hauptansatzstaff el postulates a non-linear relationship provides incentives for the states to raise rather than between population and fi scal needs. Together with to lower their tax rates. other elements (demography, pupils, social spending, centrality, and area) it results in a fi gure describing fi s- The results of the dissertation show that political and cal need in the horizontal fi scal equalisation scheme. fi scal incentives may well infl uence economic policy- making. Electoral motives and government ideology European Austerity Discourse: Is Too Much can explain parts of individual economic policies but Saving Bound to Backfi re? the institutional set-up in federal systems may also N. Potrafke, K. Gründler for the Konrad-Adenauer-Stif- provide incentives for governments. tung e.V., October 2018 to February 2019.

For some time now, there has been growing criticism in Europe of a supposedly overly restrictive austerity policy. The lack of clarity on how to deﬁ ne and measure austerity, however, leads to contradictory results and diﬀ erent

28 ifo Annual Report 2018 IFO CENTER FOR PUBLIC FINANCE AND POLITICAL ECONOMY

economic policy implications in both political discus- economy. One of its focal points is the analysis of the sions and economic studies. This project describes the economic impacts of infrastructure access. Another ambiguity of the term “austerity” in economic studies project examines the eff ects of right-wing populist par- and is intended to contribute to a more objective com- ties at the regional level. munication of the actual economic situation in the euro area. Two basic questions are examined: research ques- Sustainability and Distributional Issues: Stud- tion (1) (“Austerity in politics, the media and the popu- ies in Public Finance and Political Economy lation”) examines (historical) trends in the relevance of F. Dorn, ongoing doctoral project. the topic in the media and the political discussion, and analyses the attitude of the population towards austerity In this ongoing doctoral project various topics at the policies. Research question (2) (“Austerity in Economics”) interface of public fi nance and political economy are analyses patterns in the defi nition, use and statistical examined. The project focuses on the impact of poli- measurement of austerity in economics studies. cies, institutions and globalisation on public fi nances, public sector performance and inequality. The project ifo and FAZ Economists Panel also examines how these factors infl uence the rise of N. Potrafke, B. Kauder, L. Dörr, F. Dorn, J. Blum, S. Gäbler, populism and political polarisation. M. Krause, internal project, ongoing. Studies in Public Finance and Political Economy The ifo and Frankfurter Allgemeine Zeitung (FAZ) Econ- A. Fabritius, ongoing doctoral project. omists Panel surveys a representative group of economics professors at German universities on current This ongoing doctoral project analyses the relationship economic policy issues on a regular basis. The panel’s between off icial development assistance and military aim is to off er the public a diff erentiated perspective on expenditure. It examines the extent to which donor Relationship economists’ views on key challenges facing Germany. countries use off icial development assistance and mil- between The economists are surveyed on diff erent topics every itary expenditure as strategic complements. Further development two months and in the light of current events within research projects at the interface between political assistance and standardised surveys in a digital form. The panel takes economy and public fi nance are in the pipeline. military expenditure national and international issues into account, primarily focuses on qualitative information and asks the Studies on Taxation, Public Finances and economists for their appraisals and expectations. Regional Economics S. Gäbler, ongoing doctoral project. Studies in Political Economy and Defence Economics This Ph.D. thesis addresses various topics in the fi eld J. Blum, ongoing doctoral project. of the public sector’s taxation and expenditure structure. There is a special focus on the German local level This ongoing doctoral project examines various topics in view of the institutional and political framework con- at the interface of public fi nance – in particular defence ditions, as well as regional interrelations. spending – and political economy. One study investigated whether changes in government infl uence com- Fiscal Sustainability in Public Finance pliance with international agreements and applied the M. Mosler, ongoing doctoral project. NATO 2% spending target as a test case. Another study estimated demand functions for military expenditure This ongoing doctoral project examines the fi scal sus- and examined diff erences in the spending behaviour of tainability of public budgets using quantitative meth- democracies and autocracies. ods, primarily from time series and panel data econom- etry. There is a special focus on public debt management Studies in Public Finance and Political Economy in developing countries and the development of tax sim- L. Dörr, ongoing doctoral project. ulation models.

This doctoral thesis looks at several diﬀ erent topics at the interface between public ﬁ nance and political

ifo Annual Report 2018 29 ifo Center for Labour and Demographic Economics

The Center’s current research addresses several press- profound changes in women’s economic and social ing, yet under-researched, societal issues; it combines opportunities, what implications does this have for vio- theoretical analyses with state-of-the-art causal infer- lence against women? And the third question is: which ence methods, and draws upon unique data sources. type of interventions might be eff ective in preventing violence against women? The Center addresses these ECONOMIC UNCERTAINTY AND THE FAMILY questions from both developed and developing countries’ perspective. In doing so, it uses sound theoretical Can changes in the fertility decisions of couples be at- frameworks to derive hypotheses and, on that basis, tributed to demand-induced changes in labour market implements empirical approaches that draw upon var- opportunities? Are people more likely to marry in reces- ious unique data sources and utilise both quasi-experi- sions or in booms? Does youth unemployment aff ect mental and experimental research designs. Economic uncertainty intergenerational relations? The Center’s fi rst research aff ects marriage and area aims to improve our understanding of the rela- IMMIGRANT INTEGRATION divorce rates tionship between business cycles and family-related decisions. To that end, the Center has set up the junior Immigrant children constitute the fastest-growing seg- research group EcUFam (Economic Uncertainty and the ment of the population in many European countries, Family), which is led by postdoctoral researcher, com- thus shaping the future of these societies. The success- prises three doctoral students, and is funded by the ful integration of immigrant children into host societies, Leibniz Competition (SAW). Deploying a variety of meth- both economic and social, is therefore an issue of par- ods and datasets, the group conducts research into the amount social importance. The Center’s third research extent and importance of economic uncertainty as in- area studies the determinants of immigrant children’s duced by poor macroeconomic conditions for key fam- educational and social integration. Among other proj- ily outcomes including fertility, marriage and divorce, ects, a hallmark study was initiated in 2015: together intergenerational relationships, gender-role attitudes with external collaborators, the Center collected data and infant health. The working group is located at the on over 4,500 15-year-old pupils at almost 60 second- ifo Institute, but both the scope of its research and its ary schools in Germany. Respondents participated in scientifi c network are international, with project part- both a classical survey and a behavioural experiment ners and supporting institutions in Europe and beyond. (an investment game). This data collection represents the fi rst attempt to combine a large-scale survey with THE ECONOMICS OF VIOLENCE AGAINST WOMEN a behavioural lab-in-the-fi eld experiment. During the evaluation period, but also in the years ahead, it allows Violence against women is a global pandemic that the Center to provide a comprehensive picture of im- poses serious health threats to women and also has migrant children’s integration into the host society in- adverse consequences on their children, both in the cluding traditional outcomes, such as their education- short and long term. Intimate partner violence, the al achievements, aspirations and expectations, ethnic most common form of violence against women, is the identity, social network, civic and social engagement, leading cause of female homicides worldwide. Within and political interest, as well as novel experimental the European Union, estimates point to 22% of women measures like cooperativeness, trust, and reciprocity. experiencing intimate partner violence at some point The newly collected data will also allow for a fi rst ap- in their lifetime. In many developing countries, this plication of causal inference methods to experimental rate far exceeds 30%. Against this backdrop, the Cen- data on social behaviour, thus unearthing policy inter- ter’s second research area aims to provide answers to ventions that foster or hinder immigrant children’s so- three overarching questions. The fi rst is fundamental- cial integration. ly about the origins of violence against women: given that the prevalence of violence against women varies THE SOCIAL IMPACT OF AIR AND NOISE POLLUTION considerably both across and within countries, what is the role of ancestral cultural factors and historical One of the most pressing issues in agglomerated areas institutions in shaping those diff erences? This leads around the world is environmental and noise pollution. to the second question, which addresses the implica- As one of the main externalities of economic activity, tions of changing economic and social environments. the eff ects of pollution on health, productivity and hu- Considering that the last half-century has witnessed man interaction are highly relevant for policymakers,

30 ifo Annual Report 2018 IFO CENTER FOR LABOUR AND DEMOGRAPHIC ECONOMICS

but not yet fully understood. In its fourth research area, Opinions in the two parts of the country rarely diverge. the Center analyses the impact of man-made environ- The attitudes of eastern Germans oft en converge with mental pollution, and focuses on empirically estab- those of their western counterparts. In some cases, lishing causal links from air, soil and noise pollution to with regard to predominant gender roles for example, Convergent population health, education, early child development, western Germans orient themselves towards the atti- attitudes in eastern productivity and behaviour. Furthermore, the Center tudes of eastern Germans. The main pattern is that, in and western Germany examines the eff ects of public transport in metropoli- most areas, the East-West diff erences among young- tan areas, focusing on its role in traff ic congestion, road er interviewees are narrowing. However, experience safety, pollution, and human health. The Center’s re- of two diff erent political systems in the two parts of search in this area uses survey, administrative and big the country is still noticeable in almost all questions data in novel ways and exploits quasi-experimental re- of attitude. search designs. International Comparison of Labour Market Flexibility Index V. Meier for the Chamber of Commerce and Industry for Projects Completed in 2018 Munich and Upper Bavaria, November 2017 to January 2018, publication as Impulse für die Wirtschaft spolitik, Germany 2017 Chamber of Commerce and Industry for Munich and H. Rainer, C. Albrecht, A. Fichtl, T. Hener, J. Ragnitz, in co- Upper Bavaria, Munich, 2018. operation with ifo research professor S. Bauernschuster, University of Passau, for the German Federal Ministry for This study reviews the literature on labour market fl ex- Economic Aff airs and Energy, March 2016 to March 2018, ibility indices. It focuses on the family of OECD labour publication as ifo Forschungsbericht 96, ifo Institute, market fl exibility indices and the Heritage Founda- Munich, 2018, and in ifo Schnelldienst 71(21), 2018. tion’s index of economic freedom in the labour market. A labour market fl exibility index covers regulations of The study’s main goal is to investigate the current atti- individual and collective dismissals, as well as rulings tudes and behaviours of a unifi ed Germany’s citizens. on temporary contracts. The study shows methodolog- The preceding study “Germany 2014” described the ical details of the indices, including the weighting fac- development in the attitudes and behaviours of Ger- tors of their components. man citizens in the East and West over a long period, from the time of separation up to the fi rst 25 years aft er Incentives for the Elderly to Remain in the unifi cation. Building on this, we extend the analysis to Labour Force include the most recently available data. Apart from a V. Meier. V. Endl-Geyer for the Chamber of Commerce purely descriptive analysis of attitudes towards poli- and Industry for Munich and Upper Bavaria, April 2018 tics, the economy, values, norms and identities, as well to May 2018. as the challenges currently faced by society, we also examine their determinants with a view to formulating The study was conducted within the framework agree- policy recommendations. ment with the Chamber of Commerce and Industry for Munich and Upper Bavaria. Senior age groups are In the fi rst part of the study, a literature review sum- increasingly retiring, while substantially fewer young marises and evaluates existing results and fi ndings on people are entering the labour force in Germany. This the topic. To this end, we review the preceding study is of great importance given the prevailing shortage of “Germany 2014”, as well as leading scientifi c papers skilled workers. This study examined the current sta- from the intersecting areas of economics, sociology, tus of the employment rate of elderly people and its psychology and political sciences. In the second part, development in Germany, and especially in Bavaria. It we conduct our own empirical analysis, examining ex- followed a policy proposal concerning the creation of isting datasets. incentives to remain in the labour market until the age of retirement and beyond. The results show that a constant process of rap- prochement is underway in many areas of society.

ifo Annual Report 2018 31 IFO CENTER FOR LABOUR AND DEMOGRAPHIC ECONOMICS

Employment Incentives for Women V. Meier, V. Endl-Geyer for the Chamber of Commerce and Industry for Munich and Upper Bavaria, October 2018 to December 2018.

The study will be conducted within the framework agreement with the Chamber of Commerce and Indus- try for Munich and Upper Bavaria. In this study, female Increasing female labour market participation over the last 20 years in employment Germany, and especially in Bavaria, is described in order to provide policy recommendations to increase female employment. The employment rate of women is rising, but a shortage of skilled workers nevertheless prevails. Potential improvement lies not only in female labour market participation, but also in the number of working hours worked by women.

Current Projects

Economic Uncertainty and the Family (EcUFam) N. Danzer, H. Rainer, B. Schulz, T. Hener, P. Reich, F. Siu- da, M. Fabel, supported by the Leibniz Association, July 2015 to December 2019.

The junior research group, EcUFam (Economic Uncer- tainty and the Family), looks at issues in the area of “Economic uncertainty and the family”. As part of the project, several doctoral projects are being funded by the Leibniz Association and conducted by F. Siuda (ongoing doctoral project, as of October 2015), P. Reich (ongoing doctoral project, as of September 2015) and M. Fabel (ongoing doctoral project, as of October 2016).

Globalisation, Female Empowerment, and Domestic Violence E. Guarnieri, ongoing doctoral project, since Septem- ber 2016.

32 ifo Annual Report 2018 ifo Center for the Economics of Education

The ifo Center for the Economics of Education studies market and in everyday life, focusing on individuals the determinants and consequences of education from and their employment lifecycles. It studies the role an economic perspective. Its research aims to further of skills in individual employability and social parti- our understanding of how the state can empower cipation in a rapidly changing society. One focus is on people to benefi t from the potential of an open society, the dual vocational education system, an important as part of a social market economy that is up to face the pillar of human capital formation in German-speaking challenges of modern times. countries, combined with the relative importance of vocational and general education for productivity. Modern growth economics identifi es the generation of A research project completed in 2018 estimates the knowledge as a primary determinant of long-term eco- employment eff ects of vocational vs. general educa- Vocational education nomic growth. Knowledge generation includes both the tion over the lifecycle. Results suggest that an initial less advantageous development of individual skills and the generation of employment advantage of individuals with vocational over time new knowledge that further advances the world’s tech- compared to general education turns into a disad- nological frontier. However, little can be learned from vantage later in life. A dissertation completed in 2018 such general macroeconomic insights for concrete poli- studies various aspects of how education and other cy-making at the micro level. The research programme determinants aff ect individual labour market out- of the ifo Center for the Economics of Education there- comes. Furthermore, the Center investigates the op- fore asks which kind of knowledge matters most for portunities and limitations of adult education, train- prosperity, what determines knowledge generation, and ing and lifelong learning. which kind of policy can contribute to it. The Center thus analyses how education policies can advance the know- EDUCATION AND LONG-TERM DEVELOPMENT: ledge base of highly qualifi ed future workers and the in- ECONOMIC GROWTH AND PROSPERITY novative capacity of the economy. To understand which Beyond its individual impact, education is also crucial- policies work, the Center primarily employs microecono- ly important to the prosperity of society at large; and metric methods that allow for experimental or quasi-ex- for economic development in the long run. One focus in perimental evaluation – techniques that are increasingly this area is on the role played by international student proving indispensable in a wide variety of contexts, but achievement in economic growth and social cohesion Education and social are rarely used in this crucial area in Germany. today. An additional focus is on a historical perspec- cohesion tive, such as how the diff usion of education before and Education systems generate the human capital of a during industrialisation changed historical develop- highly educated workforce that is of crucial impor- ment. In addition, the historical perspective is com- tance to the global competitiveness of modern eco- bined with the modern outlook by assessing the long- nomies exposed to an ever-changing world. In the long term persistent relevance of historical circumstances run, only continuous advances in knowledge make it to economic development today. possible to escape worldwide low-wage competition. 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 to 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 of determinants: 1) cultural factors including families, address political and other determinants of education: values, and norms; 2) resources spent on education; and 3) the institutional framework of the education system. Research into these determinants oft en draws EDUCATION AND INDIVIDUAL OUTCOMES: LABOUR on rich micro data from various international student MARKETS AND LIFECYCLES achievement tests. It focuses on topics like the integra- The fi rst research area analyses the importance of tion of immigrant children, the eff ectiveness of teach- education for individual opportunities in the labour ers, the remediating eff ects of mentoring programmes,

ifo Annual Report 2018 33 IFO CENTER FOR THE ECONOMICS OF EDUCATION

student assessments as an accountability tool, and the Letters 153, 2017; CESifo Economic Studies 63(3), 2017; strengths and weaknesses of digital learning meth- Large-scale Assessment in Education 5(12), 2017; CESifo ods. Currently, one project evaluates the eff ectiveness Working Paper No. 5720, 2016. of a 1:1 mentoring programme for secondary-school students. A dissertation project completed this year The Programme for the International Assessment of studies, among other things, how the dependence of Adult Competencies (PIAAC) provides information on children’s educational outcomes on parental back- key adult skills in 33 countries. On the basis of these ground can be reduced. Another completed disserta- data, the project conducted research into the acqui- tion project analyses the individual and institutional sition and utilisation of skills. In particular, the pro- determinants of education and occupational choice. ject aimed to improve the understanding of the causal eff ects of skills on labour market outcomes using im- GOVERNANCE OF EDUCATION: EFFICIENCY AND proved identifi cation methods. In addition to draw- EQUITY ing on international PIAAC data, the analyses are also based on data from the German longitudinal PIAAC sur- The fourth research area focuses on how the poli- vey, in which PIAAC participants were surveyed in three tical governance of education systems aff ects ed- additional waves in 2014, 2015 and 2016. Furthermore, ucational success and equity. Central elements of German PIAAC data has been linked to administrative the governance of education systems studied in this data on individuals’ employment histories. Within the area include exam systems, autonomy, competition, overall project, the PIAAC data and the project results and tracking. One project completed this year found were communicated to the scientifi c community and to that the introduction of external comparative stan- stakeholders from politics and industry. External testing dardised testing improves student achievement. The improves student area also studies the feasibility of governance reforms One study conducted within this project estimates the achievement and their acceptability in the population, drawing on the Center’s own opinion survey on education policy. employment eff ects of vocational versus general edu- The thematic focus of the fi ft h ifo Education Survey, cation over the lifecycle. Results suggest that the initial released this year, was on the public’s opinions on employment advantage of individuals with vocational gender equality in education and on the opinions of compared to general education turns into a disadvan- youths on various education policy topics compared tage later in life. This trade-off is strongest in countries to those of adults. The Center also coordinates the Eu- like Austria, Denmark and Germany, which are charac- ropean Expert Network on the Economics of Educa- terised by a strong apprenticeship system. tion (EENEE), a Europe-wide policy advisory network funded by the European Commission. Ultimately, the evaluation of policies with (quasi-) experimental Economic Growth and Returns to Skills Ȗ methods aims to bring evidence-based policy advice 1990 2011 into the political decision-making process. Returns to numeracy skills 0.40 SGP 0.35 Projects Completed in 2018 CHL 0.30 KOR Acquisition and Utilisation of Adult Skills – 0.25 USA DEU GBR ISR IRL A Network for Analysing, Developing and ESP EST JPN AUT POL 0.20 NZL NLD SVK Disseminating PIAAC CAN SVN TUR FRA LTU AUS F. Hampf, L. Wößmann, M. Piopiunik, S. Wiederhold BEL CYP 0.15 CZE in cooperation with ifo research professors E.A. Ha- ITA FIN DNK NOR GRC nushek, Stanford University and G. Schwerdt, Uni- 0.10 SWE versity of Konstanz, funded through the Leibniz Com- 012345 petition as part of a consortium headed by GESIS, Averageannual growth rate in real GDP per capita in % February 2015 to December 2018, publication of re- Source: Hanushek, Schwerdt, Wiederhold and Wößmann (2017), sults in European Economic Review 73, 2015; Economics Economics Letters 153: 15–19. © ifo Institute

34 ifo Annual Report 2018 IFO CENTER FOR THE ECONOMICS OF EDUCATION

A further study analyses the reasons for large diff er- quential, improves student achievement in maths, ences in returns to skills across the countries. Results science, and reading. By contrast, internal testing that suggest that returns to skills are systematically larger simply informs or monitors progress and teacher in- in countries that have grown faster in the recent past spectorates without external comparisons have little Internal testing has (see Figure). These results are consistent with models discernible eff ect on overall performance. Introducing little discernible where skills are particularly important for adaptation standardised monitoring without external comparison eff ect to dynamic economic change. has a positive eff ect in countries that were initially performing poorly, but not in high-performing countries. A Another study shows that the skills needed to master similar pattern of larger impacts in poorer performing information and communication technologies lead to systems shows for the impact of school-based external higher earnings in the labour market. It implemented comparisons. an instrumental-variable model that exploits the fact that skills increase with regular use, which is fostered Countries that Expanded the Use of Standardised Testing by fast internet access. for External Comparison between 2000 and 2015 Saw the Achievement of their Students Improve

Accountability and School Institutions in Conditional change in PISA math score Cross-Country Perspective 60

L. Wößmann, A.B. Bergbauer in cooperation with ifo PER POL 40 research professor E.A. Hanushek, Stanford University, BRA funded by the Smith Richardson Foundation, October USA ITA DEU CHL DNK 2016 to September 2018, publication of results in NBER 20 ISR LUX CZE PRT Working Paper Nr. 24836, 2018; ifo Schnelldienst 71(20), SWE CAN LVA CHE ESPIRL MEX 2018; VOX CEPR Policy Portal. 0 IDN NOR JPN AUS BGR AUT ROU KOR HUN Student testing has been expanding rapidly around GRC BEL -20 FRA FIN the world. But the surrounding debate is confused by RUS GBR ISL HKG NZL failure to diff erentiate among alternative forms and THA -40 uses of testing. Diff erent confi gurations of assessment -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 usage are likely to generate performance-conducive in- Conditional change in standardised external comparisons centives of diff erent strengths for diff erent stakehold- Notes: This graph is the depiction of an added-variable plot of the change in countries’ average PISA maths score between 2000 and 2015 against the change in ers in diff erent school environments. How the assess- the use of standardised testing for external comparison, both conditional on a rich ments aff ect student learning will depend on how the set of student, school, and country controls. information created is translated into incentives for the Source: Own depiction based on Bergbauer, Hanushek and Wößmann, NBER Paper Nr. 24836, 2018. © ifo Institute actors and into behavioural results.

This project fi ts into a general investigation of how Teacher Eff ectiveness and its Determinants in institutional aspects of education systems work and Germany: An In-Depth Analysis whether reforms are successful in increasing the per- B. Enzi, N. Obergruber, L. Wößmann, funded by the Ger- formance of their students. The analysis combines man Research Foundation (DFG) in the DFG Priority Pro- international student achievement data over the past gramme 1646 “Education as a Lifelong Process: Analyz- 15 years in 59 countries with accountability reforms. It ing Data of the National Educational Panel Study (NEPS)”, exploits the panel structure of the PISA data to include October 2015 to September 2018, publication of results country-fi xed eff ects. In addition, the project devel- in ifo Beiträge zur Wirtschaft sforschung 75, ifo Institute, oped a simple theoretical model of a tree of princi- Munich, 2017; ifo Beiträge zur Wirtschaft sforschung 80, ifo pal-agent relationships. Institute, Munich, 2018; ifo Working Paper No. 225, 2016; No. 243, 2017; IZA Discussion Paper No. 11732, 2018. Results suggest that some uses of student testing af- fect student learning, while others have no discernible The project aimed to analyse the eff ectiveness of teach- impact. In particular, expanding standardised testing ing and its determinants based on student-level achieve- with external comparisons, which are usually conse- ment data from the German National Educational Panel

ifo Annual Report 2018 35 IFO CENTER FOR THE ECONOMICS OF EDUCATION

Study (NEPS). A fi rst goal of the project was to exploit the relationship between public opinion and the level the longitudinal structure of the NEPS data to estimate of information of the population. As part of this, a fi rst value-added models of student achievement that in- research project collected data on the similarities and clude teacher-fi xed eff ects. Based on the estimated diff erences in the opinions held by the U.S. and German distribution of teacher quality, the eff ects on student public. Respondents in both countries hold diff erent achievement of having an eff ective teacher can be quan- views on a variety of issues, but they react to informa- tifi ed. Results indicate that there is lower variance in tion in very similar ways. This suggests that the diff er- teacher quality in Germany than in the United States. ence in policy outcomes between the U.S. and Germa- ny is largely driven by institutional diff erences, rather A second goal of the project was to study the determi- than divergent preferences. nants of teacher quality. The NEPS survey information exceeds the information on teacher characteristics A second research project focuses on public opinion typically available in administrative linked student- on state spending in diff erent areas of education. This teacher datasets, enabling new and detailed analyses research shows that providing respondents with the of the determinants of teacher eff ectiveness. To gain information that, according to numerous studies, early reliable results on teacher eff ectiveness in Germany, childhood education has larger benefi cial eff ects than multiple estimation strategies were used. A value-add- other types of education spending, raises support for ed model of cognitive achievement made it possible to increased spending for preschools. These information Teachers with better estimate the eff ects of pre-service cognitive and peda- eff ects are driven by the pervasive underestimation of grades are more gogical teacher skills on student achievement. Results positive eff ects of investment in early education. eff ective suggest that teachers’ grades in the high-school leaving degree and in a practical test in the study programme A second key aspect focuses on the question of how to are good predictors of teacher eff ectiveness. In models reduce the association between children’s education out- that exploit within-student variation across subjects, comes and parental background. A fi rst research project the project also investigated a battery of other poten- analyses the opinions of the adult population on structur- tial determinants of teacher quality. al reform of the education system that aims to increase educational opportunities for children from disadvan- Other parts of the project studied additional topics in taged backgrounds. As it turns out, the majority of the the economics of education using the NEPS data. One German public perceives inequality in educational oppor- project analysed predictors of gender diff erentials in tunities as problematic and supports reforms in this area. test scores and teacher assessments. Another project studied the determinants of the choice of maths-in- A second research project investigates divergence in tensive occupations. Finally, one project performed an the educational aspirations of diff erent socioeconomic evaluation of the staggered introduction of a reform groups. Its results show that information on earnings across West German states between 1965 and 1982, af- and the unemployment rates of university graduates, as ter which high-track students automatically received an well as information on tuition fees and student aid, raise interim degree upon successful completion of grade 9. the aspirations for their children’s education less among respondents without university education than for re- The Role of Information for Public Preferences spondents with university education. This suggests a on Education: Evidence from Representative limited scope for information interventions to reduce Survey Experiments the large gap in educational aspirations between chil- K. Werner, completed doctoral project, October 2013 dren from diff erent socioeconomic backgrounds. to July 2018, publication of results in Journal of Public Economics 167, 2018; CESifo Working Paper No. 7000; Microeconometric Analyses of Individual and No. 7192, 2018, Rationality & Competition CRC Discus- Institutional Determinants of Education and sion Paper 128, 2018. Occupational Choice N. Obergruber, completed doctoral project, October This doctoral project aims to empirically analyse ques- 2013 to July 2018, publication of results in ifo Bei- tions concerning the economics of education, and träge zur Wirtschaft sforschung 80, ifo Institute, Mu- particularly education policy. The fi rst key aspect is nich, 2018.

36 ifo Annual Report 2018 IFO CENTER FOR THE ECONOMICS OF EDUCATION

In four self-contained chapters, this doctoral thesis The European Expert Network on Economics of Educa- studies the determinants that causally infl uence the tion (EENEE) aims to contribute to the improvement of educational attainment of people or their occupation- decision-making and policy development in education al choice. The fi rst chapter investigates the infl uence of and training in Europe. It advises the European Com- parental separation on the reading-skill development mission on the analysis of economic aspects of edu- of 10-year-old students. The analysis uses panel data cational policies and reforms. It aims to support the from the National Educational Panel Study (NEPS) and dissemination of knowledge of the economics of edu- a value-added approach to show that the performance cation in Europe. of children is particularly negatively aff ected in the year before their parents separate. In 2018, EENEE published fi ve analytical reports and associated policy briefs. The topics include the bene- The second chapter investigates the consequences of fi ts of early childhood education, class size and student The economics of an educational reform in Germany in the 1960s and outcomes, education externalities, civic behaviour, and education in Europe 1970s. The reform rewarded drop-outs from the high transnational collaborative partnerships. Two addition- track with a lower-track school degree. Exploiting dif- al analytical reports on digital technology and on voca- ferences in the timing of implementation between the tional education over the lifecycle are being fi nalised. German states, the analysis fi nds that the reform re- In a further task of evidence-based policy advice, the duced school switching and increased years of school- EENEE network answered one ad hoc question about ing, completion of high track, and the likelihood of the impact of Finnish budget cuts on access and quali- holding a university degree. ty of education. To strengthen the interaction between academic research and policy making, EENEE hosted a The third chapter descriptively analyses maths intensity conference in Brussels in November 2018 together with of occupations chosen by 15-year-old students depending the Network of Experts working on the Social Dimen- on their relative ordinal rank in class in maths compared to sion of Education and Training (NESET II). The partici- German. The strong correlation of maths intensity of the pating policymakers and researchers from EU member chosen occupation and better rank in math compared to states discussed many aspects of the conference top- German is driven neither by school- or class-specifi c fac- ic “Strengthening Common European Values through tors nor by labour demand, parents’ occupations, grade Education: What does the Evidence Tell us?” Finally, levels, or cognitive skill levels. The correlation is best ex- EENEE maintains a website on Economics of Education plained by measures of students’ interests. in Europe (www.educationeconomics.org). In addition to providing information on the activities described The fourth chapter studies long-run consequences of above, the website regularly updates extensive lists of wealth inequality. The equal-division inheritance rule references to the literature on key topics in the econo- in agriculture in the 19th-century German Empire led mics of education and on European experts in the fi eld. to an earlier adaption to industrialisation, which is observed in occupation data. This head start for counties The Political Economy of Education Policy: with an equal division of inheritance has positive in- Insights from a Public Opinion Survey come eff ects that still persist today. L. Wößmann, E. Grewenig, S. Kersten, F. Kugler, P. Lerget- porer, L. Simon, K. Werner in cooperation with ifo research professors M.R. West, Harvard University, G. Schwerdt, Current Projects University of Constance, internal project in continuation of a project funded 2014–2017 by the Leibniz Competition, European Expert Network on Economics of January 2018 to December 2019, publication of results Education (EENEE) in Journal of Public Economics 167, 2018; European Jour- L. Wößmann, S. Kersten, F. Kugler, U. Baldi-Cohrs in co- nal of Political Economy 53, 2018; ifo Schnelldienst 67(18), operation with the Centre for European Policy Studies 2014; 68 (17), 2015; 69 (17), 2016; 70 (17), 2017; 71 (17), 2018; (CEPS) and senior experts from leading European uni- schulmanagement 6/2016; Harvard Kennedy School versities on behalf of the European Commission, Direc- PEPG Working Paper 15-02, 2015; CESifo Working Paper torate General Education and Culture, January 2017 to No. 5938, 2016; No. 6192, 2016; No. 6602, 2017; No. 7000, December 2020. 2018; No. 7192, 2018; No. 7222, 2018.

ifo Annual Report 2018 37 IFO CENTER FOR THE ECONOMICS OF EDUCATION

The aim of the project is to better understand public Opinion about Whole-day Schooling System of Adolescents opinion on a broad range of topics in education policy. and Adults To this end, the project conducts an annual representa- Completely favour Somewhat oppose tive opinion survey of the adult German population on Somewhat favour Completely oppose various topics of education policy. To study the caus- Neither favour nor oppose Providing al eﬀ ect of information provision on public opinion, information changes survey experiments are conducted in which randomly Adolescents 7 22 7 31 33 public opinion selected subgroups of respondents are provided with certain pieces of information before answering a ques-

tion common to all respondents. Comparing the ans- Adults 24 36 11 18 11 wers with a control group makes it possible to quantify the causal eff ect of the respective information on pub- 0255075100 % lic opinion. Source: ifo Education Survey 2018. For more details see ifo Schnelldienst 71(17), 2018. © ifo Institute The ifo Education Survey 2018 surveyed over 4,000 adults and, for the fi rst time, 1,000 youths aged between 14 and 17. The fi rst part of the ifo Education Survey 2018 covers Educational Choices, Market Design, and the opinions of Germans on gender topics, gender-based Student Outcomes discrimination and education policy measures for equal K. Werner, L. Wößmann in cooperation with the Wissen- opportunities. The second part focuses on youths’ opin- schaft szentrum Berlin, funded by the German Research ions on various education policy topics and compares Foundation (DFG) in the CRC/ Transregio 190 “Ratio- them with those of adults. nality and Competition”, January 2017 to December 2020, publication of fi rst results in NBER Working Paper Results suggest that a clear majority of both youths No. 24836, 2018; CESifo Working Paper No. 7000, 2018; and adults are in favour of covering the topics of the No. 7192, 2018; No. 7222, 2018; Rationality & Competi- Young and old do not #MeToo debate at school. 82% of youths and 86% of tion CRC Discussion Paper 128, 2018. always disagree adults support covering the topic of equal opportunities for men and women at school. Similarly, very high Education decisions are key determinants of labour shares of youths (81%) and adults (78%) also think market opportunities, social mobility and econom- that the topic of sexual harassment should be dealt ic growth. This project looks at the extent to which with at school. traditional models can explain utility-maximising individual education decisions like, for example, the In terms of education topics more generally, the survey decision between an apprenticeship and university reveals interesting commonalities and diff erences in education. There is a special focus on potential in- the opinions of youths and adults. 60% of adults sup- formation asymmetries that can explain diff erences port all-day schools until 3 p.m., for example, whereas in education decisions as part of a traditional cost- 64% of youths oppose the concept (see Figure). benefi t model. To this end, random subgroups of participants in a survey receive relevant information in Besides the descriptive depiction of the results of the survey experiments before answering the same ques- annual surveys, the project also includes a number tions as an uninformed control group. This makes it of studies that investigate diff erent topics covered by possible to identify the causal eff ect of information the ifo Education Survey more deeply. Among others, provision on reported decisions. In addition, the pro- separate studies address topics such as the eff ects of ject investigates the infl uence of behavioural factors information provision on preferences for educational like self-confi dence, time and risk preferences on be- spending, the eff ect of information about the returns haviour in education decisions. To obtain a compre- and costs of education on educational aspirations, tui- hensive picture of the relevant factors infl uencing ed- tion fees, educational inequality, the preferences of po- ucational decisions, the project works with samples litical parties, class size, and the eff ect of gender norms of both adults and adolescents between 14 and 17 on expected labour market participation. years of age.

38 ifo Annual Report 2018 IFO CENTER FOR THE ECONOMICS OF EDUCATION

Evaluating the Eff ectiveness of a Mentoring ing countries (most of which are in East Asia) and many Programme European countries corresponds to a diff erence in at- S. Resnjanskij, F. Hampf, L. Wößmann, A. Wurm, tainment of roughly two years of schooling. Although National diff erences J. Ruhose, S. Wiederhold, funded by a consortium of this fi nding has been replicated in several studies, the in attainment poorly non-profi t foundations and the Commissioner of the reasons for and consequences of such diff erences are understood Federal Government for Migration, Refugees and Inte- not well understood to date. The early-stage research- gration, June 2015 to March 2021. er project in this network conducted at the ifo Institute focuses on reforms of teacher professionalisation and Social mobility in Germany is still very low. This is re- accountability. The objective of this project is to ex- fl ected in the fact that children with disadvantaged pand knowledge of the ways in which policy-relevant or migration backgrounds are most likely to visit the schooling inputs aff ect the eff iciency and equity of lowest academic school track in secondary school. student outcomes. To this end, the latest microecono- These children oft en do not make the leap to an ap- metric evaluation methods are applied to international prenticeship position or further schooling. Instead, student assessment data. they get stuck in the transitional system, giving them little chance of upward social mobility. Possible rea- How Does Reducing the Intensity of Tracking sons for the lack of perspective are inadequate assis- Aff ect Student Achievement and Equity? tance for parents with low income or education levels Evidence from German State Reforms in school-related work, low school quality, a resulting L. Simon, L. Wößmann, funded by the German Research lack of training maturity, only vague ideas about po- Foundation (DFG) in the DFG Priority Programme 1646 tential jobs, and a lack of detailed knowledge about the “Education as a Lifelong Process: Analysing Data of the German educational system. Given these problems, National Educational Panel Study (NEPS)”, July 2018 to mentoring and coaching programmes may be an eff ec- July 2020. tive way to improve the future prospects of students from low-track schools. This project investigates how This project aims to identify the eff ect of a reduction one of the largest 1:1 mentoring programmes in Ger- in the intensity of tracking on the level and equity of many aff ects school grades, social competencies, and student outcomes in German school systems. It will the labour market success of students from low-track investigate de-tracking reforms that were implement- schools. The evaluation aims to investigate both the ed in several German states. To identify the reform Investigating short-term and long-term eff ects of the programme; eff ects, the project applies a diff erence-in-diff erences de-tracking reforms and to uncover concrete mechanisms behind them to approach to data of the 5th-grade and 9th-grade co- provide generalisable recommendations for the de- horts of the National Education Panel Study (NEPS). It sign of mentoring programmes. In 2018, the focus on will analyse eff ects on students’ achievement scores, the investigation of the potential long-term outcomes attainment of 10th grade, secondary-school degree, of the mentoring programme was strengthened by an and grade repetition. It will also study heterogeneous extension of the study horizon. eff ects by students’ socioeconomic background. The rich available NEPS data enable us to study several Outcomes and Causal Inference in International possible channels of reform eff ects. Comparative Assessments P. Sancassani, L. Wößmann, M. Piopiunik, funded by Empirical Studies in the Economics of Education the European Commission Horizon 2020 framework, L. Wößmann, various ongoing research projects, recent Marie Skłodowska-Curie European Training Network, publications, among others, in Review of Economics and August 2018 to July 2021. Statistics 100(3), 2018; Journal of Public Economics 167, 2018; Oxford Bulletin of Economics and Statistics 80(1), The European Training Network investigates how ed- 2018; European Journal of Political Economy 53, 2018; ucational policies infl uence educational outcomes IZA World of Labor 2018; NBER Working Paper No. 24836, worldwide. One of the most salient fi ndings in the fi eld 2018; CESifo Working Paper No. 6858, 2018; No. 7000, of education is that there are huge national diff erences 2018; No. 7097, 2018; No. 7192, 2018; No. 7222, 2018; Re- in student achievement in international comparative search Handbook on Sociology of Education, forthcom- studies. The large gap between the highest-performing; Advances in the Economics of Religion, forthcoming;

ifo Annual Report 2018 39 IFO CENTER FOR THE ECONOMICS OF EDUCATION

chapters in collected volumes; reports of the Aktionsrat bour economics. One study shows that diff erences in Bildung and the Academic Advisory Council of the Feder- the cognitive skills of teachers are an important deal Ministry of Economics and Energy, as well as contribu- terminant of international diff erences in student per- tions in several daily and weekly newspapers. formance. Another study analyses the importance of teachers’ subject knowledge for student performance Numerous ongoing projects deal with diff erent topics in several countries in Sub-Saharan Africa. Another in the economics of education. Several projects use project uses administrative micro data from the US microeconometric techniques to analyse the exten- state of Florida to show that teachers who entered the sive micro datasets of various international student profession during a recession are considerably more achievement tests such as PISA and TIMSS. The goal eff ective in raising their students’ test scores, sug- Drawing lessons from is to determine what lessons can be drawn from inter- gesting that the relative economic attractiveness of a international student national student tests for educational policies aimed teaching job plays an important role in bringing eff ec- tests at eff iciency and equity. Current studies investigate, tive teachers into the profession. Another project uses among other things, the eff ects of external exit exams, a randomised choice experiment among HR managers of diff erent forms of student testing, and of computer in Germany to investigate which skill signals are eff ec- use in the classroom. One report focuses on the role of tive when entering the labour market. education for digital sovereignty. Another focus of the project is on migration issues. Several ongoing studies investigate the impact of infor- One study investigates whether a high concentration mation provision on the education policy preferences of of immigrants in a region hampers the integration the population. The topics covered include the level of chances of the migrants’ children. The results indi- education spending, education policies aimed at increas- cate that children growing up in regions with high ing equality of opportunity, and aspiration for higher ed- co-ethnic concentration have lower host-country ucation. A methodological study investigates whether language skills and tend to achieve lower educational online surveys can represent the entire population. degrees. Another project, using a survey experiment among university students, investigates whether the A new study analyses the role of productivity signals in attitudes of Germans towards refugees depend on the the labour market using an experiment with CVs among perceived education level of the refugees. A further human-resource managers. Another study investigates study investigates whether the impact of immigration how the regional concentration of migrants aff ects lan- on crime depends on regional labour market condi- guage profi ciency and educational degrees of migrant tions. children. A historical research project analyses the extent to which social cohesion and religious beliefs can The Eff ects of Information Provision on Policy account for the eff ect of Protestantism on suicide. Preferences – Evidence from Survey Experiments P. Lergetporer, ongoing postdoctoral research project, Human Capital Production and Migration publication of fi rst results in, among others Journal of M. Piopiunik, ongoing postdoctoral research project, Public Economics 167, 2018; European Journal of Political publication of fi rst results in, among others Journal of Economy 53, 2018; European Economic Review 106, 2018; Labor Economics, forthcoming; Journal of Human Re- Economics Letters 152, 2017; European Economic Review sources, forthcoming; Journal of Human Resources 53(3), 90, 2016; Journal of Economic Behavior and Organiza- 2018; European Economic Review 92, 2017; Economics tion 115, 2015; Journal of Economic Psychology 46, 2015; Letters 139, 2016; Economics of Education Review 42, Journal of the Economics Science Association 1(2), 2015; 2014; Scandinavian Journal of Economics 116(3), 2014; Proceedings of the National Academy of Sciences 111(19), European Journal of Political Economy 31(9), 2013; NBER 2014; CESifo Working Paper No. 5938, 2016; No. 6192, Working Paper No. 21393; 2017; CESifo Working Paper 2016; No. 6602, 2017; No. 6832, 2017; No. 7000, 2018; No. 6832, 2017; No. 6858, 2018; No. 7097, 2018. No. 7192, 2018; No. 7222, 2018, No. 7396, 2018.

One focus of this research project is the application Empirical research has produced many insights of microeconometric evaluation methods to policy- on how education policies could be altered to im- relevant questions in the areas of education and la- prove student outcomes. But political actors are fre-

40 ifo Annual Report 2018 IFO CENTER FOR THE ECONOMICS OF EDUCATION

quently reluctant to carry out reforms supported by An Econometric Analysis of the Role of high-quality research. One important reason for this Individualism in Cognitive Skills Development discrepancy between evidence and action could be S. Resnjanskij, ongoing postdoctoral research project. that political actors are responsive to the opinions of voters and of well-organised interest groups, which Using data from an international adult skills assessment may diverge from what is in the public interest more (PIAAC), the project investigates the role of individual- generally. This postdoctoral research project empir- ism as one main cultural dimension in skill development. ically analyses the determinants of public support Individualism has recently been linked to economic for education policies. Public opinion is studied by growth, but little is known about its implications for means of representative survey experiments with a human capital investments at the individual level. The Individualism particular focus on interest groups and the eff ects of analysis is based on 7,500 individuals from 69 coun- associated with information provision on public preferences. The in- tries of origin. To investigate the relationship between better numeracy dividual topics analysed include educational spend- individualism and adult skills, the project looks at skill ing, tuition fees, educational inequality, educational diff erences between migrants from diff erent cultural aspirations, political party preferences and gender backgrounds within destination countries, eliminating norms. cross-country diff erences in educational and labour market institutions. Previous research suggests that cul- Econometric Evaluations of Education Reforms ture is persistent and migrants take their original cultur- in Germany al toolkit with them when they relocate. Individualism is L. Zierow, ongoing postdoctoral research project, measured at the country level using the Hofstede index. publication of fi rst results in Labour Economics, forth- The results indicate that a one-standard-deviation incoming; IZA Discussion Paper 11732, 2018. crease in individualism is associated with an increase in numeracy skills by 0.25 standard deviations. This postdoctoral research project aims at estimating the causal eff ects of several major educational The Role of Human Capital in Reforms of reforms of German states over the last decades on Policy-Making student performance, students’ later labour market L. Mergele, ongoing postdoctoral research project, outcomes and the equity among students of diff er- publication of fi rst results in International Tax and Pub- ent backgrounds. Its results aim to shed more light lic Finance 24(4), 2017; Berlin Doctoral Program in Eco- on how to design an eff icient and equitable educa- nomics and Management Science (BDPEMS) Working tion system. The methodological framework takes Paper 2017-02, 2017. advantage of the diff erent timing of implementing the reforms across states, but also employs varia- Political reforms may shift policy-making in two dimen- tion of reform implementation across municipalities sions. First, the authority for policy-making may change within states. The diff erence-in-diff erences analyses between higher and lower levels of government (decen- are conducted using large administrative datasets tralisation). Second, the government may transfer re- (e.g. the German Microcensus), as well as rich survey sponsibility for certain domains to public-sector agents Decentralising public data (e.g. NEPS). In 2018, a study was completed on (privatisation). This postdoctoral research project ex- employment services the eff ects of the expansion of full-day kindergarten amines how the human capital of the individuals aff ect- in Germany on child development. Using unique ad- ed by these reforms shapes the outcomes of changes ministrative data on the universe of kindergartens in policy-making. Policy changes studied include the and school entrance examination data, the study decentralisation of public employment services in Ger- fi nds that full-day child care has a positive eff ect on many and the privatisation policies in East Germany fol- the school readiness of immigrant children. There is, lowing the fall of the Berlin Wall. The project combines however, also a negative eff ect on the socio-emotion- large-scale micro data and empirical microeconometric al well-being of children of almost all subgroups. An- tools to derive its conclusions. Preliminary results sug- other study investigates reforms of the perspectives gest that low-qualifi ed job seekers are more likely to fi nd of high-track school dropouts. employment once local governments assume responsibility for providing public employment services.

ifo Annual Report 2018 41 IFO CENTER FOR THE ECONOMICS OF EDUCATION

Microeconometric Analyses on Determinants of and Eastern Europe on the vocational occupation choic- Individual Labour Market Outcomes es of adolescents. Manufacturing jobs are skill-specifi c, L. Simon, ongoing doctoral project, publication of while service jobs are more general, implying that they fi rst results in CESifo Working Paper No. 6832, 2017; teach transferable skills that can more easily be applied No. 6858, 2018; IZA Discussion Paper 11857, 2018; ifo to new jobs or technologies. The analysis shows that de- Working Paper No. 281, 2018. spite decreasing employment in manufacturing in their region, adolescents choose more skill-specifi c occupa- This doctoral project analyses the impact of education tions in manufacturing. This has negative consequences and other determinants on labour market outcomes for their subsequent labour market outcomes. using microeconometric methods. The fi rst paper uses a randomised fi eld experiment among German hu- Microeconomic Analysis of the Relationship man-resource managers to evaluate which skill signals between Education, Individual Skills and are valued by employers when considering the CVs of Labour Market Success using PIAAC, PIAAC-L Females rewarded for applicants who enter the labour market. Its results indi- and NEPS IT skills; cate that signals in all three studied domains – cognitive F. Hampf, ongoing doctoral project, publication of fi rst males for maturity skills, social skills, and maturity – aff ect the probability results in CESifo Economic Studies 63(3), 2017. of being invited for a job interview. Grade-point aver- ages and social skills prove relevant for both genders The aim of this doctoral project is to gain a better un- and for both high-school and college graduates. The derstanding of the interrelation between skills and relevance of other signals diff ers in terms of credibility, labour market outcomes. The fi rst part analyses data relevance, and expectedness by gender and education from the PIAAC Survey of Adult Skills (“PISA for adults”) level. Females are particularly rewarded for IT and lan- to compare employment probabilities over the work- guage skills and males for maturity. ing-life cycle for individuals with vocational and general education. An initial employment advantage of vo- A second project analyses the impact of beliefs about cational education relative to general education turns refugees’ education levels on natives’ general attitudes into a disadvantage later in life. A second project also towards refugees. In a survey experiment among 5,000 studies the eff ect of business cycles on an individual’s university students, respondents’ beliefs are shift ed by educational decision at the time when a person gradu- providing randomised diff ering information about the ates from high school. By attending college, individuals education level of refugees. Its results show that shift - can evade negative labour market conditions during ing beliefs towards the better education of refugees economic hardship and accumulate cognitive skills increases concerns about labour market competition relevant on the labour market. The third project stud- amoung high-skilled natives, but does not aff ect general ies the contribution of skills to explaining higher wag- attitudes. es for college graduates. Among others, one approach exploits exogenous variation in the probability of uni- A further project analyses the eff ect of a labour market versity enrollment due to the distance of a high-school deregulation on the demand and supply side of the la- graduate’s home town to the nearest university. The bour market. The deregulation was an amendment to last project studies the eff ect of changes in the length the Trade and Craft s code of Germany regarding the re- of schooling on skills accumulation for basic-track stu- Deregulation quirement to become self-employed craft smen. Using dents in Germany. To this end, two German reforms – increases number of individual social security data, fi rm-level data and micro the compulsory schooling reform and a short school businesses but not census data, the project sheds light on the impact of the year in the 1960s – are analysed in a diff erence-in-dif- employment reform. Results show that while the reform drastically ferences framework using PIAAC-L and NEPS data. increased the number of businesses in deregulated craft occupations, the eff ect on earnings and employment for Conditions and Consequences of Education incumbent workers was slightly negative. The reform also around the World – Microeconometric Analyses failed to increase overall employment in the craft s sector. A. Bergbauer, ongoing doctoral project.

The ﬁ nal project analyses the impact of regional struc- The dissertation topic spans from generating human tural change caused by exposure to imports from China capital to its productive use in the economy. The ﬁ rst

42 ifo Annual Report 2018 IFO CENTER FOR THE ECONOMICS OF EDUCATION

two papers investigate institutional frameworks and Microeconometric Analyses of School Reforms exploit reforms thereof. The fi rst paper examines the B. Arold, ongoing doctoral project. infl uence of diff erential uses of student tests on student learning. Using PISA data, results indicate that tests for The dissertation aims to analyse the eff ects of school How changes in external use increase student achievement, while tests curriculum reforms on long-term attitudes and the curriculum aff ect life for internal use do not. This is consistent with diff erent life decisions of students applying quasi-experimental decisions strengths of incentives set to diff erent stakeholders, as methods. The fi rst research project looks at the eff ects outlined by a simple theoretical model of a tree of prin- of the abolition of compulsory religious education in cipal-agent problems. The second paper analyses the schools across German states by applying a panel-data eff ect of EU accession of Eastern European countries on approach using NEPS data. The main focus is the extent student achievement. It seems that political, economic, to which such reforms aff ect religiosity, religious aff ili- and social EU integration has enhanced student learn- ation and personal prayer. In addition, other outcomes ing. This positive link between political regimes and such as attitudes towards gender equity are analysed. student learning seems to work through the parents’ The second research project focuses on the topic of work situation. The third paper regards the infl uence evolution in US school curricula. The goal is to under- of education – measured by skills and attendance – stand whether the omission of evolution in school on economic activity. Building on subnational data in curricula aff ects long-term attitudes on evolution and Sub-Saharan Africa, a positive relation between skills subsequent life decisions such as the choice of major at and development is confi rmed. university. A third research project aims to evaluate the extent to which educational success is determined by The Political Feasibility of Educational genetic endowments and how educational institutions Decisions can mediate genetic diff erences. E. Grewenig, ongoing doctoral project.

The doctoral project deals with the political feasibility of educational and labour market decisions, as well as the evaluation of educational reforms in Germany. A fi rst research project examines whether and how positions of the diff erent political parties aff ect the opinions of the German population towards specifi c educational-reform proposals. A second research project methodologically examines how the beliefs of the German population can be appropriately illustrated. Particularly, it analyses the impact of a classic belief elicitation method frequently used by experimental economists, providing monetary incentives, on voters’ response behaviour. The third project investigates the impact of so-called gender identity norms, such as the norm that mothers should reduce their labour supply when their children are young, on the intended labour market participation of adolescents in Germany. A fourth research project studies a German educational reform concerning students’ transition from primary school into secondary schools. Before the actual transition is made, each student obtains a recommenda- tion from her primary school teacher as to which track the teacher thinks the child should pursue. The aim of the project is to analyse the impact of binding teacher recommendations on the percentage of students attending high-track schools and on student achievement.

ifo Annual Report 2018 43 ifo Center for Industrial Organisation and New Technologies

Disruptive innovation processes, digital transforma- INNOVATIONS tion, and regulatory and institutional responses to The Center’s research covers a broad range of the de- them are oft en controversially discussed in public, in terminants and eff ects of innovation and entrepreneur- the media and the policy debate without presenting ship, and emphasises the policy-relevant conclusions “hard evidence” underlying the arguments. The re- that can be drawn. The Center is particularly well- Investigating the search programme of the ifo Center for Industrial Or- positioned to swift ly transfer these insights to relevant eff ect of digitalisation ganisation and New Technologies explores how poli- stakeholders in academia, industry and politics by on society cies can foster competitiveness and innovation, and publishing a variety of articles addressing at diff erent thus promote sustainable economic prosperity in this audiences, through its active role in the policy debate challenging environment. Moreover, the Center empir- (e.g. through regular participation at “Leibniz im Bund- ically investigates how transformative developments estag” (Leibniz in Parliament)), its contact to trade such as digitalisation and innovation aff ect society and associations, and through the new “Framework Agree- how policy can steer them in a direction that benefi ts ment on Conducting Economics Studies” with the individuals and fi rms alike in a social market economy. Chamber of Commerce and Industry for Munich and The Center helps to shed light on these questions by Upper Bavaria. This more applied work in turn inspires interrelating applied economic research with industry new research projects/questions where the acquired expertise, diverse data sources, and modern methods institutional knowledge is employed to fi nd empirical of causal inference and policy evaluation. The Center’s answers. Examples of determinants of innovation that unique organisational profi le enables its applied mi- have been analysed by the Center’s economists include croeconomists, industry experts and data specialists competition, R&D subsidies, regional policy, migration, from the LMU-ifo Economics & Business Data Center and intellectual-property rights. (EBDC) to collaboratively produce cutting-edge analysis that is of high value to academics, practitioners and DIGITAL INFRASTRUCTURE AND THE SOCIO- policymakers alike. This internal structure is further ECONOMIC IMPACT OF DIGITAL TRANSFORMATION corroborated by the Center’s strong ties to Munich’s Digitalisation is changing the world at an ever-in- growing group of researchers in innovation economics, creasing pace. It has fundamentally altered how in- to industry partners and the broader (inter-)national dividuals behave, how production and business pro- research community, especially the CESifo Research cesses are organised, and how market participants Network. The Center’s research activities comprise the interact. At the same time, these processes and their following three areas, which are closely intertwined inherent complexity are presenting new challenges and interrelated: to researchers, practitioners and policymakers. This research area therefore tries to shed light on the so- COMPETITIVENESS, INSTITUTIONS AND cioeconomic impact of digitalisation using rigorous REGULATION empirical analysis. In two studies for the Chamber of Commerce, for instance, the Center analysed the dig- Many markets have industry-specifi c features and reg- ital problem-solving skills of the workforce and the ulations that need to be considered in the assessment eff ects of digitalisation on the labour market. Addi- of sectoral competitiveness, productivity and overall tionally, the Center focuses on the question of which welfare. Through its long-term qualitative industry industry, innovation and digital infrastructure pol- Consequences of monitoring (e.g. “Branchen special”, EUROCONSTRUCT icies, and what kind of institutional framework can regulatory change and various studies on trade fairs), the Center has built help fi rms and individuals to harness the potential of up this expertise, which it uses to reveal and evaluate the digital transformation. In this context, the Center measures for strengthening competitiveness and the is currently evaluating the “Next Generation Access” eff ects of regulatory changes. The Center investigates programme, Germany’s multi-billion-euro public in- the consequences for fi rms and industries, individuals vestment programme for the comprehensive diff u- and society in general. In this context, two of the Cen- sion of high-velocity broadband infrastructure, on ter’s doctoral students study if and how broadband in- behalf of the Federal Ministry of Transport and Digital ternet bandwidths should be taken into account when Infrastructure. competition authorities defi ne broadband internet markets and decide how to regulate them.

44 ifo Annual Report 2018 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

Projects Completed in 2018 The following speakers participated in the forums: Forum 1 – Industry: ifo Industry Colloquium 2018 Chair: H. Schultz, ifo Institute; introduction: W. Wohl- P. Brandt, L. Dor ffmeister, O. Falck, S. Rumscheidt, rabe, ifo Institute; experts: O. Falck, ifo Institute; J. Schricker, K. Wohlrabe, A. Wölfl in cooperation with H. J. Langer, EOS GROUP; G. Müller, The Association of the Chamber of Commerce and Industry for Munich and German Engineers (VDI)/TU München. Upper Bavaria, supported by the Bavarian Ministry of Economic Aff airs, Regional Development and Energy, Forum 2 – Commerce: report available in ifo Schnelldienst 72(1), 2019. Chair: W. Fischer, CityPartner München e.V.; introduction: S. Rumscheidt, ifo Institute; experts: R. Meyer, This year’s ifo Industry Colloquium took place on 7 No- Meyer & Meyer Group, CityWOW!; F. Gallus, otto.de; vember, 2018, with around 200 representatives from S. Rumscheidt, ifo Institute. business and politics participating in the event. Aft er a welcome speech by Eberhard Sasse, President of the Forum 3 – Construction: Chamber of Commerce and Industry for Munich and Up- Chair: J. Wallner, Bavarian Building Industry Asso- per Bavaria, a welcome address was held by Bavarian ciation; introduction: L. Dorffmeister, ifo Institute; Minister of Economic Aff airs Franz Joseph Pschierer. experts: R. Rimpler, The Association of German craft s- Clemens Fuest, President of the ifo Institute, gave a pre- manship; P. Racky, University of Kassel; L. Dorffmeister, sentation on: “The German Economy: Current econom- ifo Institute. ic climate and need for economic policy”. Forum 4 – Services: Two sets of parallel sessions on the industry and com- Chair: R. Obermeier, Chamber of Commerce and In- merce sectors and on the construction and services dustry for Munich and Upper Bavaria; introduction: sectors followed. In each session, the respective sector P. Brandt, ifo Institute; experts: Anita Wölfl , ifo Insti- analysis and forecasts were presented by ifo industry tute; G. Felbermayr, ifo Institute; I. Pohl & J. Ullerich, experts, followed by a discussion of major industry-re- NTT DATA Germany. lated structural changes. The next ifo Industry Colloquium will take place on Jens Südekum of Duesseldorf Institute for Competition 6 November, 2019. Economics (DICE) closed the ifo Industry Colloquium 2018 with his talk on: “Eff ects of automation on the labour market”.

ifo Industry Colloquium Prof. Clemens Fuest, President of the ifo Institute

ifo Annual Report 2018 45 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

tion and communication technology in the value-added process – in the labour market. The study is divided into three parts.

The fi rst part presents the state of the art of empirical economic research on the current eff ects and prog- noses of future labour market eff ects of digitalisation. There has been clear evidence of a digitalisation-induced labour market polarisation in recent decades in the US, as well as in Europe and Germany. Accordingly, relative winners are employees with low and high skill levels, while those with intermediate skill levels oft en perform easily automatable tasks and lose jobs relative Prof. Dr. Oliver Falck, ifo Institute to the other groups. Overall, digitalisation has led to shift s in the labour market, but not to overall job losses. Macroeconomic models, which take into account not Introduction of a Tax Break for Research and only the substitution eff ects of automation, but also Development the jobs added as a result of technological change, con- O. Falck, T. Lohse for the Chamber of Commerce and clude unchanged or even increased employment. Industry for Munich and Upper Bavaria, October 2017 to April 2018, publication in IHK Impulse für die The second part adds its own empirical analyses of Wirtschaft spolitik, 2018. the long-term development of employment and wages by occupation in Germany and Bavaria. These con- The study was conducted within the framework agree- fi rm existing fi ndings that overall employment has ment with the Chamber of Commerce and Industry for not changed dramatically, but there are structural Munich and Upper Bavaria. The fi rst part of this study shift s. In the period from 1999 to 2016 nationwide, the reviews the economic literature on the implications of so-called routine occupations, i.e. occupations that tax relief for research and development (R&D). The lit- contain many clearly-defi ned tasks that are easier to erature on the eff ectiveness of R&D tax relief in OECD automate, have decreased by a total of 4.2%, while countries shows that these schemes increase private non-routine occupations have grown by 7.3% (Fig. 3). Tax relief, R&D and R&D expenditure and are likely particularly benefi cial In Bavaria, where employment growth was higher over- productivity for small and medium-sized fi rms, as well as start-ups. all, employment in non-routine occupations has risen To date, however, the literature does not provide ro- by 22.5%, compared to 5.2% in routine occupations bust evidence that R&D tax relief also increases em- (Fig. 4). Within Bavaria, there are diff erences in the ployment and productivity. From an Upper Bavarian structure and the development of employment. Em- perspective, the second part of the study evaluates ployment in Bavaria overall grew by 0.2% from 2000 the potential benefi ts and problems associated with to 2010, while in Upper Bavaria, where the proportion R&D tax relief models that were recently discussed in of routine occupations is relatively low, employment Germany. grew signifi cantly more by 3.1%.

Impact of Digitalisation on the Labour Market These past trends are extrapolated in the next step and N. Czernich, T. Fackler, O. Falck, A. Fichtl for the Cham- projected into the future until 2030. Projected total em- ber of Commerce and Industry for Munich and Upper ployment is not expected to change much for Germany Bavaria, October 2017 to September 2018, publication for 2030 either (between –4.8% and 5.5%, depending IHK Impulse für die Wirtschaft spolitik, 2018. on the model), while the projections for Bavaria are more positive and mostly show employment growth The study was conducted within the framework agree- (depending on the model between 1.6% and 13.5%). ment with the Chamber of Commerce and Industry for However, the positive development of employment Munich and Upper Bavaria. It examines the impact of may not hide the fact that signiﬁ cant structural shift s digitalisation – including the increasing use of informa- will continue across occupations.

46 ifo Annual Report 2018 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

The third part derives policy implications from previ- This study was conducted within the framework agree- ous fi ndings and the empirical analysis. Policies must ment with the Chamber of Commerce and Industry for be designed to optimally support workers in the pro- Munich and Upper Bavaria. It aims to thoroughly eval- cess of adapting to digitalisation. The promotion of uate the digital skills of employees, especially among Digital skills in young digital skills at all levels of the education system and young professionals, in a national and international professionals lifelong learning in working life should be prioritised. comparison, and to fi nd out which of them, in terms Moreover, job creation in new digital business models of these skills, starts in an increasingly digital working should not be hindered by over-regulation and a fair environment under good or bad preconditions. The competitive environment for traditional and digital analysis employs data from PIAAC (Programme for the business models should be created. International Assessment of Adult Competencies) that includes measured digital skills of adults in a number Job Polarisation in Germany of OECD countries. Non-Routine Routine Estimated Relation The results show that Bavaria and Germany can keep Average yearly employment growth in % up by international comparison. Compared to other Business Consulting and Organisation Social Worker General Engineering Purchasing, Sales and Trading countries participating in PIAAC, the digital skills of Child Care Nursing and Obstetrics Assembler ƛ& ")"/(0+!" /"1/&"0 0.05 Warehousing and Transport the German workforce are similar to the international /&3"/0,#"%& )"0&+,!/ƛǽ Doctors´Receptionist and Assist. Cooks IT and Computer Science average; however, Bavaria performs better than other 0.00 German states. Restricting the sample to young professionals, the results are similar. However, further analyses reveal strong heterogeneities in digital skills -0.05 Sales Occup. Warehouse Management Technician Techn. Occup. in the Automotive Bankers in terms of education and socioeconomic background Pipeline Construction Metal Worker Fitter Carpenter Electrician Business Management Bricklayer (Shorthand)Typist Mecanical Technician characteristics. Furthermore, digital skills are strong- 1000 2000 3000 4000 ly correlated with occupations and sectors. In some Monthly Wage 1999 in euros occupations (e.g., service technicians, craft smen, and Source: Calculations by the ifo Institute. © ifo Institute off ice workers), only the top 25% of young professionals in Germany are as digitally skilled as the average Lifelong learning and Job Polarisation in Bavaria performers in top-performing countries. Based on on-the-job training Non-Routine Routine these diff erences and results, two main policy impli- Estimated Relation cations are derived: that the education system should Average yearly employment growth in % strengthen the development of digital skills and fos-

0.10 Social Worker Fitter Purchasing, Sales and Trading Business Consulting and Organisation Assembler Electricians Nursing and Obstetrics General Engineering ter lifelong learning and on-the-job training. /&3"/0,#"%& )"0&+,!/ƛǽ Warehousing and Transport Sales Occup. 0.05 Doctors´Receptionist and Assist. IT and Computer Science Cooks Mechanical Technician

0.00 Digital Skills of German and Bavarian Workforce

-0.05 Warehouse Management Carpenter 340 Techn. Occup. in the Automotive ƛ& ")"/(0+!" /"1/&"0 Bricklayer Technician Electrical Engineer Bankers Business Management -0.10 (Shorthand)Typist 320

1000 2000 3000 4000 5000 300 Monthly Wage 1999 in euros Source: Calculations by the ifo Institute. © ifo Institute 280

260

Digital Problem-Solving Skills of the Workforce 240

USA Korea Japan and Career Entrants – Bavaria by National and PolandEstoniaIreland Canada Austria NorwayBavaria Finland BelgiumSlovakia Denmark SwedenAustralia International Comparison Netherlands United Kingdom Czech Republic

A. Heimisch, F. Hampf for the Chamber of Commerce Germany (excl. Bavaria) and Industry for Munich and Upper Bavaria, December Source: Calculations by the ifo Institute. © ifo Institute 2017 to September 2018, publication in IHK Impulse für die Wirtschaft spolitik, 2018.

ifo Annual Report 2018 47 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

Representation of the (Upper) Bavarian Trade fairs, conferences, conventions and other events Economy based on Clusters have a major economic importance for Düsseldorf. In O. Falck, M. Ebnet, T. Lohse for the Chamber of Com- an average year the customers of Messe Düsseldorf merce and Industry for Munich and Upper Bavaria, May and its subsidiary spend around one billion euros on 2018 to July 2018, publication in IHK Impulse für die events in Düsseldorf. If all of the eff ects that are gen- Wirtschaft spolitik, 2018. erated indirectly are included, event-induced revenues amount to 1.66 billion euros. This purchasing power The study was conducted within the framework agree- provides job security for nearly 16,700 people in Düs- ment with the Chamber of Commerce and Industry seldorf. Around 40% of the employees are employed in for Munich and Upper Bavaria. Using empirical cluster the hotel and catering industries. Another 30% of jobs methods, the objective of this study was to identify are in the craft sector and in event-related services. In Identifying clusters groups among sectors of the German and (Upper) Ba- addition, the city of Düsseldorf has received 36.3 mil- varian economies that provide comprehensive rep- lion euros in tax revenues from trade fairs and other resentations of their distinctive linkages, but do not events. (have to) rely on the restrictive classifi cations of the of- fi cial statistics. Performing two diff erent cluster analy- Compared to the last study from 2008, all economic ses, the authors rely on information about job changes eff ects (purchasing power, employment, tax revenues) obtained from the Institute for Employment Research, have increased for Düsseldorf. The increase is largely as well as Input-Output Tables. The data-driven cluster due to the international attractiveness of Düsseldorf analyses suggest that it is plausible to divide the Up- as a trade-fair venue. International trade visitors stay per Bavarian economy into 13 (job changes) or 9 (In- in Düsseldorf longer than national ones. As a result, put-Output Tables, see Figure 1) clusters, respectively. the hotel industry benefi ts greatly from the business As both methods lead to the formation of relatively of Messe Düsseldorf and its subsidiary. On average, large and mixed clusters, this study highlights that the 32% of all annual stays in Düsseldorf are generated by Upper Bavarian economy is highly integrated. diff erent events at the Düsseldorf Exhibition Centre.

Building-Equipment Sector in Germany and Selected European Countries 2/ %0&+$,4"/ƛ" 10 M. Kocijan for the Messe Frankfurt Exhibition, the Ger- Average event year of Messe Düsseldorf man Sanitary Industry Association, the Federation of German Heating Industry and the VdZ – Forum für Billion euros 2,98 3 Energieeﬀ izienz in der Gebäudetechnik, May 2017 to 2,51 July 2018.

2 This project analyses developments in the German 1,66 building-equipment sector. To this end, key market indicators such as number of enterprises, turnover, em- International ployees, and investments are collected. Furthermore, 1 comparison key market indicators of the German building equipment sector are roughly compared with corresponding data from Belgium, Denmark, France, the United King- 0 dom, Italy, the Netherlands, Austria, Spain, and Swit- Düsseldorf Wohle of North Whole of Germany Rhine-Westphalia zerland. A methodological report describes, among other things, the process of identifying and delimiting Source: Calculations ot the ifo Institute. © ifo Institute the sector and its characteristics.

The Economic Impact of the Düsseldorf Trade Fairs and Events H. Penzkofer for the Fair Düsseldorf GmbH, January 2016 to August 2018.

48 ifo Annual Report 2018 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

Current Projects The workshop series with the Bavarian State Off ice for Statistics (BSOS) also continued in November 2018 with another joint workshop at ifo, this time focusing The LMU-ifo Economics & Business Data Center on “Regional Prices”. In order to further intensify the Synergies in regional (EBDC) exchange between BSOS and the ifo Institute in the economics O. Falck, H. Mittelmeier, V. Reich, S. Wichert, S. Yang. area of “regional economics” and to make better use of The now enlarged EBDC team has continued its eff orts to potential synergies, a research cooperation has been establish new research relationships and foster existing established here as well. ones through 2018 and is very happy to report progress. Furthermore, the EBDC has put considerable eff orts Starting 2018, the EBDC team was very glad to welcome into the implementation of consistent research data Valentin Reich as an old and new member. Aft er several management procedures and good scientifi c practices years of very conscientious work as a student assistant in general at ifo and LMU. The EBDC is now an institu- at the EBDC during his Master’s degree in economics tional member of the interdisciplinary “LMU Open Sci- at the LMU, he is continuing his scientifi c career as a ence Center (OSC)”, which aims to strengthen scientifi c specialist at the ifo Institute. With his longstanding ex- integrity in the academic process by promoting trans- pertise in the methodology of the ifo company surveys, parency and reproducibility, and teaching the neces- he supports the ongoing research project to link the ifo sary expertise. As part of the infrastructure project of Strengthening company data sets with other external data sources, the DFG-funded Collaborative Research Center (CRC) scientifi c integrity internet and geodata (“Record linkage” (RL)) using new “Rationality & Competition” at the LMU, the EBDC puts statistical methods like machine learning. this mission into practice by supporting and giving advice to CRC researchers regarding archiving their re- In October 2018, in order to exchange expertise and search data. methodological knowledge in this fi eld, the EBDC, together with Bundesbank’s Research Data Center (RDSC), Framework Agreement on Conducting organised an expert workshop on the “Record Linkage of Economics Studies Company Data: Practical Experiences” at the ifo Institute, O. Falck, A. Fichtl for the Chamber of Commerce and which was a great success. In addition to ifo/EBDC and Industry for Munich and Upper Bavaria, July 2017 to RDSC members, representatives of all relevant compa- July 2021. ny data holders and RL experts in Germany participated (ZEW, IAB, German Record Linkage Center, Federal Sta- The Chamber of Commerce and Industry for Munich tistical Off ice). Aft er a very productive exchange, the par- and Upper Bavaria has commissioned the ifo Institute ticipants agreed to continue this format and initiated the to conduct a major, ongoing project involving indepen- fi rst steps towards a joint research data project. dent, science-based economic advisory work. As part of this project the ifo Institute is involved in conducting economic studies (meta-analyses, empirical policy evaluations, execution and evaluation of surveys etc.), the draft ing and organisation of economic policy oriented events, as well as a regular exchange of knowledge on economic policy topics. All of ifo’s Centers are involved in the project. The ifo Center for Industrial Economics and New Technologies is supervising the project.

Information System “Branchen special” H. Hofmann, C. Vogel in cross-departmental cooperation with over 20 other ifo industry experts for the DG-Verlag, Wiesbaden, biannual publication in Bundesverband der Deutschen Volksbanken und Raif- feisenbanken (BVR), DG-Verlag, Wiesbaden.

ifo Annual Report 2018 49 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

“Branchen special” reports on the 150 most important A list of all of the reports available and their publica- sectors covered by Germany’s medium-sized compa- tion dates can be accessed on the ifo website (www.ce- nies. Biannually updated industry reports are pub- sifo-group.de/branchenspecial). Individual reports can lished on the following economic sectors: services, be obtained from the Volksbanken und Raiff eisenban- agriculture, construction and development, retailing ken, while subscriptions are available from the DG-Ver- In-depth sectoral and wholesaling, manufacturing, and skilled craft s lag in Wiesbaden. analyses and trades. The reports contain in-depth analyses and forecasts of sector structure and the current economic Bau | Ausbaugewerbe | 2.01 | Januar 2019 | 1 situation in a clear, standardised format. More specifi - cally, the reports off er information on supply and demand structures in the consumer goods and services Ausbaugewerbe markets, company size and trends towards concen- +++ Gute Umsatz- und Ertragsaussichten, aber Probleme bei der Nachwuchsgewinnung +++ tration. Turnover and production forecasts, as well as Auf einen Blick Zusammenfassung

Ausbaugewerbe 2015 capacity utilisation and price development monitoring Der Ausbau ist dem Bauhauptgewerbe nachgelagert und profitiert verzögert vom Neubau-Boom. Elektrotechniker und Fliesenleger wie- 99,0 Mrd. € Umsatz sen zuletzt das stärkste Umsatzplus auf. Ihnen kommen Energieeffizi- are conducted to evaluate the economic outlook. The enz-Maßnahmen, Smart-Home sowie der mit dem expansiven priva- ten Konsum verbundene Einbau höherwertiger Bodenbeläge zu Gute. 200 067 Unternehmen economic condition of each sector is assessed using Allerdings verlangsamt sich das Expansionstempo im Hochbau. Im- pulse kommen 2018 vor allem aus dem öffentlichen Bau. Größere the results from company comparisons, off icial sta- Fensterfronten finden sich dort häufiger als in Wohnbauten, was den 1 066 100 tätige Personen Glasern helfen dürfte. Generell werden Gewerke wie die Elektrotech- niker begünstigt, welche aufgrund größerer Betriebseinheiten Vortei- tistics and an analysis of trends in prices and costs. Quelle: Statistisches Bundesamt (Handwerkszählung); Berechnungen des ifo Instituts. le bei öffentlichen Ausschreibungen haben.

Umsatzentwicklung Ausbauhandwerke Das Ausbaugewerbe zeigt sich proﬁtabler als das Bauhauptgewerbe. An industry rating featured in every report oﬀ ers key In jeweiligen Preisen Durch den engeren Endkundenkontakt sind Ausbauhandwerke eher Elektrotechniker Klempner, Installateur und Heizungsbauer Stuckateure Tischler in der Lage, bei günstiger Konsumkonjunktur Zahlungsbereitschaf- Fliesen-, Platten- und Mosaikleger Maler und Lackierer Glaser ten für höherwertige Ausstattungen abzugreifen. Am höchsten fallen information on current and future trends in turnover Index 2011=100 112 operative Marge und Zinsdeckung in der Elektro- und SHK-Installati-

108 on aus. Beide Bereiche sind Proﬁteure der Energiewende. Sinkende and proﬁ ts in the industry, as well as the intensity of Insolvenzen und Kapazitätsengpässe sprechen dafür, dass sich die 104 Gewinne im Ausbaugewerbe weiter positiv entwickeln. 100

competition in the industry and its vulnerability to eco- 96 Viele Ausbaugewerke kämpfen mit sinkenden Lehrlingszahlen. Die Entwicklung hängt neben den Präferenzen für eine Hochschulausbil- 92 dung auch mit rückläuﬁgen Meisterzahlen und gestiegener Soloselb- nomic cycles at a glance. 88 ständigkeit zusammen. 2011 2012 2013 2014 2015 2016

Quelle: Statistisches Bundesamt (Handwerksberichterstattung); Berechnung des ifo Instituts Aft er many successful years the concept of the informa- Branchen-Rating

Umsatzentwicklung (nominal) Ertragslage Konjunktur- Konkurrenz- tion system is now updated. The list of sectors is tight- Branche/Sparte 2017 2018 abhängigkeit intensität 2017 2018

Ausbaugewerbe ened by the consolidation of related categories. The Elektrotechniker Klempner, Installateure, Heizungsbauer Stuckateure reports also have a new design. Beginning with Janu- Tischler Fliesen-, Platten-, Mosaikleger Maler, Lackierer ary 2019 the reduced number of 54 biannually updated Glaser Legende: / / / / Updated information editions still report on 150 key sectors. The consolida- stark steigende/stark sinkende Umsätze geringe/hohe Konjunkturabhängigkeit geringe/hohe Konkurrenzintensität gute/schlechte Ertragslage

system tion of reports provides a direct confrontation of neigh- Volksbanken Raiffeisenbanken bouring sectors. Tables and fi gures give deeper insight New layout for “Branchen Special” into the sectors and off er both a cross-sectional and a hierarchical comparison. The biannual shift ing focus on relevant subsectors enables more detailed analysis. Evaluation of the Next Generation Access The reports continue to highlight the company policy Programme options, as well as the market positioning and competi- T. Fackler, O. Falck, S. Schüller, for the Federal Ministry of tiveness of medium-sized companies in a sector. In this Transport and Digital Infrastructure, in cooperation with context the reports focus on (industry-specifi c) institu- Ernst & Young and WIK-Consult, June 2017 to June 2021. tional changes and how diff erent market participants react to them. Some of these institutional changes are Empirical evidence suggests that broadband internet taken up by ifo researchers and become subject to a access has positive eff ects on local growth and employ- deeper examination in separate projects. Data from of- ment and accelerates structural change. The German fi cial statistics, as well as from primary and secondary federal government therefore aims to ensure the com- sources, are used as an information base, especially prehensive availability of next-generation broadband association statistics and the results of surveys con- technologies for all German households. Yet there are ducted by diff erent institutions. The results of the ifo areas in which market-driven expansion by private Business Survey are particularly important, as they en- suppliers appears not to be profi table. For such areas, able a well-grounded assessment of current and future the Next Generation Access Programme is meant to developments. incentivise the private expansion of broadband infra-

50 ifo Annual Report 2018 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

structure through complementary state aid. Following Economic Situation and Structure of Europe’s European Commission guidelines, the eff ectiveness of Construction Sector (EUROCONSTRUCT these measures will be evaluated in a rigorous empir- network) ical policy evaluation design. In its collaboration with L. Dorff meister, E. Gluch, M. Kocijan for the EC-Partner the consortium, the ifo Institute will focus on the statis- institutes, the organisers and participants in the EURO- tical analysis of the data. CONSTRUCT conferences, as well as recipients of the conference proceedings and for presentations at spe- ICT Sector in the Greater Munich Area cialist conferences, publication in ifo Schnelldienst 71(2), K. Candel-Haug, N. Czernich, O. Falck for the Chamber 2018; 71(13), 2018; as well as in various specialist journals. of Commerce and Industry for Munich and Upper Ba- varia, October 2018 to June 2019. The European research and advisory network EURO- CONSTRUCT consists of 19 European member insti- The study will be conducted within the framework tutes (15 from Western Europe and four from Central agreement with the Chamber of Commerce and In- and Eastern Europe). At conferences held twice a year dustry for Munich and Upper Bavaria. It analyses the in diff erent locations, current forecasts for all part- structure and the development of the ICT sector in the ner countries – as well as for Europe as a whole – are Greater Munich Area, using secondary data sources on presented. The forecasts not only feature fi gures (in three indicators, namely employment, fi rms and rev- euros) diff erentiated by construction type, but also Constructing Smart enue in the last fi ve years. The data analysis makes it present the physical variables of construction (number Cities possible to identify, for example, interesting inter-sec- of dwellings). The conferences in 2018 (held in Helsinki tor developments and diff erences between the city of in June, and in Paris in November) also looked, among Munich and its metropolitan area, as well as to compare other things, at Smart Cities and their impact on the the importance of the ICT sector to all industries in the construction industry, at the reuse of building and Greater Munich Area economy. Furthermore, a national components, as well as the urban building megaproj- and international assessment of the Munich ICT sector ect “Greater Paris”. One of the main results of the anal- will be conducted. Finally, start-up activities in Munich yses conducted in 2018 was the fact that the construc- and three other major German cities will be evaluated. tion activities in Europe will continue to grow in the years ahead, but growth will steadily lose momentum. Construction in Germany by Segment The summer conference 2019 will be held in Rome. L. Dorff meister, M. Kocijan, E. Gluch for federal and state ministries, local authorities, research and advi- The Economic Impact of the Dortmund Trade sory institutes, companies and associations; ongoing Fairs project, work tables (on request) as well as publica- H. Penzkofer for the Westfalenhallen Dortmund GmbH, tions in ifo Schnelldienst and external publications. January 2017 to November 2019.

As part of this research and advisory project, values The objective of this project is to calculate the direct and and quantities illustrating German construction activi- indirect purchasing power and income eff ects, as well as ties are forecast on a quarterly basis. These fi gures are the resulting tax revenues, of the Dortmund trade fairs. broken down into residential construction, commercial The calculations of the direct and indirect eff ects are de- building construction and civil engineering, and pub- rived from an estimation model that primarily uses the lic-sector building construction and civil engineering. individual expenditure of visitors and exhibitors. The forecasts are presented for debate in the construction and housing forecasting group, as well as at the ifo The Economic Impact of Trade Fairs in Industry Colloquium (ifo Branchen-Dialog). They are Germany also integrated into the Joint Economic Forecast pre- H. Penzkofer for the Association of the German Trade pared by fi ve major German research institutes, and into Fair Industry, August 2017 to July 2019. the ifo Institute’s forecasts. Moreover, they are used for a series of reports in “Branchen special” and as the ba- Based on surveys conducted for the project among sis for the German contribution to forecasts of European visitors and exhibitors at selected trade fairs, the total construction (EUROCONSTRUCT). number of visitors and exhibitors and their expenditure

ifo Annual Report 2018 51 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

are determined. The calculations of the direct and indi- Randstad ifo Personnel Manager Survey rect eff ects are derived from an estimation model that P. Brandt, O. Falck, J. Schricker, K. Wohlrabe for Rand- primarily uses the characteristics of the visitors and ex- stad Deutschland GmbH & Co.KG, ongoing project, hibitors and individual expenditure. which is published on the company’s website and that of the ifo Institute. Furthermore, articles working with The Trade Fair Index this data are released in ifo Schnelldienst. Business H. Penzkofer in cooperation with Messe Frankfurt expectations at trade GmbH, January 2017 to May 2019. Four times a year the ifo Institute surveys personnel fairs managers in manufacturing, wholesaling and retail- The “Messe Index” (Trade Fair Index) describes both ing, as well as in the service sector, on the importance the business developments and business expecta- of flexibility in personnel placement. The participating tions of German companies at international consumer managers provide a general assessment of flexibility and capital-goods trade fairs in Germany. It provides and an assessment with respect to specifi c measures an up-to-date evaluation of the trade fair activities of (overtime, limited contracts, “mini-jobs”, temporary these companies, as well as the six-month trade fair workers, freelancers, outsourcing, internal transfers, outlook based on their business expectations. These working time accounts). The project aims to provide in- evaluations are facilitated by the fact that the busi- sights into the role of flexibility measures in business cy- ness climate calculated for the “Messe Index” signals cles on a long-term basis. A special, changing question the direction in which the economy is developing very deals with current personnel policy. An evaluation of eff ectively. the special questions can be found on the ifo Institute’s website and in ifo Schnelldienst. In 2018, special ques- Infrastructure Project of the DFG-CRC tions were asked on the EU’s new General Data Protec- “Rationality & Competition” tion Regulation (GDPR), on-the-job training, Transpar- H. Mittelmeier, S. Wichert; January 2017 to December ent Remuneration Law, as well as on apprentices. 2020. Aims of On-the-Job Training In % Since January 2017 the EBDC has been part of the infrastructure project of the DFG-funded collaborative Learning new skills research center (CRC) “Rationality & Competition”, 71 Employees' motivation and which is backed by several research institutions from 70 loyality Munich and Berlin. The members of the CRC analyse Attractiveness as employer 64 Preventing market individual- and fi rm-level (ir-)rational decision be- failure haviour in a competitive environment and investi- 54 gate suitable policy responses in such situations to Expaning existing skills 47 prevent market failure. The infrastructure project supports and links up the activities of CRC’s empir- Ensuring competitiveness 40 ical research. It coordinates data collection efforts Improvement of productitity 24 for all CRC members – administratively and method- ically – gives recommendations on research data Promoting internal mobility 13 management and provides a secure infrastructure to 0 20406080 work with confi dential data. The EBDC in particular is Source: Randstad ifo Personnel Manager Survey. © ifo Institute responsible for data archiving and data publication to promote replications and secondary studies for the SFB members. To this end, the EBDC has devel- Digital Skills in the Manufacturing Sector oped an online interface (including a metadata re- T. Fackler, O. Falck, S. Wichert, ongoing project, in co- pository) that enables CRC researchers to document operation with LinkedIn. and archive their research projects and data collection projects easily and completely through the CRC Digital skills are in great demand in the labour market. homepage. While they are oft en associated with tech companies, they are increasingly required in other sectors. This

52 ifo Annual Report 2018 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

joint project with LinkedIn takes advantage of their knowledge-intensive sectors. Another study address- data, the “Economic Graph”, to investigate wheth- es the question of whether the increasing popularity er and, if so, which digital skills are in demand in the of online shopping among the German population manufacturing sector in Germany. Beyond taking stock leads to a change in the (employment) structure in the of the applied and advanced digital skills in diff erent traditional stationary retail sector. To this end, mu- Broadband and (sub-)industries, occupations and regions, the study nicipality-level data on the online shopping aff inity mobile internet will illuminate where digital skills come from (e.g. la- of German households is used. The third dissertation bour mobility between IT and manufacturing compa- project by Andreas Mazat examines the importance nies, education and degrees) and how they have devel- of improving broadband internet product quality to oped over time. the competitiveness of German internet providers. The potential of mobile internet technologies to close Economics of Innovation in Telecommunications gaps in broadband internet coverage across rural ar- A. Heimisch, A. Mazat, V. Lindlacher, ongoing Ph.D. eas is also considered. scholarships by Deutsche Telekom AG. In a joint study, Alexandra Heimisch and Andreas Mazat, These doctoral projects deal with determinants of in- among others, look at a regulatory topic. Although the novation in telecommunications and investigate its market for fi xed-line telephony is shrinking, the market underlying mechanisms. They also consider the over- for fi xed-line access is still regulated in some Europe- all economic impact of these innovations. To answer an countries. In these countries, regulatory authorities these questions, individual-, regional- and fi rm-level question whether substitution between mobiles and data are used. fi xed lines is strong enough for a deregulation. Instead of classically estimating cross-price elasticities, Hei- In Alexandra Heimisch’s doctoral project (dissertation misch, Mazat and their co-authors introduce the new defence in July 2018), a fi rst study investigates the re- method of estimating a “cross-technological elastic- turns on specialised skills in information and telecom- ity” between fi xed lines and mobile on the basis of munication technologies (ICT) (e.g. writing emails or unique regional fi ne-grained data in Austria. To over- searching for information online) in the labour market. come endogeneity concerns in the local availability of These kinds of skills partly emerge from being exposed mobile infrastructure, they employ an IV strategy that Interplay with to broadband internet (learning by doing). By employ- relies on the idea that availability of mobile infrastruc- fi xed-line usage ing two diff erent instrumental variable approaches, ture is lower in more rugged areas, as roll-out is cost- ICT skills can be shown to have a causal, positive ef- lier. Their initial results indicate a signifi cant negative fect on wages. One mechanism driving the positive eff ect of 3G mobile coverage on the rate of change in wage returns is the selection of individuals with high fi xed-line usage. ICT skills into occupations with a high abstract task content that pay wage premia. This study is published The doctoral project of Valentin Lindlacher, who re- as CESifo Working Paper No. 5720, 2016. Another study ceived a scholarship in September 2017, aims to deal deals with the eff ects of online job search in the Ger- with issues regarding market defi nition, market dis- man context. tinction and evaluations, for example in the context of the rollout of fi bre infrastructure. Methodologically, it In the doctoral project of Andreas Mazat (dissertation plans the increased use of techniques from the fi eld of defence in January 2019), the fi rst paper addresses machine learning. the eff ect of high-speed internet availability on en- trepreneurs’ decision to start a business, as well as In a joint project, Valentin Lindlacher and Andreas Mazat on fi rm location. An instrumental variables strategy, determine individual willingness to pay for broadband exploiting the technological peculiarities of the pub- internet services off ering diff erent bandwidths. In ad- lic switched telephone network that infl uence the dition, they calculate own- and cross-price elasticities employability of DSL, is applied to identify a causal of demand between internet contracts off ering diff er- relationship. Initial results indicate that the establish- ent bandwidth. Based on this analysis, they suggest ment rate of start-ups increases with high-speed in- drawing the boundaries of the market for broadband ternet availability, especially in the service sector and internet access along bandwidth.

ifo Annual Report 2018 53 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

Papers in Empirical Innovation and Regional tify the eff ect of relaxation in manpower constraints Economics faced by fi rms in West Germany. There are plans for T. Lohse, ongoing doctoral project. future research to investigate domestic and exporting fi rms and their heterogeneous constraints and corre- Conceptually, this dissertation project is located at the sponding performance. intersection of regional and empirical innovation economics. The fi rst part is a joint project with Oliver Falck Socioeconomic Impact of Broadband Internet and Johannes Koenen, which evaluates a place-based S. Schüller, ongoing postdoc project, publication as Evaluating place- innovation policy, the so-called “Innovative Regional CESifo Working Paper No. 6129, 2016; Wirtschaft sdienst, based innovation Growth Cores” programme. This programme has been 96(8), 2016. policy central to the economic development strategy of East Germany, but has received little (empirical) attention to The ongoing processes of digitalisation in economy date. Considering the case of the German book market, and society certainly have important implications, not Andreas Mazat, Bastian Stockinger and Tobias Lohse only for economic growth but also for labour markets investigate in the second part how the willingness of and political systems. The diff usion of broadband in- consumers to shop online aff ects the stationary retail frastructures enabling fi rms and households to access sector. The third part of this dissertation is concerned high-speed internet plays a crucial role in this “Digital with the question of how the availability of very high- Revolution”. Two initial projects focus on the causal speed internet access impacts fi rm-level investments. impact of ADSL2+ broadband availability on voting behaviour and on fi rm performance, both exploiting Economic Outcomes and Driving Forces of a local public broadband infrastructure delivery pro- Innovation: Evidence on Digitalisation and gramme in the Province of Trento, Italy. Migration K. Candel-Haug, ongoing doctoral project. Labour Mobility, Incentives, and Innovation T. Fackler, ongoing postdoc project. This dissertation project (dissertation defence in Jan- uary 2019) focuses on the creation and diffusion of in- Building on the dissertation projects, which focused on novation in the context of two of the main challenges the determinants of innovation, this project extends currently faced by our societies and economies: dig- the scope of research to include both the creation and italisation and migration. Two papers show how digi- the consequences of technological progress. More talisation and the possibilities of new information and specifi cally, it explores the role of knowledge workers Digitalisation drives communication technologies impact fi rm organisation in the process of innovation, as well as exploring the innovation and productivity in various ways. The third chapter of eff ects of digitalisation on the labour market. The in- the dissertation project analyses the contribution of centives for fi rms and individuals play a crucial role in immigrants from new EU member states to innovative- all of these areas. Methodologically, the project takes ness in Germany and, unlike results for the US, fi nds advantage of the increasing computational power signifi cant positive complementarities. available to researchers, using machine learning tools for its analysis. Enterprises’ Constraints and Strategies S. Yang, ongoing doctoral project. The Socioeconomic Eff ects of the Digital Transformation This project focuses on manpower constraints and fi rm S. Wichert, ongoing postdoc project. performance. By leveraging the EBDC unique datasets that combine fi nancial data and fi rm surveys, it is pos- Building on a chapter of his completed Ph.D. project sible to observe German fi rms’ self-reported manpow- (on the eff ects of broadband internet on health), part er constraints. The initial results show that constrained of this habilitation project now extends this issue to fi rms have higher capacity utilisation, lower invento- the study of the socioeconomic eff ects of digital trans- ries, more unsatisfi ed orders, and want to invest more formation on individuals, companies, and society as in capital expenditure. This project proceeds to use a whole. This includes the analysis and development German reunifi cation as an exogenous shock to iden- of institutions and policies that infl uence, promote or

54 ifo Annual Report 2018 IFO CENTER FOR INDUSTRIAL ORGANISATION AND NEW TECHNOLOGIES

regulate digital processes with a view to strengthening competition and innovation. In order to tackle this question, it is oft en necessary to prepare a suitable empirical data basis from various sources. The second part of the habilitation is therefore devoted to the development and application of methods for analysing and linking innovative datasets, in particular the ifo company datasets, with new statistical methods (like machine learning).

ifo Annual Report 2018 55 ifo Center for Energy, Climate and Resources

The Center’s research activities are determined by the At the centre of research on climate and resources, main challenges stemming from climate change, the which is naturally closely linked to the research on en- scarcity of natural resources and sustainable energy ergy, are the eff iciency and eff ectiveness of climate pol- supply. In accordance with its name, the Center is espe- icies and analyses on the impact of climate and energy cially active in research and policy advice on climate and policies on the use of exhaustible energy resources. energy policy and the eff icient utilisation of resources. One focus in this area is on the long-term macroeco- Its activities focus on topics that are relevant in the nomic and sectoral implications of climate policies longer term which are analysed as part of multi-year for economic development, carbon emissions and in- research projects and, whenever appropriate, in co- vestment in energy generation technologies. In 2017, operation with researchers from other disciplines and the main emphasis was on the eff ects of uncertainty, research institutions. These medium-term projects strategic behaviour and technology development. The are complemented by selected short-term consulting Center cooperated in this research, for example, with projects for public and private clients. The Center’s re- researchers from various disciplines and institutions in search uses both theoretical and numerical methods, Germany in a multi-year project on the integrated anal- as well as empirical approaches, depending on the re- ysis of green transformations. search question. The results of its research serve as a basis for providing policy makers with in-depth infor- The eff ects of climate policies on the use of fossil fuels mation on the eff iciency and eff ectiveness of climate, are analysed with regard to the eff ects on extraction energy and environmental policies. paths, strategic incentive and substitution eff ects, and the estimation of future emissions. The suppliers Decarbonising energy In the fi eld of energy, the Center is particularly con- of energy resources and the analysis of resource- and systems cerned with the transformation of energy systems in energy-related investments traditionally have a spe- the course of their decarbonisation. cial signifi cance for the Center. In 2018, research in this area focused increasingly on the problem of stranded The characteristics of energy supply in combination assets, analysing, for example, to what extent climate with behavioural, security-of-supply and economic policies lead to wealth losses in various sectors. aspects lead to areas of tension in the transformation of energy systems, which are examined under special Furthermore, in the year under review, the Center sup- consideration of policy options on diff erent regional ported public and private clients in diff erent consulting levels. While one focus of this research is the analysis of projects: in a multi-year project for the German Feder- electricity markets, the eff ects of policies measures on al Ministry for Economic Aff airs and Energy (BMWi), for regional value added and employment are also exam- example, methods and indicators for improving the ined. In this context, an ongoing interdisciplinary project monitoring of the bioeconomy are being developed. involving local stakeholders analyses, for example, the The Center was also involved in the development of transformation of energy supply in the Alpine foothills. methods for prioritising topics and activities under the 7th Energy Research Programme for the BMWI. The pro- Since German energy policy must also be seen in the posals of the Center for the further development of the context of European developments, the Center’s re- research programme, which was presented in the year National and search also takes the interaction of national and in- under review, were largely taken into account.

international energy ternational policies and CO2 reduction targets on the policy European level into account. In this analysis, the Center In addition to its research tasks, the Center maintains employs a model of the European power market into an internet-based information platform on resource- which renewable energy generation from wind and and energy-related topics. It also contributes to the sun is integrated in a very detailed manner. The model existing database for the international comparison of employed is being continuously reﬁ ned and improved. economic institutions (DICE) with indicators from the In the course of a perennial research cooperation with areas of climate change and energy policy. The Center other universities and research institutes, the current is systematically active in policy advice, for example in focus is on the integration of acceptance and on the the German Advisory Council on Global Change (WBGU) ﬂ exibilisation of energy demand. and the Bavarian Climate Council.

56 ifo Annual Report 2018 IFO CENTER FOR ENERGY, CLIMATE AND RESOURCES

Projects Completed in 2018 demand, and increasingly important cross sectoral topics, as well as the most fundamental channels to decarbonise the energy system in these dimensions. Trends and Perspectives in Energy Research, The recommendations generally point out the impor- Project Part B: Development and Application tance of systemic relationships and challenges for the of Methods for the Prioritisation of Topics and energy transition and the future design and structure Measures in Energy Research in the Context of the energy research programme. This also includes a of Germany’s Energy Transition stronger and more direct consideration and integration Diff using new energy (“Energiewende”) (EnFo-2030) of the socioeconomic conditions and drivers required technology K. Pittel, J. Pfeiff er, C. Weissbart, M. Zimmer, P. Brandt for the successful and eff ective diff usion of new, inno- in cooperation with TU Munich, German Aerospace vative energy technologies. In addition to the research Center e.V., Research Center for Energy Economics e.V., topics, EnFo-2030 also derived selected recommenda- University of Münster, for the German Federal Ministry tions to adapt formats and structures for the support of Economics and Energy, December 2016 to April 2018. and public funding of energy research to the identifi ed future challenges and recommendations. Specifi cally, The energy research programme of the German feder- the project discussed: a) preconditions for so-called al government characterises the guidelines and instru- integrative energy research, which comprehensively ments for public policies to support energy research. integrates social, economic and technological energy The main target of the programme is to successfully research; b) the specifi c needs of start-up fi rms; c) the realise the various energy- and climate-policy goals of future role and design of large joint research projects; the so-called Energiekonzept and the accompanying and d) the role and value of living lab research ap- fundamental transformation of the energy system in proaches. Germany. In October 2018, the seventh edition of the energy research programme was published. As part The ifo Institute was supported by Prof. Löschel from of a broader process of consultation EnFo-2030 con- the University of Münster and was part of an interdis- tributed to the revision of the previous sixth edition ciplinary project team consisting of the DLR (German of the energy research programme together with its Aerospace Center), FfE (Research Center for Energy complementary partner project “Technologies for the Economics) and the Technical University of Munich, Energiewende”. which led the project. The evaluation of the need for energy research and the discussion of support and Energy market The task of EnFo-2030 was to develop and use a novel funding formats were based on the review of energy models under review approach for the systematic identifi cation and charac- market models and scientifi c literature as well as the terisation of essential issues for the new energy research expertise of the project advisory board with 14 experts programme. In contrast to its partner project, which con- from the manufacturing industry, the energy sector sidered a broad range of technologies separately and in and academia. Additional insights were derived from a great detail, EnFo-2030 particularly addressed systemic workshop at the German Federal Ministry of Econom- issues and challenges from a more aggregate, top-down ics (BMWi) organised by both projects, EnFo-2030 and perspective. It elaborated fundamental changes in the “Technologies for the Energiewende”, as well as from technical, economic, political and social conditions for the results of an online survey among the members of a successful transformation of the energy system, and the energy-research networks (“Forschungsnetzwerke evaluated the previous edition of the energy research Energie”). The online survey was designed, processed programme against this background. On this basis, a and evaluated under the supervision of the ifo Institute catalogue of 12 theses was developed, which summaris- by both projects in spring 2017. Throughout the deriva- es the central fi ndings and guidelines for the future fo- tion and discussion of the need for future state-funded cus and strategy of publicly funded energy research. energy research, the ifo Institute, in cooperation with Prof. Löschel, took an economic perspective and con- The theses result from a multi-step process of analy- sidered societal and systemic aspects. The ifo Insti- sis starting from a sectoral analysis, and aggregate tute was lead author of the chapter on cross-sectoral and structure the future challenges and need for en- topics. In this context, the potential and risks of the ergy research according to energy supply and energy digitalisation for the energy transition, the changes in

ifo Annual Report 2018 57 IFO CENTER FOR ENERGY, CLIMATE AND RESOURCES

and development of new business models, acceptance the incentive to invest into R&D on the other. In order issues related to changes in the natural environment, to model uncertainty about possible transition path- new technologies and behavioural changes, the char- ways, we developed a Bayesian approach towards acteristics and drivers of energy demand behaviour, the calibration of deterministic models of econom- as well as the regulatory reforms that may be required ic growth. Using this approach, we recalibrated the were discussed. socioeconomic component of DICE and were able to quantify uncertainty about possible future investment Integrated Analysis of a Green Transformation and technology pathways. Based on this approach, we (InTrans) derived optimal policy pathways, including the optimal K. Pittel, A. Schmitt, A. Ciesielski in cooperation with taxation of greenhouse gas emissions over time and the ZEW – Leibniz Centre for European Economic Re- under uncertainty. search Mannheim, University of Munich and the Uni- versity of Bayreuth for the German Federal Ministry of Furthermore, we developed a model featuring multiple Education and Research, June 2015 to November 2018. technologies for producing energy, with a focus on the power sector. Technology paths in this model are inter- The reduction of fossil fuel use and the stabilisation of preted as the evolution of capacities associated with greenhouse gas emissions is an important element of a diff erent technologies over time. They are determined green transformation. In its contribution to the project, by the investment behaviour of households and fi rms. the ifo Center for Energy, Climate and Exhaustible Re- Compared to similar models used in the literature, our sources focused on technological change and the pro- model features a higher degree of aggregation with revision of environmentally-friendly technologies, which spect to capacities. For example, diff erent technologies are an important prerequisite for a successful green for generating electricity from wind and solar energy are transformation. aggregated to one technology. This results in a smaller number of technologies than in other models, which en- Feasible growth and technology paths were compared ables us to analyse within-model uncertainty regarding, with respect to their economic and climate impact, for example, future technological developments. Path dependencies in while taking into account diff erent types of uncertain- technological change ty. The process of technical change and potential path dependencies were at the heart of the analysis. One important goal was to study endogenous technological Current Projects change and technology paths in the context of transition processes that are inevitable in the course of long-run Determination of Economic Indicators for development. The macroeconomic perspective on long- Monitoring the Progress of the Bioeconomy run growth, investment and technology paths allowed J. Wackerbauer, T. Rave in cooperation with the Leibniz us to draw conclusions about the distribution of welfare Institute for Bioeconomy (ATB), the Fraunhofer Insti- gains and losses in an intergenerational context. tute for Systems and Innovation Research ISI at Karls- ruhe and the nova-Institute, Hürth, for the German A second focus was on the analysis of suitable long-run Ministry for Economic Aff airs and Energy, April 2016 to policies to foster clean technologies. In this context, it March 2019. was of interest whether, and to what extent, the regu- lator might be able to create investment incentives by This project is one of the three pillars of the German reducing regulatory and political uncertainties. federal government’s bioeconomy monitoring. This includes traditional areas like the wood industry or the Economic growth and In one part of the project, the analysis of transition food industry, as well as new innovative applications climate change paths was based on the workhorse Integrated Assess- for bio-based materials. The objective of this project is ment model DICE by William Nordhaus, where we en- to contribute to the development of the scientifi c basis dogenised investments by households into R&D. This for long-term monitoring of the bioeconomy. Via con- approach allows for explicit modelling of the eff ects of tinuous monitoring a knowledge base for political ac- endogenous economic growth on climate change on tion and a public debate about the bioeconomy will be the one hand and of the eff ects of climate change on created. To achieve the objectives of the National Pol-

58 ifo Annual Report 2018 IFO CENTER FOR ENERGY, CLIMATE AND RESOURCES

icy Strategy Bioeconomy, indicators will be developed The objective of the INOLA project is the interdisciplin- that are based on scientifi c criteria. Methods of data ary and transdisciplinary development of system solu- collection will be established, which make it possible tions for sustainable land use and energy management to make all dimensions of the bioeconomy measurable. of the model region “Energiewende Oberland” (“Ober- The progress in the transformation process towards a land Energy Transition”). The Energiewende Oberland bioeconomy, but also potential barriers or trade-off s region covers three administrative districts south of will be visualised to enable decision-makers to draw Munich. The central question of the project is which so- Cooperation shapes any necessary consequences. cial and technical innovations are necessary to establish the energy transition sustainable regional land use jointly with an adequate Ten work packages will be processed until the end of energy system. Cooperation between municipalities the project: and districts, as well as the refl exive design of the innovation process, are crucial in achieving these objectives. – Requirements for statistical data and indicators and The primary contribution of the project is an innovation inventory concept providing the region with the necessary process – Biomass fl ows and utilisation of by-products knowledge to successfully shape the transition towards – Methodological development of a bio-based indicator a sustainable land use and energy system. system under economic aspects with strong links to the NACE classifi cation The ifo Institute’s task within INOLA is to determine the economic impact of diff erent scenarios for regional – Quantifi cation of cascade and coupling usages energy and land use systems. An input-output model – Innovations, patents, education is used to identify the eff ects on value added, employment and sectoral output at the regional level, and to – Combination of economic indicators and ecological determine innovation strategies. accounting – Pilot study for the chemical and plastics industries Research Network for the Development of New Methods in Energy System Modelling (4NEMO) – Drivers and restraints in the transition to the bio- K. Pittel, M. Mier, C. Weissbart in cooperation with DLR, economy EWI, Research Center Jülich, RWTH Aachen, Technical – Further development of the NACE classifi cation University Munich, the Universities of Stuttgart and Freiberg and ZEW for the German Federal Ministry for – Project management and workshop Economic Aff airs and Energy, November 2016 to Octo- ber 2019. By the end of 2018 extensive results were developed for eight of the ten work packages and documented in fi ve The energy transition’s envisioned goals of increasing interim reports. Among other things, a pilot study em- the market share of renewable energy and the reduc- Social acceptance of pirically examined the applicability of the developed tion of greenhouse gas emissions have led to a dynamic future energy systems methods for selected product groups. In a workshop, transformation of the energy system. Closely connect- the developed results were discussed with experts in ed to the increased share of renewable energy is the the fi eld of the bioeconomy. advancing regionalisation of the energy system. Both the rising market penetration of intermittent genera- INOLA – Innovations for a Sustainable Land and tion technologies and the higher spatial dispersion of Energy Management at the Regional Level production structures and networks call for improve- J. Lippelt, A.M. Montoya, K. Pittel, M. v. Schickfus, ments in the coordination of the energy system and of M. Zimmer in cooperation with A. v. Streit and all players in society. This implies that besides techni- W. Mauser, University of Munich, W. Mayer, Kempten cal feasibility and economic viability, social acceptance University of Applied Sciences, the communal civil so- becomes an increasingly important aspect in the de- ciety “Energiewende Oberland” and utility company velopment of the future energy systems. partners for the German Federal Ministry of Education and Research, October 2014 to September 2019. The dynamic environment of energy systems is also visible in the variety of existing energy system models,

ifo Annual Report 2018 59 IFO CENTER FOR ENERGY, CLIMATE AND RESOURCES

which are, however, only partly capable of refl ecting renewable energy technologies. At the same time, con- the aforementioned challenges. sistent socio-technological scenarios and a concrete dataset were developed in work packages 3 and 4. In Against this backdrop, the ifo Institute coordinates nine the fi nal work package 5, the established scenarios are renowned research facilities and institutes of higher used as the basis for a comparative model analysis. education German Advisory Council on Global Change – to improve the coherence, comparability and trans- (WBGU) parency of energy models, and K. Pittel, J. Pfeiff er for the Alfred-Wegener Institute, – to improve the integration of economic and social Bremerhaven, December 2016 to September 2020. factors and the aff iliated uncertainty in energy models. The German Advisory Council on Global Change (WBGU) The project develops integrated scenarios that include is an independent scientifi c advisory body of the federal a detailed refl ection of economic, social and technolog- government that was set up in 1992 in the run-up to the ical conditions. The energy models of project partners United Nations conference on environment and devel- are improved through coordinated development, and opment (“Rio Earth Summit”). The principal task of the Increasing validity the general validity of the models is improved by the WBGU is to analyse the global change of the natural envi- and comparability stronger incorporation of economic and social factors. ronment and its implications for humanity and societies. of energy policy Accordingly, the project will help increase the validity, It also aims to raise the awareness of the broader public analyses comprehensibility, and comparability of policy analyses and politicians and draw their attention to global environ- based on energy models. Future research projects and mental and development challenges as early as possible. consulting activities can be better coordinated among the involved institutes through the creation of a common With unsustainable production processes and con- database and the ability to link the models. This will also sumption habits, humanity is severely interfering with improve the speed and eff iciency of future joint projects. the natural environment. This is leading to global environmental changes like climate change, the loss of The research eff ort comprises fi ve work packages. The ifo biodiversity, freshwater pollution or soil degradation. Institute is working on work packages 1, 2, 4, and 5 and At the same time, this global change is increasing the coordinates the entire research eff ort. In work package 1, vulnerability of industrialised countries, and particu- a list of requirements refl ecting the changed conditions larly of less developed societies, to natural disasters on energy markets was defi ned last year. A model analy- or food crises and diseases. As a result, global change sis was coordinated by the ifo Institute in a sub-package raises considerable distributional and equity concerns Adapting existing to identify the strengths and weaknesses of a representa- and puts global development opportunities at risk. models to new tive group of around 40 energy market models. The goal requirements of work package 2 is that the institutes involved adapt The advisory council analyses these challenges by pur- their existing models to the new requirements along four suing an interdisciplinary approach and assuming a clusters (technology, acceptance, regions and uncertain- broad notion of sustainability for which the conserva- ty). In this context, the ifo Institute analysed the models, tion of the natural environment is as characteristic as as already selected for work package 1, with respect to ensuring societal, economic and political participation their ability to answer major energy-policy questions. and protecting and fostering self-eff icacy and cultural Within the technology cluster, the ifo Institute developed diversity. Every two years, the council publishes fl ag- a framework to implement investments in energy eff i- ship reports to initiate a knowledge-based societal and ciency and short-term demand response in power mar- political discussion on the challenges of global change. ket models. This makes it possible to quantify the role of

energy eff iciency in reducing CO2-emissions. In the fi rst phase of the current term, which started in December 2016, the council is looking into the potential Furthermore, the model is currently being extended and challenges of digitalisation for global sustainability. to include the costs related to external eff ects that To point out the relevance of digitalisation for sustain- are usually neglected like, for example, landscape im- able development and to initiate a broader debate over pacts, which can cause local public opposition towards the relationship between digitalisation and sustain-

60 ifo Annual Report 2018 IFO CENTER FOR ENERGY, CLIMATE AND RESOURCES

ability, the WBGU published two premises and ten key view of the insights and background information on the questions in a working paper in spring 2018. Since then, respective topics is provided. Policy options are dis- these questions and premises have been discussed cussed and evaluated in so-called Position Papers. The with experts and representatives from academia, poli- working groups are engaged in a constant and ongoing tics, the economy and society in various workshops and exchange with representatives of academia, industry, one conference. The council’s ﬂ agship report on digital- politics and civil society organisations. ESYS chooses isation and sustainability will be published next year. the topics of the working groups independently.

In August 2018, the council published a policy paper on Currently, experts from technical and natural sciences, four initiatives for Just & In-Time climate policy to raise economics, law, and the social sciences participate in public awareness of fundamental fairness issues inher- working groups on the topics of bioenergy, centralised ent to climate change and climate policies in the run-up vs. decentralised energy supply, and the future regula- Regulatory design for to the 24th Conference of the Parties to the United Na- tory design of power markets. Karen Pittel contributed tomorrow’s power tions Framework Convention on Climate Change (COP to a fourth working group on “Governance for the Euro- markets 24) in Katowice. pean Energy Union”, which presented its analysis and recommendations in December 2018 shortly aft er the All nine members of the advisory council from various publication of the corresponding EU directive. scientifi c disciplines are supported by personal assistants and by the scientifi c and administrative staff of ESYS is governed by the Board of Directors to which the secretariat in Berlin. The ifo Institute is represented Karen Pittel was appointed in 2017. The Board of Direc- by Karen Pittel, who was appointed to the WBGU in De- tors coordinates the working groups and publicly rep- cember 2016, and her assistant Johannes Pfeiff er. resents the initiative. It is also in close exchange with politics, industry and civil society organisations. The Energy Systems of the Future (ESYS) – Board of members of the Board of Directors are supported by a Directors and Working Group “Governance for personal assistant and the scientifi c and administra- the European Energy Union” tive staff of the ESYS secretariat in Berlin. In May 2018, K. Pittel, J. Pfeiff er, M.-T. von Schickfus, A. Schmitt for Johannes Pfeiff er took over the assistant position for Acatech – National Academy of Science and Engineer- Karen Pittel from Marie-Theres von Schickfus und Alex ing, fi nanced by the German Federal Ministry of Educa- Schmitt. tion and Research, February 2013 to February 2020. Fossil Resource Markets and Climate Policy: The “Energy Systems of the Future“ (ESYS) project con- Stranded Assets, Expectations and the Political ducted by the German Academies Science (acatech – Na- Economy of Climate Change (FoReSee) tional Academy of Science and Engineering, the German K. Pittel, N. Jaakkola, A. Schmitt, S. Sen, M. von Schick- National Academy of Sciences Leopoldina and the Union fus, C. Traeger in cooperation with the German Institute of the German Academies of Sciences and Humanities) for Economic Research (DIW), Berlin, and Humboldt-Uni- provides scientifi c advice and impetus to politics and versity Berlin for the German Federal Ministry of Educa- society on how to design and implement a more sustain- tion and Research, October 2018 to September 2021. able energy system. ESYS was launched in 2013. The FoReSee research project analyses the interplay ESYS, led by acatech, brings together experts from between policies to mitigate global climate change and various scientifi c fi elds, from industry and institutions the behaviour of various participants in fi nancial and and civil society organisations to identify and discuss fossil fuel markets. Its main objective is to investigate challenges, opportunities and policy options for the how policies can be designed to overcome the inertia governance of the energy transition and the realisation of the energy system and facilitate its transformation of its climate and energy-policy goals. Interdisciplinary without excessive costs to society. FoReSee quantifi es working groups collaboratively review the most recent the redistribution of rents implied by various proposed insights into topics like sector coupling or raw materi- climate policy instruments in sectors and countries als for the energy transition. In the format of so-called vulnerable to asset stranding. It tries to understand Analyses, a comprehensive and rather descriptive over- private actors’ responses to current and expected, po-

ifo Annual Report 2018 61 IFO CENTER FOR ENERGY, CLIMATE AND RESOURCES

tentially uncertain, climate policies, and considers how analysis is carried out using numerical modelling, and climate policy design should take these responses into particularly integrated assessment and asset pricing account. FoReSee places an emphasis on the interplay models, building on previous work by the researchers. Climate policies and of actors, policies and information on fossil fuel and asset stranding fi nancial markets, while taking into account political Short- and Long-term Impacts of Climate economy and institutional constraints to eff ective Extremes (SLICE) climate change mitigation. In addition to traditional M. Zimmer in cooperation with T. Geiger and C. Otto, policy instruments, FoReSee investigates recently dis- Potsdam Institute for Climate Impact Research (PIK), cussed supply- and demand-side climate policies and A. Zimmer and J. Granadillos, Climate Analytics, and strives to suggest alternative instruments. The combi- D. N. Bresch, ETH Zurich, for the German Federal nation of empirical, numerical and applied theoretical Ministry of Education and Research, November 2018 modelling provides comprehensive guidance on ap- to October 2021. propriate and feasible policy design. Despite signifi cant progress since the last Assessment The team at ifo heads three work packages. In the fi rst Report of the Intergovernmental Panel on Climate work package, it investigates how fi nancial investors Change (IPCC), the long-term economic impacts of ex- and markets respond to new information and signals on treme climatic events like fl oods, storms, and droughts climate policy, and which types of information shape in- are still poorly understood. Since extreme events are vestors’ expectations of stranding of assets. Moreover, projected to intensify under global warming, gaining it examines which are relevant signals from policymak- a sound understanding of the main impact channels ers, and how companies react to climate policy risk and through which extreme events cause long-term im- uncertainty. In order to answer these questions, the pacts on economies and societies is essential to quan- team analyses the eff ects of policy shocks on stock mar- tifying the overall costs of climate change and to inform kets using econometric techniques. For example, in on- decision-makers of the implications of mitigation tar- going work, ifo researchers are investigating the eff ects gets and eff ective adaptation strategies. of carbon tax ballots in the US state of Washington. The SLICE project aims to fi ll this knowledge gap. Our A second work package explores how energy sector, analysis covers low-, middle-, and high-income coun- special interest groups and climate policy interact at tries. In a fi rst step, we use empirical methods to iden- the national and international levels. Climate policy tify the historical long-term eff ects of extreme events will have a diff erentiated impact on assets, depending on households and on the macroeconomic level. We on their pollution intensity. Carbon-intensive fossil fu- specifi cally focus on the role of public spending and els, for example, or capital assets used in the burning debt, insurance schemes, distributional aspects, and of these fuels, will be more heavily impacted by carbon poverty, as these are key determinants of the long- pricing. Insofar as these assets are owned by diff erent term losses incurred in the aft ermath of disasters. groups in society, they represent vested interests that Based on these fi ndings, we develop two separate dy- manifest themselves in diff ering political preferences. namical models to represent the long-term eff ects at Using theoretical and calibrated political economy the micro- and macroeconomic level, which are sub- models, ifo researchers analyse how diff erent policy sequently employed to assess future risks. To this end, instruments may lead to diff erent political equilibria. we combine projected hazards with socioeconomic data and translate them into direct economic damag- In its fi nal work package, the ifo team investigates how es. We then use these direct damages as an input for uncertainty and related beliefs over future climate the dynamical models to calculate long-term losses Climate change change and climate policy interact with asset prices under diff erent levels of global warming. Finally, we uncertainty aff ects and technological investments in both fossil fuel and link our micro- and macroeconomic analyses to assess investment in clean clean energy production assets. Moreover, it addresses the eff ectiveness of diff erent adaptation options rang- energy the question of how policies and fi nancial instruments ing from physical measures (e.g. dikes) to fi nancial can be designed to eff iciently address these long-run instruments (e.g. insurance schemes). Our work iden- risks, as well as potential investment ineff iciencies, tifi es regional hotspots, where the strongest climate in order to minimise the resulting cost to society. The extremes impact the most vulnerable economies, and

62 ifo Annual Report 2018 IFO CENTER FOR ENERGY, CLIMATE AND RESOURCES

assesses strategies to enhance economic resilience, which is critical to the eﬀ ective operation of the Green Climate Fund (GCF). A strong stakeholder focus is en- sured by a dedicated stakeholder workshop, the publication of policy briefs, and close collaboration with public and private partners.

ifo Annual Report 2018 63 ifo Center for International Economics

The ifo Center for International Economics primarily DIRECTOR AND POSTDOCS works on topics in the following fi elds: For the ifo Center for International Economics 2018 – globalisation and labour markets was characterised by forthcoming personnel changes. In May the Center’s Director, Prof. Gabriel Felbermayr, – trade costs and trade policy was appointed President of the Institute for the World – trade and environmental policy Economy (ifw) in Kiel, a position that he will hold as of 1 March 2019. The preparations for these changes took up some resources in 2018, but Gabriel Felbermayr In the fi rst area the Center is supported by research pro- nevertheless published two articles in the Journal of fessors Devashish Mitra from Maxwell School of Public the European Economic Association. He also acted as Administration, Syracuse University, and Marc-Andreas Associate Editor of this journal, and wrote research re- Mündler, University of California, San Diego. Research ports and policy briefs. Gabriel Felbermayr also played into trade costs and trade policy is conducted in co- a leading role as scientifi c advisor in draft ing a report operation with the professors Wolfgang Keller, Univer- on investment protection for the German Federal Min- sity of Colorado, Boulder, Mario Larch, University of istry of Economic Aff airs and Energy and contributed Bayreuth, and Wilhelm Kohler, University of Tübingen. to a letter on the measurement of trade imbalances to Peter Egger, ETH Zürich, advises the Center in all of the the German federal economics minister. He is member fi elds mentioned above. of the board of Associate Editors of the European Eco- nomic Review and the International Review of Econom- In 2018 the ifo Center for International Economics ics and Finance. He is also an associate of the board worked intensively on topics concerning trade policy. of the European Trade Study Group of scientifi c advi- Investigating tariff Central to its research were issues like Brexit, the tariff sors for the institutes of applied economic research in policy policy pursued by US President Donald Trump, Europe- Tübingen and of the Africa Comission of the German an trade policy and fundamental questions regarding economy. In addition, he sits on the Committe of In- the theoretical and empirical modelling of trade relat- ternational Economics in the society of social politics ed issues, as well as the interaction between political (Verein für Socialpolitik) and will be joining the extend- and economic factors determining trade policy. ed board of executives of the society starting in Janu- ary 2019. The Center conducted several trade related studies for clients like the German Federal Ministry of Economic Af- The deputy director, Dr. Erdal Yalcin, received the off er fairs and Energy, the European Parliament and the Ger- of a professorship at Constance College (Hochschule man Chamber of Industry and Commerce. These studies Konstanz) and acceded to this position in summer attracted a great deal of attention from both the media 2018. Under a special-order contract he is still working and policymakers. One example of this high-profi le at- with the Center to fi nish jointly started projects. Two of tention was the meeting between European Commis- the projects fi nalised in 2018 include a study on the free sion President Jean-Claude Juncker and US President trade agreement with the Mercosur member states, EU-US trade balance Trump. Figures on the EU-US trade balance produced conducted for the German Federal Ministry of Econom- fi gures by the Center were relevant to the discussion on the ic Aff airs and Energy, and some research on the impact increase in tariff s between both regions. Another study of non-tariff barriers to trade. Dr. Inga Heiland, one of conducted for EconPol Europe, which empirically eluci- the Center’s postdocs, accepted an off er to work at the dates the question of the tariff incidence (who is really University of Oslo. going to pay for the tariff s implemented by US President Trump), was even cited by the White House. Dr. Jasmin Gröschl worked on a variety of topics related to international economic policy. One focus was The Center Director Gabriel Felbermayr gave numerous on the scientifi c use of quantitative studies the Center speeches on trade related topics and was published in conducted on behalf of the German Federal Ministry several newspaper articles. He was also interviewed by of Economic Aff airs and Energy. She worked on the ex- various TV and radio programmes in 2018. These activ- post estimation results of free trade agreements and ities earned him a high spot in the FAZ ranking of 2018 the simulation of the eff ects of these agreements in a where he ranked seventh. general equilibrium framework. A study on this topic

64 ifo Annual Report 2018 IFO CENTER FOR INTERNATIONAL ECONOMICS

was published in 2018 in the Journal of Common Market ical anomalies and merged this vastly dissaggregated Studies. Jasmin Gröschl also worked on examining the dataset with other data sources. These anomalies are empirical eff ects of natural disasters and functioned as exogenous shocks, which can be relevant for the exam- a supervisor for one of the Center’s doctoral students, ination of causal inference related to several research Thomas Steinwachs. questions. One such issue, studied by Thomas Stein- How natural disasters wachs, looks at the impact of natural disasters on in- impact migration Andrea Ariu spends a fi ft h of his research time working ternational migration fl ows, how these shocks spread fl ows for the Center. The remainder of his time he is assigned and which channels (e.g. infrastructure) are relevant to to the special research departement 190 (Sonderfor- them. Parts of his work have already been published schungsbereich 190), where a subarea is overseen by in good journals, including an article on the impact of the Center’s Director. In 2018 Andrea Ariu continued the Schengen agreement on international trade fl ows working on his projects on service trade. One of his in the Journal of Common Market Studies. This arti- papers was accepted for publication by the Journal of cle originated from a consulting mandate by the Ger- International Economics. man Federal Ministry of Economic Aff airs and Energy. Thomas Steinwachs spent a large share of his time on In July 2018 Prof. Yoto Yotov of Drexel University, Phil- “ENGAGE”, a collaborative project with the Potsdam In- adelphia, US, joined the Center. He will be at ifo until stitute for Climate Impact Research (PIK). It is fi nanced August 2019, helping with research, policy consulting by the Leibniz Association, and evaluates the eff ects of and supervising the doctoral students at the Center. meteorological anomalies and the role of trade in deal- He is a prestigious empirical researcher in international ing with these eff ects. economics, who is particularly well known for his work on the estimation and simulation of structural gravity In his dissertation on trade policy Alexander Sand- models. In 2018, he published six essays in well-known kamp assesses how European anti-dumping tariff s af- international journals. Two were published in the Euro- fect prices and import quantities. This is an important pean Economic Review and one in the Journal of Inter- question that is hard to clarify due to the diff iculty of national Economics. His time at ifo has been very pro- ascertaining the direction of causal eff ects. Sandkamp ductive to date. Four of his articles are currently under uses the eastward enlargement of the European Union revision and are soon to be published in excellent jour- as an exogenous variation in anti-dumping tariff s for Eff ects of anti- nals, including the two journals mentioned above and new member states. He fi nds that European tariff pol- dumping tariff s on the Economic Journal. Together with Erdal Yalcin and icy had sizeable quantity eff ects; and that consumer Chinese companies Gabriel Felbermayr, Yoto Yotov built up a database on prices increased substantially. Alexander Sandkamp trade sanctions, which is currently being evaluated. In wrote this research paper as a single author, and was March 2019 a conference on this database will be held invited to resubmit it to the Journal of International in Philadelphia. Economics. Another piece of his work draws similar conclusions focusing on the export side by using Chi- Yoto Yotov plays an important role in mentoring nese company data, as China is the country most fre- the doctoral students at the Center for Internation- quently subject to this kind of tariff . To extract causal al Economics. In December, he helped to organise a eff ects, Alexander Sandkamp and his co-author use workshop where the Center’s researchers met with elaborate panel econometric techniques. He was also internationally renowned researchers like Esteban invited to resubmit this paper, this time to the Euro- Rossi-Hansberg (Princeton), Andreas Moxnes (Oslo), pean Economic Review. His research on anti-dumping Claudia Steinwender (MIT) and Gianmarco Ottaviano tariff s stemmed from two related articles on the Eu- (LSE and Bocconi University). ropean Parliament. A diff erent article on non-tariff barriers has already been accepted for publication in the Review of International Economics. This paper was DOCTORAL STUDENTS based on a project conducted by the Center on behalf Over the course of 2018 Thomas Steinwachs and Al- of the Bertelsmann Foundation. exander Sandkamp fi nished and submitted their dissertations. Thomas Steinwachs helped to build up a Feodora Teti, Marina Steininger, Sonali Chowdhry and dataset on the detection of meteorological and geolog- Martin Braml continued to work on their dissertations

ifo Annual Report 2018 65 IFO CENTER FOR INTERNATIONAL ECONOMICS

in 2018. With the exception of Ms Chowdhry, who is Energy on this topic, which has not been made public part of the European research network EUTIP – a proj- to date. In addition, she worked on two smaller studies: ect fi nanced under the Horizon 2020 programme – the one examining the impact of Brexit on Hesse (for the Center’s other doctoral students are participating in ICC Frankfurt) and the other one doing the same for the the QUANTAGG (“Quantitative Analysis of Global Gover- region of Upper Bavaria (for the ICC of Upper Bavaria). nance Issues”) project. This project will be completed by the Center at the end of 2019. In 2017 Marina Steininger contributed to a study on the free trade agreement between the EU and Japan, Feodora Teti worked, among other things, on the cre- which was produced in collaboration with Keio Univer- Dynamic database of ation of a comprehensive tariff database. Off icial sourc- sity in Tokyo. Work on this study conducted on behalf preferential tariff s es on these tariff s are largely incomplete and updated of the Bertelsmann foundation was continued by the infrequently. They also frequently exclude preferential German-Japanese team of authors in 2018. A paper tariff s (tariff s applied in free trade agreements) and based on this research was accepted for publication lack coverage of developments in tariff rates over time. in the Journal of the Japanese and the International Good tariff data is essential for trade research and the Economies. The innovation of the study is that an exist- creation of such databases is crucial. For this reason, ing agreement between the EU and Republic of Korea this project was partly fi nanced by the World Bank. Fe- formed the basis for the quantifi cation in the ex-post odora Teti also took a leading role in a project studying analysis. In their essence and formal implementation, the relevance of rules of origin based on the tariff data both agreements are quite similar. This approach that she collected. The study shows that rules of origin, largely avoids making arbitrary assumptions about the which are frequently seen as a burden on exporting eff ects of the new agreement on non-tariff barriers to fi rms, are oft en superfl uous in practice. These rules are trade. The results show a projected long-term increase implemented to ensure that goods channelled through in real income in Japan of USD 18 billion. The largest third countries, in the case of a free trade agreement, part of this eff ect can be attributed to non-tariff barri- are not subject to tariff privileges. Empirical evidence ers. Tariff s account for only a minor part of this change indicates, however, that a defl ection of commodity in real income. For Germany the simulation projects a fl ows is oft en not profi table in practice. This is because change of about UDS 4 billion, which is also largely due external tariff s between trade partners are oft en quite to the eff ect of non-tariff barriers. similar, and transport costs are too high to turn a profit from this defl ection mechanism. Feodora Teti was Marina Steiniger also examined the trade eff ects of the invited to resubmit her work on rules of origin to the euro. To this end, she analysed whether the introduc- Journal of International Economics. tion of the euro in 1999 led to a reduction in transaction costs and an increase in trade in diff erent sectors. Feodora Teti is also working on the evaluation of the She then examined the infl uence of these eff ects on the tariff database. She is investigating, for instance, economies involved. whether the rules on free trade agreements defi ned in article XXIV GATT are followed in reality. In 2019 she Marina Steininger will spend part of 2019 at the Paris will continue her work at Dartmouth College in the School of Economics. Her dissertation is scheduled for United States. The submission of her dissertation is submission in spring 2020. She will also stay at ifo, but scheduled for spring 2020. Despite the departure of will be supervised by Prof. Felbermayr. the department head, Feodora Teti will remain at the Institute. Martin Braml continued to work on a project on the political economy of trade in 2018. The project evaluates Evaluating the In 2018 Marina Steininger mainly worked on the quanti- the question of how to empirically explain the prefer- consequences of US tative modelling of free trade agreements. While mod- ences of people regarding globalisation, protectionism President Trump’s elling the impact of Brexit was the focus of attention in and large trade related projects like the Transatlantic trade policy 2017, this shift ed to evaluating the consequences of US Trade and Investment Partnership (TTIP). To this end, President Donald Trump’s trade policy in 2018. Marina Mr Braml used extensive data from the Eurobarometer Steininger also contributed to an important study by survey, which is conducted twice every year in all EU the German Federal Ministry of Economic Aff airs and member states. The study’s results suggest that clas-

66 ifo Annual Report 2018 IFO CENTER FOR INTERNATIONAL ECONOMICS

sical factors of infl uence like education or aff iliation Europe net of the income from European investment with a certain sector have a statistically signifi cant in the United States. Tech companies in particular use eff ect on people’s preferences. However, these fac- European subsidiaries to generate patent income. Eu- tors explain only a small share of the preferences of ropean service imports do not show up as such in the individuals. A more important factor is the trust these US trade balance as a result, but are noted as primary individuals have in European institutions. Belonging income. to the German-speaking population also seems to be an important factor, at least when it comes to prefer- Components of US-EU Balance of Payments ences regarding TTIP. The fi ndings suggest that prefer- Since 2003 ences regarding globalisation do not depend as much Secondary income Primary income on socioeconomic parameters as they do on national Services Goods narratives and variables of behavioural economics, like Current account USD bn trust. In early 2019 Martin Braml’s work on this topic 175 will be published as a working paper and sent out for 150 125 further assessment. 100 108 75 50 In 2018 Mr Braml, who is fi nanced by the QUANTAGG 25 51 0 programme, also studied the distributional eff ects of -25 tariff reduction. He does this by focusing on the price -50 -75 -153 side eff ects, which were given less attention in previ- -100 -125 ous research. The main objective is to analyse which -150 parts of the population benefi ted most from the reduc- -175 2003 2005 2007 2009 2011 2013 2015 2017 tion of tariff s. Micro data from the German income and consumption sample, for example, is combined with Source: Bureau for Economic Analysis, 2018. © ifo Institute data on tariff s. One crucial question in this context is if tariff reduction had pass-through eff ects on German Neither Comission President Juncker nor German Explaining trade households; and if so, what the magnitude was of these Chancellor Merkel has drawn attention to these facts in balance discrepancies eff ects. He will continue to work on this ambitious proj- their discussions with the United States to date. ect in 2019. He will spend part of 2019 at the University of Stanford. However, there is admittedly a problem because Euro- pean statistics show a diff erent picture whereby the EU Martin Braml also worked with Gabriel Felbermayr on does have a sizeable trade surplus with the US. Martin various analyses of the US-EU trade balance. This re- Braml worked hard to explain this discrepancy during sulted in a number of publications that received some 2018. The results of his work are documented in sever- international attention. In the fi rst half of 2018 the US al working papers. His dissertation is also scheduled for President pointed to the EU’s large trade surplus. In submission in spring 2020. Like the other doctoral stu- this respect he is partly right, at least in terms of goods dents fi nanced through QUANTAGG, he will remain at the trade. The following fi gure shows that the US had a USD Institute, but will be supervised by Gabriel Felbermayr. 153 billion defi cit with the EU in 2017. But on the other hand, there is also a USD 51 billion surplus in service In 2018 Sonali Chowdhry completed her doctoral trade and a USD 108 billion surplus in primary income courses and the interdisciplinary training programme for the United States. required by the EUTIP. This exposed her to diff erent economic legal and political aspects of trade policy. Combining these items – and omitting secondary income, which is negligible for the calculation – this re- The EUTIP network consists of various leading results in a trade surplus for the US of around USD 14 bil- searchers from diff erent European insitutions. In ad- lion. This has been the case since 2009 and the fi gure dition to the Center Director, they include researchers is likely to be similar in 2018. The imbalance is mainly like Lionel Fontagné (Paris School of Economics), Elaine due to the large surplus in primary income, which rep- Fahey (City University London) and Fabian Amtenbrink resents the income generated from US investment in (Rotterdam). Sonali Chowdhry spent part of her time in

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2018 in a secondment at the Bruegel think tank in Brus- Unfortunately, Germany – and Bavaria as well – are not sels. There she worked with André Sapir, a leading Euro- among the world leaders in the services sector, as is pean trade expert, on a study analysing the Japan-EU the case in industry. There are huge opportunities. The free trade agreement for the European Parliament. increasingly rapid digitalisation of the economy allows a growing number of service industries to participate For her dissertation she is working with French compa- in the international division of labour. Increased trade ny data to answer the question of how, and to what ex- in services not only promises classic gains in special- tent, a free trade agreement aff ects companies of diff er- isation and economies of scale, it could also be an ef- ent size and productivity. Economic theory points out fective means of mitigating the eff ects of labour short- Reducing fi xed costs that large fi rms are aff ected diff erently by trade costs ages, which are increasingly aff ecting many industries. helps small fi rms than small fi rms. This diff erence, however, depends on However, the legal framework must be right for this. the type of trade cost concerned. The reduction of fi xed costs, for example, is found to help small fi rms increase This study discusses ways to improve how the Bavari- their participation in international trade, while a reduc- an economy is embedded in the cross-border regional tion in variable costs (like tariff s) benefi ts larger fi rms. services market to increase productivity and secure The French data make it possible to link very detailed economic wealth. import-export data at the fi rm level with company information. Unfortunately, such data does not exist for We proceed in three steps. First, we survey existing Germany. Sonali Chowdhry will spend part of 2019 at trade barriers in the services sector. We focus on the CEPII in Paris and another part at ETH Zurich, both of change of barriers over time and try to cluster them. which are also EUTIP project partners. She will follow Despite a rather disappointing data situation, robust Gabriel Felbermayr to Kiel aft er his departure. trends and structures can be demonstrated. The second step shows the consequences of the existence of these barriers on trade costs, trade fl ows and relevant economic aggregates. Finally, trilateral cooperation Projects Completed in 2018 opportunities in the triangle Bavaria-Austria-Czech Republic will be discussed with the aim of reducing The Single Market and Movement of Services barriers. The goal here is to work out concrete policy and Labour – How Does Red Tape Aff ect recommendations. Competition? G. Felbermayr, F. Teti, D. Streich for the IHK Munich and Brexit and its Economic Consequences for the Upper Bavaria, November 2017 to February 2018, pub- German State of Hesse lication as IHK Impulse für die Wirtschaft spolitik, 2018. G. Felbermayr, R. Lehmann, M. Steininger, T. Stutz- mann for the Frankfurt am Main Chamber of Commerce The study was written as part of the framework agree- and Industry, March 2018 to April 2018, publication as ment with the IHK Munich and Upper Bavaria. The IHK Impulse für die Wirtschaft spolitik 2018 and ifo For- successful integration of Bavarian companies into schungsbericht 93, ifo Institute, Munich 2018. the European single market is an important pillar for Obstacles employment and growth in the Free State of Bavaria. In the course of Brexit, Germany’s real GDP will fall to intra-European Cross-border global value chains are now a reality, espe- compared to the current status quo. The average eff ect trade in services cially in the manufacturing sector, and the core of these for Germany, however, masks signifi cant heterogene- value chains is oft en found in Bavaria and neighbouring ities between diff erent subnational entities such as the regions. However, national borders are still a major ob- German states. The German state of Hesse faces a spe- stacle to intra-European trade in services. The removal cial situation, as Frankfurt am Main lies at the heart of of these barriers has stagnated in recent years. This is the German fi nancial sector. Overall, the German state worrying as 75% of workers are employed in the service of Hesse and the important metropolitan region of sector. The sector has been contributing to above-aver- Frankfurt-Rhine-Main should be less heavily impacted age growth in gross value added in recent decades and by Britain’s exit from the European Union than Germa- its inputs are becoming increasingly important to the ny. In the case of a “hard Brexit”, Hessen’s price-adjust- competitiveness of the manufacturing sector. ed gross domestic product (GDP) will be –0.17% lower

68 ifo Annual Report 2018 IFO CENTER FOR INTERNATIONAL ECONOMICS

than in the base scenario (versus Germany: –0.23%). ations were freed from the most diff icult chapters that The eff ect on the metropolitan region will be like that have led to much controversy in the past, there is still a on Hesse. If, on the other hand, a more ambitious free great deal of uncertainty about the political feasibility trade agreement was to be reached (“soft Brexit”), the of such an agreement. eff ects on Hesse and its metropolitan region would be –0.08% compared to the baseline (Germany: –0.10%). Economic Growth Impacts of Climate Change Hesse stands to be less strongly aff ected thanks to (ENGAGE) structural economic diff erences in its economy. There G. Felbermayr, T. Steinwachs for the Leibniz-Gemein- are two main reasons for this: fi rst, the sector that schaft (SAW), led by the Potsdam Institute for Climate stands to be the most strongly aff ected by Brexit, Impact Research, March 2016 to December 2018. namely manufacturing, accounts for a smaller share of added value in Hesse than in Germany. Second, fi - The IPCC 5th Assessment Report reveals major nancial, insurance and corporate services provides are knowledge gaps regarding the socioeconomic impact traditionally more present in Hesse than in Germany of climate change, especially changes in economic on average. These are the three economic sectors that growth. This prevents the integrated assessment of may even stand to gain from Brexit. impacts, mitigation and adaptation. ENGAGE aims to move towards closing these gaps by (a) developing Impact of EU Tariff Changes on the German a sound conceptual and empirical understanding of Economy the channels through which climate impact aff ects G. Felbermayr, J. Gröschl, M. Steininger for the German growth, (b) estimating economic damages from Federal Ministry for Economics and Energy, June 2018 selected impacts in a changing climate and socio- to October 2018. economic environment, particularly with regard to long-term growth eff ects, and (c) exploring how the The headlines surrounding the White House and the inclusion of growth eff ects changes the integrated incumbent US President have not faded since the be- assessment of selected impacts and mitigation strat- ginning of his term. In the process, protectionism and egies. This comprehensive approach will contribute the threat of measures to turn away from free trade and to the next generation of integrated assessments for Understanding how multilateral agreements are in the focus of the media. climate policy advice. climate change This study off ers an alternative, constructive approach. impacts long-term Instead of worst-case scenarios, the potential eff ects ENGAGE addresses three challenges: a) to develop a growth and of trade liberalisation measures between the EU and sound theoretical understanding and empirical quanti- development the US are examined. Specifi cally, the eff ects of a refi cation of the channels through which climate impacts ciprocal tariff reduction between the US and the EU on may aff ect long-term growth and development pat- industrial products and, in a subsequent scenario, the terns; b) to develop new approaches for a bottom-up reduction of import tariff s in the agricultural sector be- economic valuation of biophysical impacts bridging tween the two trading partners are examined. Further- the gap between impact and economic models; and more, the study examines the impact of liberalising c) the integration of impacts and mitigation in a global the US public procurement market. Trade cost-cutting dynamic growth framework. measures are simulated and the resulting consequences analysed for Germany, the EU, the US and third coun- ifo conducts econometric analyses of the impact of tries. natural hazards on economic outcomes to explore potential mechanisms at the hazard/growth nexus. The simulated tariff reductions do not lead to drastic changes in international trade structures in the long Since most existing studies use outcome-based disas- term. Above all, the reduction of non-tariff trade bar- ter data, which suff er severe reporting, endogeneity, riers, but not the abolition of tariff s, infl uences inter- and aggregation issues, ifo is building a new database national trade. All considerations lead to the conclu- of geological and meteorological events comprising ex- sion that a balanced, fair agreement with measurable ogenous data on physical intensities collected from pri- mutual advantages can be achieved only through a mary sources, geographically disaggregated at country, comprehensive negotiation process. Even if the negoti- region, and grid cell level.

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To this end, the ifo GAME Database on geological and Current Projects meteorological events has been updated to a longer time period (1979–2014) and has been completely reconstructed from scratch on a geographically dis- Quantitative Tools for the Analysis of Global aggregated coordinate raster grid (50 km x 50 km). In Governance Issues (QUANTAGG) cooperation with researchers from the Potsdam Insti- R. Aichele, F. Teti, M. Steininger, M. Braml for the Leib- tute for Climate Impact Research (PIK), the database niz-Gemeinschaft (SAW), January 2016 to December Spatial spillover of has been enriched with new components, like more 2019. natural disasters on precise measurements of wind speeds via wind fi eld economic activity models. The goal of QUANTAGG is to contribute towards the development of quantitative tools for policy analysis Currently, this database is used in the project “Shed- that can be used to address some of the most pressing ding Light on the Spatial Diff usion of Disasters”, to ana- international cooperation issues of our times. These lyse he spatial spillover eff ects of natural disasters on include the consequences of trade liberalisation and economic activity (measured by night light emissions) the reordering of the multilateral trade order, and in- on a global coordinate raster grid. ternational climate policy. In the last few years, new methods in quantitative trade modelling have become This is done in cooperation with two researchers from available, but they are only starting to be used for ap- the University of Utrecht. A corresponding working pa- plied trade policy analysis. QUANTAGG attempts to per appeared in the CESifo Working Paper Series (No. make use of the methodological advances to improve 7146 2018) in summer 2018. In a follow-up project with our understanding of important developments in the the working title “Illuminating the Spatial Connectivity global economy and to inform economic policy. of Disasters”, the role that country borders and infrastructure connectivity play in the spatial transmission In a research paper with Inga Heiland, Rahel Aichele in- of disaster eff ects is examined. Both projects are a part vestigates the extent to which trade liberalisation has of the inaugural dissertation “Geography Matters: Spa- contributed to global production fragmentation and tial Dimensions of Trade, Migraton and Growth”, sub- the formation of production networks, taking global mitted in September 2018 by Thomas Steinwachs to value chains explicitly into account. The work derives attain a Doctor oeconomiae publicae (Dr. oek. publ.) at structural equations for value-added trade fl ows and the University of Munich. indicators of production sharing put forward in the extant literature and develops model-based measures An ENGAGE project workshop with the participation for production networks from a multi-sector gravity of project partners from PIK took place at the ifo Insti- model with inter-sectoral linkages. The model is used tute on 18 and 19 October 2018. During this workshop, to perform a counterfactual analysis of China’s WTO achieved research outputs were discussed and the accession in 2001. The associated trade cost changes scope for future project cooperation was addressed. spurred global production fragmentation, explaining about 3–9% of the decrease in the world DVA ratio – an While ifo successfully completed its contribution to EN- indicator of production sharing – as observed between GAGE at end of October 2018, the fi nal project report 2000 and 2007. The results also imply that China’s WTO is not due until August 2020. The reason for this is a accession was a driving force behind the strengthen- cost-neutral project extension on the part of PIK. ing of production networks with its neighbours. The paper is forthcoming in the Journal for International Economics.

Feodora Teti, together with Gabriel Felbermayr and Erdal Yalcin, investigates the necessity of rules of origin in free trade agreements (FTAs). Rules of origin exist to prevent non-member countries from exporting their goods to an FTA member via the FTA country at the lowest external tariﬀ rate and then transshipping

70 ifo Annual Report 2018 IFO CENTER FOR INTERNATIONAL ECONOMICS

the good within the FTA – also called trade defl ection. heterogeneously. Thereby trade liberalisation impacts Poor households The research paper uses a new tariff database to ana- the distribution of purchasing power across individ- suff er more from lyse diff erences in countries’ external tariff schedules uals. Presumably, poorer households save less and customs duties and fi nds that the latter correlate strikingly for coun- spend a larger income share on goods. Simultaneous- tries belonging to the same deep FTA. This is due to ly, they tend to consume more imported goods (which how countries select with whom to negotiate and sign are oft en cheaper and of lower quality). Thus, poorer an FTA, rather than ex-post convergence. Therefore, in households suff er relatively more from customs duties. most FTAs, for the vast majority of products, trade de- Vice versa, we hypothesise that lower income deciles fl ection is not profi table even in the absence of costly should also benefi t disproportionately from tariff cuts rules of origin, rendering rules of origin unnecessary. implemented globally in post Uruguay-Round times. This empirical research paves the way for a quantita- Using data from the Income and Consumption Survey tive analysis of the eff ects of rules of origin. The paper and high-resolution price data from the German Statis- is currently in the revision and resubmission process tical Off ice, as well as tariff data, we test the hypoth- with the Journal for International Economics. eses outlined above and expand the research fi eld of globalisation consequences, which has tended to focus Together with Gabriel Felbermayr and Jasmin on heterogeneous labour market eff ects rather than on Gröschl, Marina Steininger investigates the econom- real income eff ects in previous years. ic consequences of Brexit in a quantitative application. The paper builds on further developments of the Part of the project is also to organise workshops. On trade simulation model, which are part of this project. December 13 and 14, a workshop with approximately A special focus of the analysis are structural estima- 35 participants will be hosted. tions of required model parameters, which allow for asymmetries and take diff erent steps of European International Market Interactions, Institutions integration into account. For another study together and the Costs of Natural Disasters with Gabriel Felbermayr, Marina Steininger estimates J. Gröschl for the DFG, January 2017 to December 2019, the trade creation eff ects of euro adoption, which re- publication as CESifo Working Paper No. 7146, 2018. sult from a reduction in transaction cost. This work contributes to existing literature, which has predomi- Natural disasters can result in severe economic shocks, nantly focused on the (macroeconomic) disadvantag- with implications for human and economic develop- es of euro adoption, due to the loss of an independent ment. Moreover, anthropogenic climate change could interest and exchange rate policy, for example, and increase the frequency and severity of such events. which has disregarded the welfare-relevant reduction Thus, studying how past natural disasters shaped eco- of trade costs. nomic outcomes and how these had been conditioned by institutional set-ups or by trade openness, migra- Similar disasters In joint research with Gabriel Felbermayr, Martin Braml tion, and capital fl ows, can provide important insights have diff erent eff ects investigates social preferences for trade liberalisation into how to cope with the eff ects of climate change in around the world and globalisation. The study, which addresses the po- the future. litical economy of trade politics, is based on survey waves of the Eurobarometer. This set-up also makes it Empirical studies suggest that similar disaster events possible to identify national and regional diff erences have diff erent eff ects throughout the world and in attitudes within the EU. Martin Braml, together with that countries’ institutions, as well as their embed- Michele Battisti, Florian Dorn, and Gabriel Felbermayr, dedness in international markets, are important in investigates the eff ects of global trade on real incomes adapting to natural disasters. However, most of the induced by price changes in consumer goods under empirical literature suff ers from a number of prob- the assumption of non-homothetic preferences. Trade lems. First, studies tend to use information on the liberalisation is likely to aff ect the prices of goods and incidence of natural disasters from databases drawn services, in particular, and most directly those of trad- from insurance records or news. This introduces se- able goods. To the extent that diff erent types of con- vere reporting and endogeneity biases, as both insur- sumers systematically buy diff erent types of goods, ance penetration and damage caused are correlated trade aff ects the overall cost of living of consumers with development. To tackle this issue, Felbermayr

ifo Annual Report 2018 71 IFO CENTER FOR INTERNATIONAL ECONOMICS

and Gröschl (2014) have proposed a database, ifo Furthermore, major work has been undertaken in an- GAME, which collects information on geological and alysing the role of connectivity of cells for spillovers. meteorological events from primary sources. Sec- A paper called “Illuminating the Spatial Connectivity ond, disasters are oft en local events; hence, mapping of Disasters” is on the verge of being fi nalised. It uses them to countries of heterogeneous size can result in grid-level disaster intensity data, combined with night measurement error and attenuation bias. This prob- lights as a proxy for economic activity and global data lem can be resolved by using recently available glob- on road networks to capture the connectivity of neigh- al data at the grid level. bouring cells. We show that spillovers on economic activity from weather shocks work only through well-con- This project has developed an extended database on nected cells. meteorological and geological intensities and exploits it to answer a number of research questions situated As part of this project, a three-month research stay at at the crossroads of environmental economics, devel- the University of Adelaide was undertaken in the fi rst opment economics and international trade. Given the quarter of 2018. During this time, we worked on a proj- seminal features of the underlying disaster and climate ect called “Quantifying the Short-Run Productivity and data, the results obtained will signifi cantly support ev- Expenditure Eff ects of Natural Disasters”. In this paper, idence-based policy-making for climate action in the we estimate the short-run eff ects of natural disasters context of sustainable development. on international trade using a panel of monthly trade data and data on two types of short-lived natural di- The research strategy follows three steps: fi rst, we sasters: earthquakes and storms. We use the eff ects of investigate how natural disasters aff ect international disasters on a country’s total factor productivity and trade and production patterns. Second, we analyse on expenditure to inform a dynamic quantitative trade reductions in economic growth due to natural disas- model. Results show strong heterogeneity across di- Identifying the impact ters at the local level and potential spillover eff ects saster types and country groups: while countries with of disasters using using unique grid-cell-level data. Connectivity of lo- high debt levels and least developed countries see both money transfers cal cells plays a major role in spillover patterns and their imports and exports reduced, developed coun- is analysed in this context using global road network tries are almost never aff ected. Disaster impacts are data. Third, we will identify how fi rms behave if they strongest within the fi rst quarter aft er the shock and are directly aff ected by natural disasters or indirectly vanish within a year of disaster occurrence, highlight- through partner fi rms using Colombian fi rm-to-fi rm ing the importance of using data at a higher frequency transaction data. Finally, we use unique international than annual data. This work is being jointly conducted money transfers and migration corridors to identify with a researcher from the University of Adelaide and the impact of natural disasters on the behaviour of is still ongoing. agents. Currently, we are working to clean the Colombi- In 2018, we created the dataset on natural disaster an fi rm-to-fi rm transaction level data to be able to intensities at a 0.5°×0.5° grid cell level for 1979–2014 match it to our gridded geological and meteorological around the globe. The CESifo Working Paper “Shed- events database. This major datawork will be ongoing ding Light on the Spatial Diff usion of Disasters” (with in 2019. When fi nalised, the information on fi rm loca- G. Felbermayr, M. Sanders, V. Schippers and T. Stein- tion around the globe will be matched to the disaster wachs, CESifo Working Paper 7146, 2018) deploys the intensity data and used to analyse the behaviour of data and combines it with night light emission data for fi rms when directly or indirectly aff ected by a disas- 24,000 grid cells for the period 1992–2013. In this pa- terous event. In addition to this data provision, we per, we fi nd pronounced negative eff ects at the local are also working to clean our information on money level and strong positive spatial spillovers. Economic transactions and collecting information on major mi- activity, however, reacts diff erently across types of gration channels around the globe. In 2019, we plan weather shocks. Our results also indicate that spatial to look into the eff ects of natural disasters on money spillovers aft er an extreme weather event tend to be transfer fl ows on a fi ne local level in certain migration local phenomena. Finally, we identify substantial het- corridors. erogeneity across income groups.

72 ifo Annual Report 2018 IFO CENTER FOR INTERNATIONAL ECONOMICS

Transatlantic Trade and Investment Partner- dhry, who obtained her Master’s degree in Economics ship International Training Network from Oxford, was hired as a Ph.D. student at ifo. She will G. Felbermayr, S. Chowdhry, EU/Horizon 2020/Marie- be working on rules of origin under the supervision of Skłodowska-Curie, project led by the University of Bir- Prof. Felbermayr. mingham, October 2017 to September 2020.

This project deals with potential reforms to the Euro- pean Union’s trade policy. The heated public debate about TTIP, the free trade agreement negotiated between the US and the EU, has illustrated the need to reassess the way the EU negotiates trade deals and that old paradigms have become obsolete in the face of profound geopolitical, technological and social changes. The role that regulations concerning environmental protection, labour market institutions and consumer protection playà in trade agreements has to be reevaluated. Other points for debate include the enforcement of investment protection clauses in bilateral treaties.

The project is handled by a consortium of eleven institutions: in addition to the ifo Institute, contributors include the University of Birmingham, ETH Zurich, Par- is School of Economics, the University of Nottingham, Erasmus University Rotterdam, Università degli Studi di Torino, the German University for Administration in Speyer, the University of Passau, City University Lon- don and the Egmont Institute in Brussel. Martin Try- bus of the University of Birmingham acts as project lead. The consortium is interdisciplinary, and consists primarily of economists and political scientists. This reﬂ ects the interdisciplinary nature of the research question. The project aims to train 15 Ph.D. students as experts in the area of European trade policy and to apply that knowledge in Europe and the world.

The ifo Institute will be working on rules of origin within the project. Such rules, which oft en involve considerable amounts of red tape, determinewhether a good originates in a country that is part of a free trade agreement; and thus whether it can benefi t from the agreement (through tariff exemption or accreditation). Em- pirical studies show that many exporters prefer paying a tariff over proving that a product is entitled to benefi t from the provisions of the free trade area. Strict rules of origin render trade deals less eff ective. They can also have negative eff ects on third countries, since adhering to them can lead exporters to re-optimise their supply chain. The consortium began work on signature of the contracr in April 2017. In October 2017, Sonali Chow-

ifo Annual Report 2018 73 ifo Center for Macroeconomics and Surveys

The ifo Center for Macroeconomics and Surveys re- projects and policy papers. It has published papers search focuses on economic policy analyses, macro- studying the economic eff ects of diff erent fi scal union Researching economic research, and inequality and redistribution. scenarios, for example of a common unemployment inequality and The Center also provides services in the form of survey insurance scheme in the euro area. Researchers in redistribution data and methodological expertise, as well as business this area have examined public attitudes towards cycle indicators and macroeconomic forecasts. The those reforms by means of randomised survey exper- Center’s “ifo Business Climate Index”, a monthly survey iments. In another policy-relevant project, the Center of 10,000 German fi rms, receives considerable public has developed the fi rst dynamic scoring framework and media attention as it is Germany’s most important for modelling and analysing tax and benefi t reforms leading business cycle indicator. for all EU countries together with co-authors from the European Commission and its Joint Research Centre. To this end, the researchers involved have combined EUROMOD with QUEST, the European Commission’s Research Projects dynamic stochastic general equilibrium (DSGE) model used for the analysis of structural reforms. This work The Center’s research focuses on: has a direct policy impact, as the newly developed framework will be applied by the European Commis- – economic policy analyses sion within the context of the European Semester in – macroeconomic research the future. – inequality and redistribution Another research area is the European Central Bank’s monetary policy and its impact on fi nancial stability PROJECTS IN ECONOMIC POLICY ANALYSES and the overall economy. Special attention is paid to the analysis of TARGET2 balances. Furthermore, the This research area covers a wide range of economic Center’s research focuses on the reform process of fi - policy analyses. nancial sector regulations, particularly with regard to the European Banking Union. The Center employs various methods to study the eff i- ciency, welfare and stabilising eff ects of economic policies from national, European, and international perspec- Projects in Detail tives. Researchers in this area conduct ex-post analyses One focus of the research on national fi scal policies in using both macro and micro data to assess the impact EU member states is placed on analysing the eff icien- of implemented reforms. Ex-ante analyses address the cy eff ects of tax and transfer systems, as well as their eff ects of reform proposals for the German tax-bene- redistributive and stabilising eff ects. Analyses are confi t system, fi scal policies in other EU member states, ducted using various empirical approaches and mod- as well as the economic eff ects of fi scal integration in els, including the tax-benefi t microsimulation model Europe using (behavioural) simulation models. These for the European Union (EUROMOD), which allows include ifo’s tax-benefi t microsimulation model for Ger- the micro-based analysis of changes in respective tax many (developed together with the ifo Center for Public and transfer policies in the EU28 and the simulation of Finance and Political Economy), EUROMOD, the tax-ben- counterfactual policy reforms. efi t microsimulation model for the European Union, and Analysing changes the NBER’s TAXSIM model for the US. These models al- Two projects by Mathias Dolls, Clemems Fuest, Andreas in tax and transfer low micro-based analyses of changes in tax and trans- Peichl and Christian Wittneben focus on the role of Au- policies fer policies and the simulation of counterfactual policy tomatic Stabilisers. The third project is a joint piece of reforms. Based on the results of these empirical studies, work by Mathias Dolls, Andreas Peichl and Christian researchers develop policy recommendations for de- Wittneben, with colleagues working at the European signing eff icient and equitable tax and transfer systems. Commission and its Joint Research Centre in Seville. It proposes a new methodology for ex-ante fi scal sur- The Center has actively contributed to the current de- veillance that incorporates behavioural and macroeco- bate over euro area reforms through various research nomic eff ects (“Dynamic Scoring”).

74 ifo Annual Report 2018 IFO CENTER FOR MACROECONOMICS AND SURVEYS

In particular, the fi rst project (“Crisis, Austerity and rate that a household faces will fall following an in- Automatic Stabilisation”) analyses how reforms of come decline in a recession, thereby increasing work tax-benefi t systems in the period 2007–2015 aff ected incentives and hence labour supply. This eff ect off sets the automatic stabilisation capacity in the EU27 based part of the initial income decline, stabilising aggre- on harmonised European micro data. Factors like un- gate income and output. The magnitude of the eff ect employment benefi ts or income taxes can stabilise depends on the change in the marginal tax rate aft er individual and aggregate income and smooth con- a change in gross income, as well as the elasticity of sumption demand in the event of shocks. Our analysis labour supply with respect to a change in the aft er-tax makes it possible to disentangle automatic changes wage. We estimate a structurally discrete choice la- in net government intervention from those that take bour supply model and individual tax rates for house- place aft er explicit government legislation (discretion- holds in the EU28 using the microsimulation model EU- ary changes), as well as changes in actual incomes and ROMOD and EU-SILC household data. Our estimations behavioural responses. We fi nd automatic stabilisers show that up to 10% of a fall in household income is to be generally heterogeneous across countries – both off set by an increase in labour supply. The EU average Progressive tax in levels and in terms of policy changes over the crisis. is roughly 2%. The results reveal a great deal of het- systems incentivise Stabilisation coeff icients vary from less than 25% in erogeneity across countries, which is mainly due to work in a recession Eastern European countries to almost 60% in Belgium, diff erences in the progressivity of tax systems across Germany, and Denmark. We discuss the implications of Europe. The incentive eff ect is large in countries with our results for post-crisis recovery. a highly progressive tax schedule, while it is zero for countries with a fl at tax, where the marginal tax rate is Furthermore, we have developed a random utility-dis- constant. Diff erences in labour supply elasticities also crete choice model of household behaviour to analyse play a signifi cant role. the incentive eff ects of taxes. This model is used in con- junction with and as an augmentation of the (static) tax A further study by Mathias Dolls, Clemens Fuest, Car- model EUROMOD. The following two projects use the la Krolage, Florian Neumeier and Daniel Stöhlker (“In- labour supply model as an integral part of the analysis. centivising Structural Reforms in Europe? A Blueprint In the paper “Dynamic Scoring of Tax Reforms in the for the European Commission’s Reform Support Pro- EU”, Mathias Dolls, Andreas Peichl and Christian Wit- gramme”) assesses the EU Commission’s recently pro- tneben (together with S. Barrios, A. Maft ei, S. Riscado, posed Reform Delivery Tool. By providing fi scal trans- J. Varga, European Commission) present the fi rst dy- fers to member states, this tool strives to incentivise namic scoring exercise linking a microsimulation and a governments to conduct growth-enhancing structural dynamic general equilibrium model for Europe. We il- reforms. We assess the current policy proposal, pro- lustrate our novel methodology by analysing hypothet- vide an in-depth analysis of its advantages and poten- ical tax reforms on the social insurance contributions tial risks, and subsequently develop our own proposal system for Belgium. Our approach takes into account for the design of such a fi scal instrument. This project is the feedback eff ects resulting from adjustments and based on a report for the European Parliament, which behavioural responses in the labour market and the assessed convergence in the Economic and Monetary economy-wide reaction to tax policy changes, which Union, and is funded by the Leibniz Research Alliance is essential to a comprehensive evaluation of the tax “Crises in a Globalised World”. reforms. We fi nd that the self-fi nancing eff ect of a reduction in employers’ social insurance contributions A joint research project by Robert Lehmann and Xenia in Belgium is substantially larger than that of a compa- Frei, Felix Rösel, both of ifo Dresden, and Sebastian rable reduction in employees’ social insurance contri- Langer, Leibniz Institute of Ecological Urban and Re- butions. This paper will be published in the Journal of gional Development, Dresden, investigates whether Policy Analysis and Management. election externalities exist between diff erent layers of government. To this end, the authors draw on vot- Shocks in federal The second project (“Labour Supply and Automatic ing polls for Germany in total, and Berlin in particular, parliament voting Stabilisers”) estimates the stabilising eff ects of tax for the four main parties (CDU, SPD, the Greens and intention impact and transfer systems through a marginal incentives the Left ). The results suggest that shocks in federal state parliament channel. When income taxes are progressive, the tax parliament voting intention impact state parliament voting intentions

ifo Annual Report 2018 75 IFO CENTER FOR MACROECONOMICS AND SURVEYS

voting intentions, but – as a new fi nding – the reverse The research project “The German current account and also applies to the same extent. The eff ects also diff er capital market imbalances in the Eurozone against the across parties. Electoral externalities are lower for the background of German fi rm’s investment and saving CDU, but increase in times of government. The oppo- decisions: causes and policy implications” is a joint site holds true for the SPD and the Left . Detailed results work by Timo Wollmershäuser, Tobias Schuler, as well were published as CESifo Working Paper No. 6375, 2017 as Thorsten Klug and Eric Mayer at University of Würz- and the paper has been submitted to an international burg. The project is supported by the German Bundes- journal. bank. It examines the behaviour of the German non-fi - nancial corporate sector, which became a net lender Another project entitled “Explaining Spatial Patterns of over the last two decades. The project has identifi ed Foreign Employment in Germany”, which is joint work several channels that prove the close relationship be- by Robert Lehmann and Wolfgang Nagl, Institute for tween a rise in corporate net lending and the widen- Advances Studies, Vienna, explores the main determi- ing of the German current account surplus. In the fi rst nants of the regional representation of foreign employ- working paper we show that fi nancial friction, world ees in Germany. Since migration determinants are not demand and labour supply shocks can explain around exclusively the same between workers of diff erent na- 40% of the variation in corporate net lending and the tionalities, the paper explains spatial patterns not only current account on a one-year horizon. for total foreign employment, but also for the 35 most important migration countries to Germany. Based on a The paper “Financial Bubbles in Interbank Lending” by total census for all 402 districts in Germany, the study Tobias Schuler (jointly with Luisa Corrado at University documents a signifi cant degree of heterogeneity in mi- of Rome) analyses the eff ects of several policy instru- gration determinants between nationalities. It turns ments to mitigate fi nancial bubbles generated in the Cultural factors out that cultural factors and amenities correlate in banking sector. The New Keynesian macroeconomic outweigh economic more cases with the nationality-specifi c representa- framework is augmented by endogenising boundedly conditions in spatial tion of foreign employment compared to labour mar- rational expectations on asset values of loan portfolios patterns of foreign ket and economic conditions. The authors identify and interbank trading. They show how a fi nancial bub- employment three groups of countries for which diff erent determi- ble can develop from a fi nancial innovation. By incor- nants are more important than others. The paper has porating a loan management technology and a bank been accepted for publication in Regional Studies. equity channel, the authors can evaluate the eff icacy of several policy instruments in counteracting fi nancial A current research project by Mathias Dolls and Carla bubbles. They fi nd that an endogenous capital require- Krolage analyses the eff ect of fi nancial incentives on ment reduces the impact of a fi nancial bubble signifi - retirement entry behaviour in the context of a major cantly, while central bank intervention (leaning against recent policy reform (“Rente mit 63”). This reform en- the wind) proves to be less eff ective. A welfare analysis ables individuals with long contribution histories to re- ranks the policy reaction through an endogenous cap- tire much earlier without facing any deductions. Using ital requirement as the best option. The results were high-quality administrative data from public pension published as CEIS Working Paper No. 47 and ifo Work- accounts, we conduct both an event study and a coars- ing Paper 260. ened exact matching procedure. The results indicate that individuals who are eligible for the early retire- In “The Money Multiplier in the Financial Crisis: a Quan- ment scheme retire on average 5.4 months earlier. titative Evaluation” Tobias Schuler (jointly with Jargjit S. Chadha, Director National Institute of Economic and The research group also conducted several projects Social Research, UK, University of Kent and University assessing the recent tax reform in the United States. of Cambridge, Luisa Corrado, University of Rome, and World Economic Survey Experts Dorine Boumans and J. Meaning, Bank of England) presents a model of mon- Carla Krolage evaluate the impact of the tax reform ey that allows for a richer interaction between broad around the world, as well as preferred policy respons- and narrow aggregates, framing them as the result of es. Carla Krolage and Klaus Wohlrabe also analyse the an optimal balance sheet decision by banks. The dy- eff ects of the reform on German businesses’ tax bur- namics of this model off er an explanation as to why den and investment choices. large increases in narrow money since the 2007–2008

76 ifo Annual Report 2018 IFO CENTER FOR MACROECONOMICS AND SURVEYS

fi nancial crisis have not led to dramatic increases in other episodes of sudden stops, the distressed econ- broad money in many advanced economies, but rath- omies of the euro area had to cope with sharply rising er a collapse in the money multiplier. They also suggest borrowing costs and signifi cant diff iculties tapping in- that a credit supply shock, like the one that aff licted the ternational capital and money markets. However, un- US economy in 2008, increases banks’ demand for nar- like the typical sudden stop, the economies of the euro row money and that, by meeting this demand perfectly area had access to additional resources to cushion the Cushioning private elastically, central banks can attenuate any contraction eff ects of private capital outfl ows. In particular, they capital outfl ows with in broad money and improve their macroeconomic per- enjoyed the extraordinarily accommodative provi- European Central formance. What is more, they show that a supply-driven sion of liquidity to commercial banks by the European Bank liquidity change in narrow money imposed by the central bank, Central Bank as part of its unconventional monetary such as QE, can stimulate the macroeconomy. Lastly, policy measures. Commercial banks without access to they conduct a counterfactual exercise based on the private interbank lending, but with suff icient collater- 2008 crisis, which suggests that if the US Federal Re- al, could obtain from their national central bank the serve had not provided bank reserves to the extent it liquidity they needed to compensate for the drying up did, broad money would have fallen and the economy of private funding. As the closing of these funding gaps may have experienced a deeper contraction in output by central bank liquidity was very unevenly distribut- and a more protracted recovery. Their contribution was ed across member countries’ banking systems, signifi - published in the Proceedings of the Royal Economic Soci- cant and persistent imbalances in the national central ety Conference, Brighton, UK, March 2018. banks’ positions in the Trans-European payment system, known as TARGET2, emerged. The main results In the project “European Financial Integration through can be summarised as follows. First, the recourse to Securitisation”, Tobias Schuler (jointly with Karolin the European Central Bank’s unconventional mone- Kirschmann and Jesper Riedler from ZEW) investigates tary policy measures – refl ected in the accumulation the potential of the securitisation market for bank- of TARGET2 balances – was mainly driven by capital based fi nancial integration. In order to eff ectively infl ow shocks. In contrast, cyclical drivers like innova- crease cross-border risk sharing through securitisation tions to aggregate demand or aggregate supply do not in the EU, they suggest a two-pronged strategy: First, it seem to induce statistically signifi cant changes in TAR- entails further improving the existing regulatory frame- GET2 positions. Second, results from a counterfactual work in order to reduce barriers to a thriving securitisa- analysis suggest that the uneven recourse of national tion market. Second, explicit incentives for risk sharing banking systems to the European Central Bank’s un- Unconventional and securitisation in Europe should enter EU regulation conventional refi nancing operations caused real dis- refi nancing avoided and EU programmes. The suggestions are practical in tributional eff ects across the euro area economies. deeper recessions that they build on adaptations of existing regulation While in the distressed euro area member countries and programmes, instead of devising new ones. Specif- deeper recessions could be avoided, the accumulation ically, they make the case for linking the countercyclical of TARGET2 claims in the core countries dampened ag- capital buff er to a measure of geographic diversifi ca- gregate economic activity. tion as a way to strengthen incentives for risk sharing. Furthermore, they argue that pertinent changes to the PROJECTS IN MACROECONOMIC RESEARCH terms and conditions of subsidies to securitised SME loans within the existing SME Initiative will help create The Center’s macroeconomic research primarily investi- cross-border investment opportunities in a strategi- gates the causes and economic impact of macroeconom- cally important sector of the European economy. The ic shocks and deduces their implications for applied busi- results were published as EconPol Policy Brief 10. ness cycle analysis. Thematically, its work focuses on the infl uence of fi nancial market frictions and uncertainty, as In the project “Capital Flows in the Euro Area and well as the impact of monetary and fi nancial policy mea- TARGET2 Balances” Timo Wollmershäuser (together sures on real and fi nancial variables. Many questions are with Nikolay Hristov, Deutsche Bundesbank, and Oli- drawn from experiences and observations related to the ver Hülsewig, University of Applied Sciences Munich) global fi nancial crisis and the euro crisis. As far as meth- looks at the consequences of the capital fl ow reversals ods are concerned, both theoretical approaches, such as in the euro area between 2008 and 2014. As in many for example DSGE models, and empirical time series ap-

ifo Annual Report 2018 77 IFO CENTER FOR MACROECONOMICS AND SURVEYS

proaches such as VAR models are used. The survey data The study “Time-Varying Business Volatility and the collected by the ifo Institute is oft en used in empirical Price Setting of Firms” (Christian Grimme together with work. Financial constraints and business uncertainty, for Rüdiger Bachmann, University of Notre Dame, Benja- example, are identifi ed using special questions from the min Born, University of Bonn, and Steff en Elstner, RWI) ifo Business Survey at the fi rm level. was revised in 2018 in the course of a Reject & Resubmit and is now forthcoming in the Journal of Monetary Eco- In the area of forecasting methodology, the Center pri- nomics. Empirical micro and macro models show that marily concentrates on processes of information con- a rise in fi rm-level uncertainty increases the frequency densation and selection against a background of the of price adjustments, the dispersion of prices and the enormous amounts of data available to the forecasters average level of absolute price adjustments. This leads (partly as a result of ifo’s own surveys). For example, this monetary policy to become less eff ective in times of area investigates whether micro data from business heightened uncertainty. and surveys are suitable for forecasting macroeconomic time series. In addition, alternative condensation The project “The Price and Employment Response of procedures for micro data on participants, industries Firms to the Introduction of Minimum Wages” (Sebas- and regional delimitations are examined. One example tian Link) studies the short-term price and employment is boosting techniques that enable the identifi cation reaction of manufacturing fi rms and service compa- of core information (e.g. fi rms with a high forecasting nies to the introduction of a statutory minimum wage quality). Furthermore, processes like Bayesian model in Germany in 2015. Exploiting variation in treatment averaging or models with mixed frequencies are exam- intensity across diff erent industries and regions, the ined for their suitability and are further developed. minimum wage eff ects are analysed by means of the unique fi rm-level survey data from the ifo Business Sur- Projects in Detail vey on expected and realised changes in prices and employment. In line with previous studies, the estimated In the project “Non-Linear Eff ects of Uncertainty and employment eff ect is only very modestly negative and Negative eff ects Real Fluctuations”, Christian Grimme (together with insignifi cant. In contrast, fi rms that were aff ected more of uncertainty are Steff en Henzel, Munich University of Applied Sciences) strongly by the minimum wage increased their prices particularly strong analyses whether the link between uncertainty and signifi cantly more frequently in the period around its in- when uncertainty is real activity is non-linear. The question is tackled both troduction. Making use of the high correlation between still low at the fi rm level with ifo micro data, and at the macro the survey data and administrative producer price in- level with the help of non-linear vector-autoregressive models. Increases in uncertainty have negative eff ects, dices reveals that the magnitude of the price eff ect is especially when the level of uncertainty is still low. This quantitatively large. Altogether, the results suggest that is because banks cut back on their lending particularly price pass-through is an important margin of adjust- in those situations. ment for fi rms in response to minimum wages.

The study “Uncertainty and the Cost of Bank vs. Bond The project “The Eff ect of Disaggregate Information on Finance” by Christian Grimme was heavily revised in the Expectation Formation of Firms” by Sebastian Link 2018. It analyses the impact of an increase in economic (jointly with Lukas Buchheim, LMU Munich) studies a uncertainty on the costs of corporate bonds and bank new aspect of fi rms’ expectation formation by asking loans in Germany and the US. The paper shows that whether expectations primarily refl ect aggregate, in- Bond yields increase bond yields rise during periods of volatility, while bank dustry-wide information (e.g., industry trends) or dis- with volatility, while loan rates fall. This diff erence is due to the fact that aggregate information (e.g., fi rm-specifi c information). bank loan rates fall banks, unlike the capital market, collect borrower-spe- First, they show that disaggregate information is strong- cifi c information, because they are interested in long- ly associated with expectations even when controlling term customer relationships. In uncertain times, banks for aggregate information at high-dimensional industry gather more information to reduce uncertainty. This levels. Moreover, aggregate and disaggregate informa- strengthens the bank’s information monopoly, making tion explain comparable shares of the variance in ex- long-term customer relationships more important to pectations. Second, they exploit a natural experiment the bank. The bank reduces short-term interest rates in to identify the causal eff ect of new information on ex- order to maintain customer relations. pectations. The predictable demand eff ects for durable

78 ifo Annual Report 2018 IFO CENTER FOR MACROECONOMICS AND SURVEYS

goods due to the German VAT increase of 2007 implied In the project “Predicting Ordinary and Severe Reces- that, at the time, durable goods retailers had access to sions with a Three-State Markov-Switching Dynamic more reliable information about their future demand Factor Model. An Application to the German Business than non-durable goods retailers. Using this observa- Cycle” by Magnus Reif together with ifo research pro- tion in a diff erence-in-diff erences design, they fi nd that fessor Kai Carstensen and Markus Heinrich, both Uni- “treated” fi rms were signifi cantly more forward-looking versity of Kiel, and Maik Wolters, University of Jena, a ahead of the VAT-induced demand shift s. Overall, their model to date business cycle turning points has been results suggest that fi rms rationally incorporate disag- developed. To this end, a variety of so-called large-da- gregate information into their expectations. ta methods (LARS, LASSO, elastic-net) are applied to select the optimal set of indicators for each period. It A research project entitled “Forecasting Imports with is demonstrated that applying this automatic variable Information from Abroad” by Christian Grimme, Robert selection provides superior results compared to the Non-linear factors Lehmann and Marvin Noeller focuses on forecasting im- case of a fi xed set of indicators. Moreover, the model is increase forecast port growth. Imports are usually seen as the aggregates used to compute short-term forecasts of German GDP accuracy with the largest forecasting bias. Two reasons for this growth. It is shown that a non-linear factor can signifi - can be identifi ed: fi rst, imports are, next to exports and cantly increase forecast accuracy. investments, the aggregate with the highest volatility in quarterly growth rates; and second, no import leading The project “Macroeconomic Uncertainty and Fore- indicator exists. This research project fi lls this gap and casting Macroeconomic Aggregates” by Magnus Reif creates a new class of leading indicator, the ifo Import investigates the predictive power of economic uncer- Climate, for forecasting import growth for six advanced tainty. To this end, both linear and non-linear models economies. The Import Climate is based on foreign sur- are used. The author fi nds that non-linear models, vey results, as well as price and cost competitiveness i.e. models that assume diff erent transmission mech- measures. For the current and the following quarter, anisms in times of high and low uncertainty, provide the Import Climate performs best for France, Germany, more accurate forecasts. In particular, the predictive Italy and the United States under real-time conditions. densities provide a better description of the actual For Spain and the United Kingdom, the Import Climate forecast uncertainty. works particularly well for the latest set of data. Thus, the new indicator is also of high practical relevance. The Furthermore, Magnus Reif (jointly with Markus Hein- results of the research project were published as CESifo rich, University of Kiel) studies whether forecast accu- Working Paper 7079 and are currently under review racy can be improved by modelling structural change (Reject and Resubmit: Oxford Bulletin of Economics and in the economy. In contrast to existing studies dealing Statistics). The results for Germany were made available with this question, the authors use mixed-frequency Precise infl ation to a German-speaking audience via the ifo Schnelldienst models, i.e. models that enable the use of indicators forecasting with (Vol. 71, No. 12, pp. 27–32). published with diff erent frequencies. They fi nd that mixed-frequency this new model class provides especially precise infl a- models Diagram of Import Climate tion forecasts.

In the MPRA Paper No. 81772 Johanna Garnitz, Robert ifo Import Climate Germany Lehmann and Klaus Wohlrabe evaluate the proper- ties of the indicators gained from the World Economic Survey to forecasting the GDP growth of 44 diff erent countries. Three key results emerge: fi rst, models in- Import share Import share Partner 1 […] Partner 38 cluding WES information perform better compared to a benchmark model for the majority of countries. Sec- ond, the WES economic climate and the WES economic ifo Export Climate ifo Export Climate Trade partner 1 Trade partner 38 expectations in particular are the best-performing indicators that result from the World Economic Survey. Finally, in 70% of all cases, extending the country-spe- Source: ifo Institute. © ifo Institute cifi c forecasting model with WES information on key

ifo Annual Report 2018 79 IFO CENTER FOR MACROECONOMICS AND SURVEYS

trading partners increases forecasting quality. The drivers of changing inequality like globalisation and article has been invited for resubmission in Applied demographic change, and especially the role of tax Economics. and transfer systems. Individual preferences regarding redistribution and attitudes toward “fair” tax systems In addition, Stefan Lautenbacher (jointly with Rüdiger are additional areas of research. Based on these stud- Bachmann, University of Notre Dame, Kai Carstensen, ies, researchers provide policy advice for reforms of the University of Kiel, and Martin Schneider, Stanford Uni- tax and transfer system to improve equality of oppor- versity) analyses newly collected fi rm-level ifo data on tunity. subjective uncertainty. This is part of the research project “Expectation Formation, Uncertainty and Ambigui- Projects in Detail ty at the Firm Level, Measurement and Macroeconomic For the empirical analysis of equality of opportunity, Implications”, which is funded by the Thyssen Founda- we acquired two DFG grants for the period 2018–2021. No simple linear tion. The work of the project team has led to several In the fi rst project, we teamed up with research part- relationship between new fi ndings. Amongst others, the new data reveals ners from France, Sweden and Luxembourg to inves- uncertainty and sales that there is no simple linear relationship between per- tigate the infl uence of unequal opportunities across growth ceived uncertainty and sales growth. In fact, uncertain- the entire lifetime of individuals. Rather than focusing ty is generated by (larger) changes in past sales growth. on a specifi c stage of adulthood, this project analyses In addition, uncertainty is closely linked to longer-term how circumstances in childhood aff ect infl uential defi rm characteristics and the fi rms’ environment, and cisions that mark individuals’ transition to adulthood, particularly to fi rm size, the sales growth trend, and the and how these decisions translate into social and eco- volatility of sales over time. nomic outcomes at later stages in life. We will simul- taneously address these questions from intergener- In their project “The Macroeconomic Projections of the ational mobility and equal opportunity perspectives German Government: A Comparison to an Independent and draw on cross-country comparisons to identify Forecasting Institution” Robert Lehmann and Timo the causal mechanisms via which social and econom- Wollmershäuser ask whether the off icial forecasts ic advantages are transmitted from one generation to published by the German federal government are bi- another. ased compared to the Joint Economic Forecast. Both the governmental and the Joint Economic Forecast are In the second project, on which we will work with part- especially biased for longer forecast horizons, which ners from Poland, the UK and Italy, we go beyond the is mainly driven by a false assessment of trend growth conventional approach of treating income as the only in gross domestic product. However, the government outcome dimension of interest. It is widely acknowl- also signifi cantly deviates from the Joint Econom- edged in the literature on this topic, and more so in ic Forecast, which results in an even worse forecast. practical decision-making, that well-being is a multidi- Moreover, this deviation may also be driven by political mensional concept that incorporates not just income, infl uences. The results of the project were published as but also health, education and civic participation. a CESifo Working Paper at the end of 2018. Therefore, if the goal of public policy is to seek equality of opportunity, its measurement must account for PROJECTS IN INEQUALITY AND REDISTRIBUTION the multidimensionality of well-being. To date, however, researchers studying equality of opportunity have The Center also investigates trends in income and made little progress in this respect – a shortcoming wealth distributions, as well as other indicators of that will be addressed by this research project. To this inclusion and equal opportunity. Using a variety of end, we will investigate theoretical models of equal- Tax policy aff ects econometric techniques, the Center conducts micro ity of opportunity with the goal of linking individual income distribution data analyses to explore trends in wealth and income responsibility and multidimensional well-being and distribution, and to identify the causal eff ects of tax off ering various measurement approaches to evaluat- and transfer policies. ing equality of opportunity in the presence of multiple Particular attention is devoted to the empirical anal- outcomes. Furthermore, we will bring the developed ysis of equal opportunity and regional diff erences in measures to the data in order to assess equality of op- inequality. In addition, researchers analyse potential portunity with respect to multidimensional well-being.

80 ifo Annual Report 2018 IFO CENTER FOR MACROECONOMICS AND SURVEYS

Our research on equality of opportunity has yielded way of trading off upward and downward biases in scientifi c papers for publication in peer-reviewed jour- inequality of opportunity estimations. Finally, regres- Making inequality of nals. sion trees can be graphically represented; their struc- opportunity easier to ture is immediate to read and easy to understand. This understand In the fi rst paper Paul Hufe and Andreas Peichl inves- will make the measurement of inequality of opportu- tigate the existence of unequal opportunities with re- nity more easily comprehensible to a large audience. spect to political participation in the US. While it is well Furthermore, the use of cutting-edge machine learn- documented that political participation is stratifi ed ing methods contributes to ifo’s eff orts to incorporate by socioeconomic characteristics, an open question methods from big data analysis into its methodologi- is how this fi nding bears on the normative evaluation cal toolkit. of the democratic process. In this paper the authors draw on the analytical tools developed in the equality Further inequality-related research projects are cur- of opportunity literature to answer this question. They rently in progress and have been presented at scien- investigate to what extent diff erential political partic- tifi c conferences. Amongst others, Carla Krolage and ipation is determined by factors that lie beyond indi- Andeas Peichl (together with Daniel Waldenström, Re- vidual control, rather than being the result of individ- search Institute of Industrial Economics, Stockholm) ual choices. Using rich panel data from the US, they do develop alternative measures for assessing top income indeed fi nd a lack of political opportunity for the most shares to account for population and economic growth. disadvantageous types. Opportunity shortages tend Based on real and growth-adjusted income thresholds, Top income shares in to complement each other across diff erent forms of as well as on fi xed group size, these measures show the US have not been participation and persist over time. They also fi nd that that top income shares in the US have not been sim- simply fanning out family characteristics and psychological conditions ply fanning out over time. Instead, the fi ndings show over time during childhood emanate as the strongest determi- diverging developments at the top, i.e. while the over- nants of political opportunities. all trends of Piketty and Saez (2003) are robust, there are some important qualifi cations. More specifi cally, In a second paper, Paul Hufe and Andreas Peichl (to- when linking top incomes to productivity growth, they gether with Ravi Kanbur, Cornell University) acknowl- fi nd sharper interwar drops in top shares and almost edge the multiplicity of normative ideals when evalu- no increases at all aft er 1990. In addition, groups just ating the fairness of a given income distribution. More below the very top experienced not only less income specifi cally, they reconcile the ideals of equal oppor- growth than those above them, but also benefi ted less tunities and absence of poverty from a perspective than the upper middle class located just below in terms of inequality measurement. A remarkable advantage of income distribution. An analysis of pre-tax national of their approach is its appeal to the measurement of account measures yields similar results. unfair inequalities. They develop a family of measures of unfair inequality, which combine in essential fashion In a project on wage inequality and the German min- both inequality of opportunity and absolute depriva- imum wage, Maximilian Blömer (together with Nicole tion. An empirical application of their approach yields Guertzgen, University of Regensburg and IAB, Laura strong upward corrections to inequality of opportunity Pohlan and Holger Stichnoth, ZEW, Mannheim, and Ge- based on quantifi cations of unfair inequality. rard van den Berg, University of Bristol) estimates an equilibrium search model using German administrative In a last contribution, Paul Hufe (together with Daniel data and uses this for counterfactual analyses of a uni- Mahler, University of Copenhagen, and Paolo Brunori, form minimum wage. The model with worker and fi rm University of Florence) proposes a set of new methods heterogeneity does not restrict the sign of employment to estimate inequality of opportunity based on con- eff ects a priori and allows for diff erent job off er arrival ditional inference regression trees. More specifi cally, rates for the employed and the unemployed. They fi nd the authors illustrate how these methods represent that unemployment is a non-monotonic function of the a substantial improvement over existing empirical minimum wage level. In the sample of low- and medi- approaches to measuring inequality of opportunity. um-skilled individuals, a minimum wage equivalent in First, they minimise the risk of arbitrary and ad hoc real terms to the one actually introduced in 2015 raises model selection. Second, they provide a standardised the unemployment rate by 1.4 percentage points, an

ifo Annual Report 2018 81 IFO CENTER FOR MACROECONOMICS AND SURVEYS

increase of 13% vis-a-vis the old steady-state value. – Toulouse School of Economics (Toulouse, France), The researchers fi nd that eff ects diff er strongly by la- – University of Oxford (Centre for Business Taxation) bour market segment. Cross-segment variation of the (Oxford, UK), estimated eff ects is mostly driven by fi rm productivity levels, rather than by search frictions or the opportuni- – Università di Trento (Department of Economics and ty cost of employment. Detailed results were published Management) (Trento, Italy), as CESifo Working Paper No. 7160, 2018 and ZEW Dis- – VATT Institute for Economic Research (VATT; Helsin- cussion Paper 18-032. ki, Finland), and

ECONPOL EUROPE – ZEW – Leibniz Centre for European Economic Re- search (Mannheim, Germany). EconPol Europe – The European Network for Economic and Fiscal Policy Research is a unique collaboration of The mission of EconPol Europe is to contribute its re- nine policy-oriented university and non-university research fi ndings to help solve the pressing economic search institutes that contribute their expertise to the and fi scal policy issues facing the European Union, and discussion of the future design of the European Union. thus to anchor the European idea in the member states A new voice for In spring 2017, the network was founded by the ifo In- more deeply. Its task is also to transfer its research research in Europe stitute together with eight other renowned European results to the relevant target groups in government, research institutes as a new voice for research in Eu- rope. The ifo Institute was commissioned by the Ger- business and research, as well as to the general public, man Federal Ministry of Finance to set up this indepen- and to build a bridge between national and European dent network devoted to research and to contributing policy debates. its results to the economic and fi scal policy debate in Europe. With its cross-border cooperation on fi scal and economic issues, EconPol Europe aims to promote growth, prosperity and social cohesion in Europe and, in particular, to provide research-based contributions to the successful development of the European Economic and Monetary Union (EMU). Its tasks consist of joint interdisciplinary research in the following areas: – sustainable growth and best practice – reform of EU policies and the EU budget – capital markets and the regulation of the fi nancial sector – governance and macroeconomic policy in the Euro- pean Monetary Union

The network’s research results are disseminated through various EconPol Europe publication channels like working papers, policy reports, policy briefs and The founding members are: opinion pieces. In 2017, 6 EconPol Working Papers, – ifo Institute – Leibniz Institute for Economic Research 4 EconPol Policy Reports, 4 EconPol Policy Briefs and at the University of Munich e.V. (ifo; Munich, Germany), 5 EconPol Opinions were published. These publica- – Centre for European Policy Studies (CEPS; Brussels, tions discussed a variety of politically relevant topics, Belgium), such as the future eﬀ ects of Brexit on the European economy, macroeconomic imbalances and absorption – Centre d’Études Prospectives et d’Informations channels of macroeconomic shocks in the Eurozone, Internationales (CEPII; Paris, France), reforms of the Common Agricultural Policy, debt rules – Institute for Advanced Studies (IHS; Vienna, Austria), in the Eurozone, or tax competition in Europe.

82 ifo Annual Report 2018 IFO CENTER FOR MACROECONOMICS AND SURVEYS

bussche, Catholic University of Leuven, and Stefano 09 Schiavo, University of Trento, addressed the issue of EconPol 2018 protectionism in a plenary session. October POLICY REPORT Vol. 2 On Tuesday, 20 November, various sessions were held

on the topics of migration, convergence and divergence in the EU, capital market regulation and many What a feeling?! other current issues. How to promote ‘European Identity’ Sarah Ciaglia, Clemens Fuest, Friedrich Heinemann Service Functions

A key service function of the Center is conducting and interpreting business surveys. The regularly collected data not only constitute an integral part of the ifo In- stitute’s economic forecasts; they also form the basis of industry and aggregate economic forecasts of businesses, industry associations and government agen- cies. The survey results are extensively discussed and Testing economic interpreted in the media. In economic research, micro behavioural patterns data derived from ifo business surveys play an import- using business survey ant role in testing economic behavioural patterns – for data example investment and employment behaviour, labour market trends or pricing policies. The Institute’s excellent reputation in the area of Business Surveys is also confi rmed by the fact that the surveying tech- In addition to various academic workshops, lunch sem- niques developed at the Center are currently used in inars and a parlamentary breakfast with members of over fi ft y countries across the world. The regular sur- the European Parliament, EconPol Europe organised veys are also part of the harmonised European Com- the network’s second annual conference in November mission Business Surveys Framework, from which the 2018. The two-day conference focused on “Internation- Center receives considerable funding. Each month the al Trade and Protectionism”. The conference brought Center delivers parts of its aggregated survey results, together some 150 scientists, politicians, experts from which are then included in the European Sentiment national and European institutions and journalists to Indicator. discuss current developments in international trade and other economic policy issues. The conference was The Center’s economic forecasts are based on ongoing structured as follows: The aft ernoon of 19 November observation and analysis of economic developments, 2018 was dedicated to a panel discussion on the chal- taking the survey results and the constructed indica- lenges of trade policy in the European Union, followed tors into special consideration. Numerous empirical by a speech by Maria Martin-Prat, Director of the Eu- models are used in its forecasts. For the short-term ropean Commission’s Directorate-General for Trade. forecasts, approaches are typically applied that suit- Maria Åsenius, Head of the Cabinet of Commissioner ably compact and employ information from timely in- Malmström, Bernd Lange, Chairman of the Interna- dicators in forecasting. Examples are bridge equations, tional Trade Committee of the European Parliament, vector-autoregressive (VAR) models, factor models Andrea Montanino, Chief Economist of Confi ndustria, and models of mixed frequencies. For a forecast hori- and Eckart von Unger, Senior Manager, BDI (moderator: zon of over two quarters, more structural time-series Sébastien Jean, Director CEPII), took part in the discus- methods and macroeconomic models are used. In sion. In the evening, Simon J. Evenett, University of St. recent years the Center has set up the so-called ifo- Gallen, Gabriel Felbermayr, ifo Institute, Hylke Vanden- DGSE model for Germany, which simulates the German

ifo Annual Report 2018 83 IFO CENTER FOR MACROECONOMICS AND SURVEYS

economy as part of the euro area in the framework of ments. It does not predict long-term growth trends. an estimated micro-founded, structural multi-country The ifo Business Survey is designed to supplement model. This model is not only used for forecasting, but off icial statistics. It provides information on economic is also adopted in policy simulations. phenomena that are not ascertained by off icial statistics, and is published in a timely manner. To ensure that its economic forecasts are scientifi cally sound, the Center’s models for the analysis and forecast- The long time series of the ifo Business Survey is used ing of business cycles are constantly examined with re- to derive informative business-cycle indicators. The gard to their practical suitability. Based on the Center’s ifo Business Climate Index, combined with quarterly own research, the models are regularly improved and questions on capacity utilisation and order stocks, pro- new developments in forecasting methods are imple- vides a reliable picture of the current business situa- mented. tion and short-term developments. A key advantage of ifo’s economic indicators vis-à-vis the off icial statistics are their early availability. Off icial German production and new-order indicators are generally not published Service Projects until four weeks aft er the end of the reporting period, and are oft en subject to major revisions. The results of The Center regularly carries out a number of service the ifo Business Survey are released between the 22nd projects, based on its own research work and continu- and 27th day of the survey month. Furthermore, par- ously monitored using scientifi c criteria. The most im- ticipants give their appraisal of and expectations for portant projects are the ifo Business Surveys and the their fi rms, thereby off ering supplemental information economic forecasts. to the quantitative information provided by the off icial statistics. IFO BUSINESS SURVEYS External individuals interested in the time series of the The business survey introduced by the ifo Institute in ifo Business Survey can obtain data from the ifo Insti- 1949 was an innovation in business-cycle and market tute’s database service. The data off ered also include observation. Today it is one of the most important time series from other sources. sources for assessing the current economic situation in Germany. In 1990, shortly aft er the German Economic IFO BUSINESS CLIMATE GERMANY and Currency Union took eff ect, the business survey was expanded to include eastern Germany. The ifo Business Climate, which is calculated as the transformed mean of the balances of the business The monthly survey is based on roughly 9,000 re- situation and expectations for the next six months, sponses from fi rms throughout Germany on how they has been published regularly by the ifo Institute since see their business situation and related aspects of op- 1972. Since April 2018 it has been published as ifo erational activities. The standard questions require Business Climate Germany, which now also covers fi rms to appraise their current situation and assess the service sector. It has proven to be a reliable ear- their business expectations and plans in the three ly indicator of economic development in Germany. to six months ahead. Survey participants are asked Compared to the production index for manufacturing to exclude seasonal fl uctuations from their assess- industry provided by off icial statistics, it leads, on av- Appraising the ments. As this is only partially possible, the results erage, by two to three months. As a result, it has be- current situation and undergo an additional seasonal adjustment. The sur- come an integral part of German economic forecasts. assessing business vey results, which are subject to a complex evaluation The national and international importance of the ifo expectations procedure, provide information on some 600 individ- Business Climate can be seen in the reactions to the ual subsectors, the manufacturing industry, services, publication of the new forecast by fi nancial markets, construction, as well as the wholesaling and retail which eagerly await its results every month. The industry. ifo Institute provides special monthly ifo Business Survey evaluations and commentaries for Bavaria, The ifo Business Survey aims to capture the busi- Baden-Württemberg, North Rhine-Westphalia and ness-cycle component of macroeconomic develop- Saxony.

84 ifo Annual Report 2018 IFO CENTER FOR MACROECONOMICS AND SURVEYS

ifo Business Climate for Industry and Tradeɭ data. As a voluntary survey – the ifo Investment Sur- Seasonally adjusted vey is like all non-oﬀ icial surveys and is not grounded ifo Business Climate Assessment of business situation in law – it cannot essentially replace a comprehensive Index, 2015 = 100 Business expectations survey. This is especially true with respect to the de- 110 sired subdivision of the sectors.

IFO INVESTMENT SURVEY OF LEASING 105 With its business survey of the leasing sector the ifo In- stitute closes a statistical gap. Unlike in other areas of the investment survey, this is a comprehensive survey, 100 as there are no oﬀ icial statistics for the extrapolation of sample results. It has been conducted in cooperation with the Berlin-based German Association of Leasing 95 2014 2015 2016 2017 2018 Companies every October since 1977. At the end of the year the results are presented in the ifo Schnelldienst ɭ+2# 12/&+$Ǿ0"/3& "0" 1,/Ǿ1/!"+! ,+01/2 1&,+ǽ Source: ifo Business Survey, December 2018. © ifo Institute and a comprehensive leasing report. The latter comprises the size and kind of the investment, as well as the distribution across sectors.

IFO INVESTMENT SURVEY OF MANUFACTURING IFO INSURANCE SURVEY INDUSTRY In close collaboration with the Federation of the Ger- The ifo Investment Survey was the forerunner of all of man Insurance Industry, the ifo Institute has been con- the German Federal Statistics Off ice’s investment sur- ducting a quarterly business survey for the insurance veys. Today it supplements off icial ex-post data with sector since the end of 1999. Included in the survey are timely information on projections based on compa- insurance companies in the areas of life, health and ny plans. This makes the ifo Institute the only source property/casualty. In terms of gross premiums, the of quantifi ed estimates of current developments in insurance companies participating in the survey cover investment prior to the publication of off icial ex-post over 75% of the premium income.

Changes or Expansions of the Production Programme IFO WORLD ECONOMIC SURVEY (WES) Dominate For over 30 years the objective of the ifo World Eco- The main motive of investment activity, listed by ....% of firmsɭ nomic Survey (WES) has been to depict the current Timely information Replacement economic situation and outlook in numerous industri- and international Rationalisation Expansion (narrow sense) al, emerging and developing countries as accurately as comparability Enlargement/change in production programme possible. The survey results are characterised by their 100 timely information and international comparability. The assessments and expectations of on-site experts 80 are particularly valuable in countries where the oﬀ icial statistics remain unreliable. The ﬁ gure below shows 60 the high correlation of the survey results with actual 40 growth in the world economy. In 2018, the ifo Institute also polled over 1,200 inter- 20 national business experts at research institutes or 0 multinational enterprises on the economic situation 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 and outlook in some 120 industrial, emerging and developing economies. In return, participants received ɭ Responses from manufacturing, weighted with company turnover. detailed survey results. The WES results are also pub- Status: Spring of preceding year; 2018 provisional. Source: ifo Investment Survey. © ifo Institute lished in the quarterly English-language journal ifo

ifo Annual Report 2018 85 IFO CENTER FOR MACROECONOMICS AND SURVEYS

World Economic Survey, and in a condensed form in Ger- of family businesses. The basis for the development man in the ifo Schnelldienst. In Latin America the ifo In- of the enterprise database are inter alia ﬁ rm and institute has cooperated with Fundação Getulio Vargas/ dividual data from representative enterprise surveys, Instituto Brasilerio de Economia (FGB/IBRE) since 2007, information from public annual accounts and data which 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 World Economic Climate enable the analysis of family businesses in comparison to non-family businesses with regard to their econom- Economic climate ic signifi cance and economic activities. As part of this Assessment of economicsituation project, the ifo Institute also produces the “Jahresmon- Balances Economic expectations 100 itor der Stift ung Familienunternehmen” on an annual 80 basis. To this end, a representative company survey of 60 current and relevant issues is carried out, which en- 40 ables the analysis of the economic developments of 20 family businesses. In 2017, both family and non-family 0 enterprises in Germany were surveyed on their invest- -20 ment activities in the course of the company survey -40 for the “Jahresmonitor der Stift ung Familienunterneh- -60 men”. In total, the survey provided information on the -80 investment behaviour of around 1,500 German compa- -100 nies. This year’s report is based on a survey conducted 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 between April and July 2018, in which around 1,300 Source: ifo World Economic Survey (WES) IV/2018. © ifo Institute family and non-family enterprises from Germany took part, and deals with international tax competition from LOGISTICS INDICATOR a business perspective. The Logistics Indicator is conducted on behalf of IFO ECONOMIC FORECASTS Bundesvereinigung Logistik (BVL) within the context of the Institute’s economic surveys. The objective is to Four times a year, the Center publishes a detailed re- gain a timely insight into developments in the logistics port on the German economy that includes forecasts industry. Monthly replies from over 4,300 companies of gross domestic product (sector origin, use and dis- Surveying providers participating in the survey are used to answer ques- tribution), the labour market, infl ation, as well as pub- and users of logistics tions about the current situation and expectations lic expenditure and revenues. Thanks to the German for the months ahead. In addition to logistics service economy’s strong links with the world economy, and providers, users of logistics services are surveyed and in particular with the European economy, a forecast is summarised in the overall aggregate of the logistics also made for the European Union and other import- industry. The results are available for the period from ant countries. A well-founded analysis of the economic 2005 in a seasonally adjusted form. The results are situation forms the basis of the forecast. Special atten- commented and illustrations are created on a quar- tion is paid to quantifying the dynamics of econom- terly basis. The results and the comments will be pub- ic activity, and to identifying business-cycle turning lished on the BVL website. points. Since 2010, the Center has also provided annual sector accounts for institutional sectors, the economy DATABASE FAMILY BUSINESS FOUNDATION as a whole, non-fi nancial and fi nancial corporations, private households (including non-profi t organisa- The aim of the cooperation between the Stift ung Fami- tions), the government sector, as well as for the rest of lienunternehmen and the ifo Institute, which has exist- the world. The accounts provide a systematic overview ed since 2017, is to build up a comprehensive company of important transactions between sectors that are in- database on the basis of scientifi c methods and fi nd- cluded in the overall economic fi gures. ings. In the future this database will develop into one of Germany’s leading and internationally renowned data The Center frequently makes statements to the media sources for scientifi c research relating to the activities on the current economic outlook and the economic

86 ifo Annual Report 2018 IFO CENTER FOR MACROECONOMICS AND SURVEYS

policy problems related to it. The economic implica- economic activity in Europe and the world for the EEAG tions of fi scal and monetary policy decisions are also Report. Special matters are also treated on a regular analysed and commented upon. basis. The forecast is part of the “Economic Outlook” chapter. JOINT ECONOMIC FORECAST ECONOMIC ANALYSES, PREPARATION OF In spring and in autumn the Center, together with the INDICATORS AND FORECASTS department for business cycle research of the ETH (Swiss Federal Institute of Technology) Zurich (KOF), The project aims to compute monthly, survey-based participates in the Joint Economic Forecast (Gemein- electricity indicators to forecast electricity consump- Forecasting schaft sdiagnose). In June 2018 a new two-year con- tion in Germany and in the EnBW customer base; and electricity tract was awarded to the ifo Institute by the German to build an appropriate econometric model to predict consumption Federal Ministry for Economic Aff airs and Energy. The the target time series over a forecast horizon of up to other four successful consortia were the German Insti- 12 months. The electricity indicators will be generated tute for Economic Research (DIW), the Halle Leibniz In- from the disaggregated results of the ifo Business Sur- stitute for Economic Research (IWH), the RWI – Leibniz veys of the manufacturing industry and refl ect cyclical Institute for Economic Research, Essen, together with variations in power demand. The forecasting model is the Institute for Advanced Studies in Vienna (IHS), as based on the idea of improving predictive accuracy by well as the Kiel Institute for the World Economy (IfW). combining a larger number of individual forecasts and The Joint Economic Forecast comprises forecasts for models not only of business cycle fl uctuations, but also Germany, the European Union and other major coun- the medium-term trend, seasonality, temperature and tries, as well as an evaluation of those economic poli- structural eff ects of electricity demand. Additionally, cies that aff ect Germany’s economic activity. It is pre- this project includes consulting services connected sented at the facilities of the federal press conference with the current state of the business cycle and eco- (Bundespressekonferenz) in Berlin, and subsequently nomic policy issues. submitted to the German Federal Ministry for Econom- ic Aff airs and Energy.

EUROZONE ECONOMIC OUTLOOK Service Projects in Detail

The Eurozone Economic Outlook is a European joint ifo Business Survey initiative of the ifo Institute, KOF in Zurich and Istat in K. Wohlrabe, P. Brandt, L. Dorff meister, S. Sauer, S. Rum- Rome. It provides an estimate (for the past quarter) scheidt, S. Litsche, A. Bauer, F. Leiss, monthly publica- and a forecast (for the current and following quarters) tion in ifo Schnelldienst and ifo Konjunkturperspektiven. of real GDP, private consumption, industrial output and infl ation in the Eurozone. Forecasting is primarily ifo World Economic Survey (WES) conducted by applying econometric forecasting meth- K. Wohlrabe, J. Garnitz, D. Boumans, J. Nothhaft , quar- ods. The projections are then rounded off using the terly publication in ifo World Economic Survey and ifo personal appraisals of the project team. The Eurozone Schnelldienst. Economic Outlook is published quarterly – in January, April, July and October – as a two-page press release in ifo Investment Survey in Leasing German and English. A. Städtler, S. Rumscheidt, regular publication in ifo Schnelldienst. EUROPEAN ECONOMIC ADVISORY GROUP (EEAG) The European Economic Advisory Group at CESifo ifo Business Survey of the Insurance Sector (EEAG) is a European expert advisory board consisting S. Litsche for the Association of German Insurance of seven well-known economists from seven countries Companies, information for clients and participants. and currently chaired by Giuseppe Bertola (Università di Torino). It was launched in 2001 by CESifo. The group Profi t Situation and Trends writes detailed reports on specifi c economic policy S. Litsche, biannual determination of the profi t situa- issues. The Center provides a forecast and analysis of tion and trends in the metal and electric industry.

ifo Annual Report 2018 87 IFO CENTER FOR MACROECONOMICS AND SURVEYS

ifo Business Survey for Bavaria Calculation and projection of the productivity P. Jäckel, F. Leiss for the Bavarian Ministry of Economic and innovation gaps of the German federal Aﬀ airs, Regional Development, Energy, regular publi- states cation in Konjunktur in Bayern as well as on the client’s R. Lehmann together with ifo Dresden, for Bertelsmann website. Foundation, project period: June 2018 to September 2018, it is intended to publish the project in the series ifo Business Survey for Baden-Württemberg ifo Forschungsberichte. S. Litsche for Landeskreditbank Baden-Württemberg – Förderbank, regular publication in the series L-Bank- Brexit and the Economic Consequences for the ifo-Konjunkturumfrage and on the internet http://kon- German State of Bavaria and Upper Bavaria junktur-bw.de. R. Lehmann together with G. Felbermayr and M. Steininger, for Chamber of Commerce and Industry ifo Business Survey for Saxony for Munich and Upper Bavaria, project period: August M. Weber, regular publication in ifo Dresden berichtet. 2018 to December 2018, there are plans to publish the project as an IHK study. ifo Business Survey for North Rhine-Westphalia A. Weichselberger for NRW Bank, regular publication in Brexit and its Economic Consequences for the the series NRW.Bank.ifo-Index and on the internet. German State of Hesse R. Lehmann together with G. Felbermayr and M. Steinin- ifo Investment Survey Manufacturing Industry ger, for Chamber of Commerce and Industry Frankfurt A. Weichselberger, regular publication in ifo Schnell- am Main, project period: March 2018 to April 2018, dienst. the study was published as ifo Forschungsberichte 93.

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, for Stift ung Famil- ienunternehmen, regular publication in Jahresmonitor Stift ung Familienunternehmen and on the internet.

88 ifo Annual Report 2018 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. The International Institutional Comparisons and Migration fi rst research area studies migration and institutions, Research aims to address various societal challenges with a focus on migrant self-selection and integration. by analysing the causes and economic impacts of insti- Five papers on self-selection were completed for sub- Migrant self-selection tutions, with a special focus on migration, fi nancial in- mission in 2018. One paper analyses couples’ emigration and integration termediation and how beliefs and preferences interact decisions and a second examines return migration deci- with institutions. With its publication of the ifo DICE Re- sions of families who previously migrated to Denmark. A port and the CESifo Forum, as well as the maintenance third paper covers international spillover eff ects of fam- and development of DICE (Database for Institutional ily reunifi cation rules, a fourth looks at emigration mo- Comparisons in Europe), the Center fulfi ls key service tivation and the earnings of Danish emigrants, while a tasks for academia and the general public. fi ft h paper co-authored with EconPol partner VATT tests the extent to which international migrants select them- DICE DATABASE AND THE JOURNAL IFO DICE REPORT selves into diff erent destination countries based on Against the background of recent economic, political and their attitudes towards redistribution. The research on societal challenges, there is a growing need for informa- refugees includes a fi eld experiment with a researcher tion on diff erences in institutional regulations. The Cen- from EconPol partner CEPS on how to foster the labour ter’s research questions focus on how respective national market integration of refugees. One paper on this topic regulations diff er within the EU, as well as worldwide. has already been submitted. Another paper studied how refugees who arrived in transit countries in 2015 and With its unique DICE Database, the ifo Institute does a 2016 were self-selected. A project conducted in collab- great deal to to close this information gap. DICE off ers oration with researchers from Uppsala University uses users one-stop-shop access to quantitative and qual- geo-coded register data from Sweden to study the eff ect itative information on institutions, which is compiled of allocating refugees to individual neighbourhoods. from numerous sources and can be linked to other eco- Two papers on the implications of EU enlargement for nomically relevant indicators. The database addresses fi rm productivity and innovation in sending and receiv- a wide range of users and is accessible free of charge. ing countries were fi nished and submitted. A new DFG The database currently covers the following topics: project analyses language learning and migration inten- banking and fi nancial markets, business, education tions. Another new project (with EconPol partner VATT) and innovation, energy, resources and natural environ- analyses self-selection of emigrants from Finland. ment, infrastructure, labour market, migration, public sector, social policy and values. At present, the data- In the second research area of migration and politi- base contains around 3,800 entries. cal economy, the project on how bitterness in life af- fects concerns over immigration was completed with a It is closely linked to the ifo DICE Report – Journal for In- publication in 2018. A paper co-authored with EconPol stitutional Comparisons. This quarterly journal analyses partner CEPII that studies the role played by immi- Role of immigration institutions, regulations and economic policy approach- gration in the electoral success of extreme parties in in electoral success es across countries. Its editors are Marcus Drometer, French presidential elections for the years 1988 to 2017 of extreme political Yvonne Giesing, Christa Hainz and Till Nikolka. In the “Fo- was revised and resubmitted. Further papers deal with parties rum” section of the journal, a selected topic is covered by the interplay between political economy and migra- several authors from diff erent perspectives. The ifo DICE tion policy. Turning to the US, another study examines Report also features the following sections: “Research whether naturalisations are used strategically by gov- Report”, “Reform Model”, “Database” and “News”. ernments to increase their re-election probability. This paper was revised and resubmitted in 2018. A second CESIFO FORUM project analyses how the number of asylum applica- CESifo Forum includes contributions from internationally tions and the rejection of these applications change renowned authors on policy issues of worldwide inter- before and aft er elections in the European Union. Final- est, as well as data and information from the ifo Institute. ly, another project deals with the question of how the This English-language journal is published on a quarterly emergence of immigration-critical parties aff ects the basis by CESifo GmbH and edited by Chang Woon Nam. decision of migrants to migrate to a particular country.

ifo Annual Report 2018 89 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

The third research area of institutions and fi nancial intermediaries studies the impact of institutional reg- Projects Completed in 2018 Government ulations on fi nancial intermediation. One paper anal- guarantees and yses how the removal of a government guarantee in- Practical Experiences with the Exemption risk-taking behaviour fl uences banks’ risk-taking behaviour. This paper has Provisions § 2a – § 2c VermAnlG of the Small in banks been submitted to a journal. In a related project, the Investor Protection Act since 1 June 2016 eff ect on the real economy is studied, and the diff erent C. Hainz, S. Reiter in cooperation with L. Hornuf, Uni- ways in which access to credit is measured are com- versity of Bremen, for the German Federal Ministry of pared. This project analyses how a fi rm’s perception of Finance, March 2018 to October 2018. aggregate bank lending policy depends on its individual credit market experience. The insights gained from What experience have crowd investing portals, issuers this research were used to rephrase the question on and investors had over the last two years with the ex- credit access in the business expectations survey. A pa- emption regulations of the Small Investor Protection per that analyses the decision-making rules underlying Act introduced in Germany in July 2015. On behalf of the monetary policy decisions of the European Central the German Federal Ministry of Finance, the project Bank was published in 2018. team is conducting an empirical survey to examine experiences with the Small Investor Protection Act. They In the fourth research area on institutions and so- use existing databases and develop questionnaires for ciety, a paper that analysed household saving and this purpose. investment behaviour during political instability in a developing country was published. A research proj- The regulation of start-up companies oft en leads to a ect on target-specific beliefs and redistributive pref- confl ict of objectives. On the one hand, legislators want erences offers insights into both perceived equality to protect investors from fraudulent activities in the of opportunity and its political consequences. A pa- capital market. To this end, issuers must make infor- per on this topic was accepted for presentation at mation available to potential investors and are subject the American Economic Association annual confer- to far-reaching regulation. However, the provision of ence in January 2019. A completed project identifies information and compliance with the relevant laws are the role and characteristics of individual volunteers associated with high costs, especially for young com- engaged in the German refugee crisis of 2015/16, panies. On the other hand, the government is aware of and measures the resulting savings in local govern- the fi nancing diff iculties of young companies. For this ment expenditure. Another paper investigates the reason, it has created exemption provisions aimed at Resurgence strategies effect of fiscal consolidations on the current ac- the special needs of start-up companies. aft er urban decline count in the OECD countries. Furthermore, a paper on the causes of urban decline in eastern German For the period since June 2016, the study examines mid-sized cities and their differentiated resurgence whether crowdfunding is carried out with or without strategies is in the revision process. a securities prospectus, to what extent defaults have already occurred, which type of fi nancial products are INTERNATIONAL ADVISORY AND RESEARCH used, which investor structure exists and how the por- PROJECTS tals have reacted to the new exemption provisions. In addition to the classical crowdfunding of companies The ifo Center for International Institutional Compari- and real estate, the fi nancing of social and charitable sons and Migration Research participates in various in- projects is also examined. terdepartmental international consulting and research projects. The focus here is on the evaluation and anal- Economic Advantages of Free Movement of Goods ysis of economic risks, as well as on institutional re- P. Poutvaara, C. Rhode, T. Stitteneder, M. Valeyatheep- forms. illay for the European Parliament, Brussels, June 2018 to October 2018.

This project conducts an evaluation on the economic advantages of the free movement of goods in the Euro-

90 ifo Annual Report 2018 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

pean Single Market. The scope of the research is to fo- ed migration channels. These channels facilitate the cus on economic achievements and the potential of the immigration of skilled workers, even if there is no bind- Points systems for European Single Market as a growth engine. The results ing job off er. As a rule, this migration channel is imple- migration presented show that the Single Market has enjoyed sub- mented as a points system, the criteria for which vary stantial benefi ts in terms of trade fl ows, output and in- from country to country. come per capita. However, there is substantial variation in the size of gains, meaning that small member states The study proposes a concept for controlling poten- and Eastern European countries benefi t the most. tial-oriented immigration in Germany that ensures that a certain number of skilled workers can enter Germany Optimising the Recruitment and Residence- to look for work. On the basis of the “3 Plus” principle, Permit Procedures of Qualifi ed Professionals particular consideration is given to those candidates from Third Countries who, in addition to the three necessary basic prereq- P. Poutvaara, C. Rhode, T. Stitteneder for the Chamber uisites, also have the best integration prospects in the of Commerce and Industry for Munich and Upper Ba- German labour market. varia, August 2018 to November 2018. Labour Market Integration of Refugees in Due to the growing shortage of skilled workers, the re- Germany: Evidence from a Field Experiment cruitment and immigration of qualifi ed workers from M. Battisti, Y. Giesing in cooperation with N. Laurents- third countries is increasing in importance. In practice, yeva, CEPS, Brussels, ifo Project partly fi nanced by the however, the matching of employers and skilled work- Mercatorstift ung and the University of Munich, January ers, as well as the immigration process – including vari- 2015 to December 2018. ous procedural steps – prove challenging. Between 2015 and 2016, over one million refugees ar- In this study, a status quo analysis and problem descrip- rived in Germany. Their labour market integration is tion was formulated for the subprocesses of recruit- challenging for several reasons: their lack of job-related ment and residence (visa) procedures, which highlights skills (including language), qualifi cations, and task-spe- How to integrate existing support structures, individual procedural steps cifi c human capital have hindered refugees’ labour mar- refugees into the and the actors involved, taking into account the legal ket integration. Moreover, matching frictions, a subopti- labour market framework. Concrete recommendations and steps for mal network, residency requirements and legal barriers optimisation were developed for the resulting problem may be larger than for natives or other migrants. areas. Recommendations regarding the recruitment process consist of the expansion of a central informa- We designed a randomised controlled trial to evaluate tion platform, which is supplemented by further advi- the role of matching frictions for the employment pros- sory services, and the creation of a “matching pool” to pects of refugees. In a fi rst step, we conducted personal improve matching between employers and specialists. interviews with approximately 400 job-seeking refugees Further digitalisation, an inter-agency IT platform and a in Munich and collected data on their job search be- systematic analysis of current processes are proposed haviour, their job expectations and experiences, their for the processing of visa applications. education, skills and social integration. We subsequently provided all participants with a German CV and basic Development of a Steering Mechanism for job search information. In a second step, we randomly Potential-orientated Migration of Qualifi ed selected half of the participants and added them to the Professionals database of an NGO that sends CVs directly to employ- T. Nikolka, P. Poutvaara, C. Rhode, T. Stitteneder for ers. This intervention aims to isolate the eff ect of match- the IHK for Munich and Upper Bavaria, October 2018 ing and information frictions, while having no eff ect on to December 2018, publication in IHK Impulse für die the underlying skill set of refugees. Results of follow-up Wirtschaft spolitik, 2018. telephone surveys show a positive and signifi cant treatment eff ect of 13 percentage points on employment In international competition for qualifi ed specialists, aft er twelve months. These eff ects are concentrated traditional immigration countries such as Australia, among poorly educated refugees and those facing un- Canada and New Zealand also rely on potential-orient- certainty about their residence status. These individuals

ifo Annual Report 2018 91 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

may not search eﬀ ectively, could lack access to alterna- of economically relevant institutions. The “Database” tive support programmes, and may be disregarded by section highlights and introduces new entries in the employers due to perceived higher hiring costs. DICE database. ifo DICE Report articles can be downloaded from the CESifo homepage. DICE: Database for Institutional Comparisons in Europe CESifo Forum C. Hainz, P. Poutvaara, C. Rhode, T. Stitteneder. C.W. Nam.

In the process of the DICE relaunch, the Center con- In 2018, the “Focus” section of CESifo Forum addressed ducted an in-depth user needs analysis. Based on its the following topics: EU cohesion policy, income in- Database with ﬁ ndings, a new DICE concept was developed, which equality in the EU, unconditional basic income and Chi- innovative web entails a new IT infrastructure, as well as content de- nese foreign direct investment in the EU. CESifo Forum interface velopment. The partially heterogeneous needs of the articles can be downloaded from the CESifo homepage. diﬀ erent target groups are met by an innovative web interface with novel functionalities. 04 ifo DICE Report 2018 Winter M. Drometer, C. Hainz, Y. Giesing, T. Nikolka, C. Rhode, Vol. 19 T. Stitteneder.

SPECIALS SPOTLIGHT TRENDS In 2018 the “Forum” section of the ifo DICE Report dis- Digital Transfor- Target Risks without Challenges of Electri- Statistics Update mation, International Euro Exits Õ 1&,+,# "36+! Competition and Clemens Fuest and ,+$Ě%2)/#Õ cussed the following topics: labour migration, wealth Specialization Hans-Werner Sinn Sophia Appl-Scorza, Florian W. Bartholomae Jana Lippelt and Christina Littlejohn taxation, the sustainability of the euro and minimum Converging Media versus Diverging Poli- wages. The “Research Reports” and “Reform Models” tics - the Brexit Twitter on Debate rubrics are not thematically deﬁ ned, but again, they Andrew Bassilakis, Matthias Diermeier and Henry Goecke always cover country comparisons of the organisation

FOCUS

04 Chinese Foreign Direct 2018 Winter Investment in the EU Vol. 16 Jan Knoerich and Tina Miedtank, Ágnes Szunomár and Agnieszka McCaleb, Frank Bickenbach and Wan-Hsin Liu

REFORM MODEL FORUM Labour Market Reforms and Collective Bargaining in France Minimum Wage Till Nikolka, Panu Poutvaara Michael Christl, Monika Köppl-Turyna, Dénes Kucsera, Philippe Askenazy, Mario Bossler, RESEARCH REPORT Joachim Möller, Jan Fidrmuc, J.D. Tena, Paul Redmond, Seamus McGuinness, Sergio Puente, Jan van Ours, When History Matters Little Raul Eamets, Amaresh K. Tiwari Hierarchy and Regional Development in China, AD 1000-2000 Ying Bai, Ruixue Jia

DATABASE Minimum Wages Across Countries Joop Adema, Yvonne Giesing, Anne Schönauer

NEWS New at DICE Database, Conferences, Books

92 ifo Annual Report 2018 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

Current Projects Analysis of Internal Migration Responses to Refugee Placement and Local Electoral Outcomes Transparency – Tax Secrecy By International M. Valeyatheepillay, ongoing doctoral project. Comparison C. Fuest, M. Drometer, C. Rhode, T. Stitteneder for the In a fi rst subproject, Swedish geo-coded data is used Foundation for Family Businesses, Munich, September to empirically evaluate the success or failure of refu- Neighbourhood 2018 to January 2019. gee placement policy in terms of neighbourhood inte- integration aft er gration and dynamic sorting following the initial refu- refugee placement This ifo study analyses the extent to which companies gee placement. The project examines how integrated are required to publish information on their business the refugees are in terms of their individualised neigh- activities and their economic success. In particular, bourhood, and investigates their subsequent moves we focus on the EU accounting guidelines and coun- and sorting among short- and long-distance subse- try-by-country reporting. We also study the publica- quent movers. tion of individual income and tax data in Scandinavian countries. In a second subproject, Swedish geo-coded data and electoral data are used to analyse the extent to Language-Skill Investments and Migration which electoral outcomes, and more specifi cally, the Decisions success of an anti-immigration party, aff ected migra- P. Poutvaara, T. Nikolka, in cooperation with ifo re- tion responses and ethnic segregation of immigrants, search professor S. Übelmesser, M. Huber, University of and how these migration responses depend on the Jena, sponsored by the Deutsche Forschungsgemein- initial allocation. A third subproject will analyse the schaft (DFG), Bonn, March 2018 to March 2020. eff ects of elections on educational attainment and the labour market integration of refugees and their This project collects survey data in several countries on children. adult-age language learning and migration intentions, as well as motives for language learning and migration The data allows us to identify k-nearest neighbour- intentions. A survey of language course participants in hoods, calculated at the 50 and 500 closest neighbours; Goethe Institutes in diff erent countries was conducted and to measure the diff erent neighbourhood attributes in 2018, an online questionnaire for university students using scales and shapes that suit the attributes best was also completed, and a survey will be implement- and, as such, create individualised neighbourhoods. ed. Together, the two surveys shed light on language This is particularly important as the nearest neigh- learning and migration decisions. They also highlight bours are the individuals that the refugees have a high- the role played by labour market and family consider- er likelihood of meeting and will therefore have an ef- ations, as well as preferences concerning institutional fect on the integration of newly arrived refugees. factors and social norms, especially in terms of gender norms, in migration decisions. The project results will Interaction between Institutions and Financial contribute to a better understanding of the character- Markets istics and motives of potential migrants, and will allow S. Reiter, ongoing doctoral project. policymakers to design immigration and integration policies taking these factors into account. There are In a fi rst subproject, micro data collected by the Aus- Access to credit four paper projects: the fi rst focuses on the motives trian Central Bank (OeNB Euro Survey) is used to em- related to home of language learning, the second studies migration in- pirically investigate the relationship between home ownership tentions, the third analyses the role of internationally ownership and access to credit in Central, Eastern, and applicable qualifi cations compared to country-specifi c Southeastern Europe. The research project is conduct- ones for migration (intentions) and the fourth studies ed together with Dr. Christa Hainz (ifo Institute) and the investment decisions in language skills in the pres- Prof. William Pyle, Ph.D. (Middelbury College). ence of potentially gender-specifi c migration incentives. The data collected will allow further analysis be- Emigration Choices over the Skill Distribution yond these papers in the future. B. Rude, ongoing doctoral project.

ifo Annual Report 2018 93 IFO CENTER FOR INTERNATIONAL INSTITUTIONAL COMPARISONS AND MIGRATION RESEARCH

This Ph.D. project investigates which characteristics data quality. DICE 2.0 will be available to end users and skills drive migration decisions. To this end, Finn- by spring 2019. ish population data is analysed in cooperation with researchers from Finland and England. The publication of the ifo DICE Report – Journal for In- stitutional Comparisons will be continued. The journal ifo Center of Excellence for Migration and Inte- provides comparative analyses of institutions, regu- gration Research (CEMIR) lations and economic policy approaches across coun- P. Poutvaara, G. Felbermayr, H. Rainer, L. Wößmann, tries. It combines cutting-edge research with actual M. Drometer, M. Burmann, Y. Giesing, T. Nikolka, M. economic policy issues and provides input for the DICE Valeyatheepillay, M. Battisti, J. Saurer, M. Piopiunik in database. cooperation with the ifo research professors G. Borjas, Harvard University, Cambridge MA., and G. Peri, Uni- CESifo Forum versity of California, Davis. C.W. Nam.

CEMIR brings together migration research from diff er- The Center will continue to publish the CESifo Forum ent ifo Centers while providing a forum for migration re- journal. Apart from the crucial issues related to the search beyond the Institute. In 2018, CEMIR organised European integration and the future of the EU, CESifo a series of Lunchtime Seminars to provide ifo postdoc- Forum also aims to focus on current economic topics of toral and doctoral students and external guests the worldwide interest from a European perspective. opportunity to present their latest research. It also organised a Junior Economist Workshop in June. CEMIR continues to foster collaboration within the Institute Spillover of national and with external researchers. Till Nikolka has worked immigration policy to together with researchers from Uppsala University in third countries a project analysing the spillover eff ects of national immigration policies to a third country. Yvonne Gies- ing conducted a fi eld experiment to study the labour 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, including a joint article by two Center Directors in Die Welt.

DICE Database for Institutional Comparisons in Europe and ifo DICE Report – Journal for Institutional Comparisons 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 visualisation and a sign-in function. The user experience is not only optimised by a modern interface and extensive features. Rather, DICE offers a remarkably flexible 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

94 ifo Annual Report 2018 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, and until December 2015 it was funded by the Leibniz Association project “Optimal Immigration Policies in Europe: From Confl icting Interests to Mu- CEMIR tual Gains (SAW-2012-ifo-3)”. CEMIR brings togeth- Center of Excellence er expertise from four ifo research centers – the ifo for Migration and Integration Research Center for International Institutional Comparisons and Migration Research, which is responsible for co- ordinating CEMIR, the ifo Center for the Economics of As in previous years, CEMIR organised a junior econ- Education, the ifo Center for International Econom- omist workshop and a Lunchtime Seminar series, at ics, and the ifo Center for Labour and Demographic which ifo researchers and external guests presented Economics. The research conducted in these Centers their work. analyses migration and integration from the diff erent perspectives of labour economics, international economics, public economics, and education economics. CEMIR’s research helps to answer the question of how recipient countries’ welfare state and labour 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 analyses 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, the directors of the four ifo Centers in question, Panu Poutvaara, Ludger Wößmann, Gabriel Felbermayr and Helmut Rainer, worked together in 2018 along with the ifo researchers Marcus Drometer, Yvonne Giesing, Till Nikolka, Britta Rude, Madhinee Va- leyatheepillay (ifo Center for International Institutional Comparisons and Migration Research), Marc Piopiunik (ifo Center for the Economics of Education), and Ju- dith Saurer (ifo Center for Labour and Demographic Economics). They worked in cooperation with a range of external researchers, including the ifo research professors George Borjas (Harvard University, Cambridge MA), and Giovanni Peri (University of California, Da- vis), as well as the researchers Ilpo Kauppinen (VATT Institute for Economic Research, Helsinki), Romuald Méango (Munich Center for the Economics of Ageing), Matz Dahlberg (Uppsala University), Martin David Munk (Aalborg University), Anthony Edo (CEPII), Nadzeya Laurentsyeva (CEPS), and Cevat Giray Aksoy (European Bank for Reconstruction and Development).

ifo Annual Report 2018 95 Research Group Taxation and Fiscal Policy

The Research Group “Taxation and Fiscal Policy”, 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 Ph.D. students, one postdoc- heated debates about the future institutional setup of toral researcher and one senior economist (50%), who the Eurozone. The Research Group studies the develop- carry out research projects and engage in policy con- ment of fi scal policy in the Eurozone and beyond and Tax and fi scal policy sulting with a focus on the area of taxation and fi scal contributes to the discussion about reforms of Euro- consulting policy. Taxation, government debt and public spending zone governance. The Research Group also analyses are key areas of public policy. They play a role in nearly the development of the EU budget and makes propos- all areas of government activity, and they aff ect allo- als for reforming it. cative eff iciency, the distribution of income and the stability and sustainability of economic development. The Research Group “Taxation and Fiscal Policy” therefore pays particular attention to the following issues: Projects Completed in 2018

INTERNATIONAL TAXATION Convergence in EMU: What and How? M. Dolls, C. Fuest, C. Krolage, F. Neumeier, D. Stöhlker Growing global economic integration along with the for the European Parliament, January 2018 to May 2018. further liberalisation of international capital fl ows have increased the relevance of international tax mat- Convergence is one of the key goals of the European ters and intensifi ed tax competition. Reports about Union and has taken centre stage in recent debates. multinational enterprises that reduce their tax burden Focusing on real, nominal and cyclical convergence, by shift ing profi ts from high-tax to low-tax countries the paper presents important indicators and discusses have triggered an intense public debate. These devel- their development across time and countries. Evidence opments have led to calls for more coordination of tax suggests that income, employment and other key eco- policy both at the EU level and internationally. The Re- nomic indicators have converged for some groups of search Group contributes to this debate by analysing member states before coming to a halt (or even diverg- tax competition and tax avoidance as well as proposals ing) with the onset of the global fi nancial and euro area for tax coordination, tax harmonisation or the intro- debt crises. duction of new tax instruments. The paper subsequently discusses which types of con- TAXATION, FISCAL POLICY, AND INEQUALITY vergence are of importance for the proper functioning In recent years the distribution of income and wealth has of the EMU. For one, a successful design and transmis- attracted increasing attention in public debates. The Re- sion of monetary policy is greatly facilitated if mem- search Group contributes to this debate by studying the bers of a currency union are at similar stages of their incidence of taxation and the impact of taxes and public business cycles. Likewise, a certain degree of nominal spending on inequality. The Research Group also ana- convergence is crucial for the proper functioning of a lyses the regional distribution of income and its deter- monetary union, but full convergence would not be Impact of minants in Germany. In this context, it examines issues economically justifi ed. Real convergence as such is not globalisation on like the impact of globalisation on the income distribu- required for a functioning monetary union, but consti- income distribution tion, as well as the eff ects of economic policy reforms. tutes an important objective of the EMU in itself and In addition, the Research Group studies various aspects may foster cohesion and political acceptance of the of the economic, political, and social consequences of EMU. inequality. We argue that, in the existing institutional setup, economic convergence depends mostly on the policies FISCAL POLICY AND GOVERNANCE IN THE EUROPEAN of the member states. In this context, we assess the MONETARY UNION recently proposed reform delivery tool, which aims The recent economic and fi nancial crisis has put public to incentivise governments to conduct growth-en- fi nances in several EU member states under tremen- hancing structural reforms by means of fi scal trans- dous pressure and raised concerns about the solvency fers. Acknowledging the importance of national

96 ifo Annual Report 2018 RESEARCH GROUP TAXATION AND FISCAL POLICY

ownership, giving member states the opportunity economic assessment of these proposals based on the to submit reform proposals, and requiring detailed established criteria. Particular attention is paid to four implementation milestones all go in the right direc- diff erent property tax concepts that diff er with regard tion. However, the disbursement of funds should de- to the tax base: one based on market values of prop- pend not only on the implementation of the agreed erty, one based on construction costs, one based on reforms, but also on achieving output convergence land values and one based on the plot and fl oor space. targets. Moreover, available resources should be The implications of the diff erent models regarding the used more eff ectively in promoting economic con- tax burden for property owners, as well as the munic- vergence. We subsequently present our proposal of ipalities’ tax revenues, are empirically analysed using “national convergence roadmaps” which serves as a an extensive dataset collected specifi cally for this pur- blueprint for the reform delivery tool. Our proposal pose. Lastly, the study evaluates the consequences aims to strengthen the role of national responsibil- of a property tax reform for the German Länder fi scal ity for the convergence progress by giving mem- equalisation scheme (Länderfi nanzausgleich). ber states the possibility to propose a convergence roadmap in the context of the European Semester, The study concludes that from a public fi nance per- specifying structural reform plans and convergence spective, the better arguments speak in favour of a Value-based property targets. Convergence targets should be restricted to property tax with a simple tax base. A property tax taxes are problematic a small set of output convergence goals that allow for based on plot and fl oor space, for instance, would better policy targeting and give more emphasis to meet this criterion. In contrast, value-based proce- policy prioritisation. Financial support for structural dures to determine the property tax would involve reforms would depend on the potential for positive substantial problems. Assessing market values for spillovers, continuous implementation of the reform property would involve signifi cant assessment costs, package and achievement of the agreed convergence which is hardly justifi able given that the revenues goals. Existing resources from the European Struc- from the property tax are of only minor importance tural and Investment Funds should be used for this compared to the revenues collected from other tax- purpose. Restricting programme eligibility to mem- es that involve lower assessment costs (i.e., proper- ber states with below-average per-capita GDP would ty tax revenues amount to roughly 14 billion euros as ensure that resources are channelled towards those of 2017). However, the application of standardised countries with the greatest need to catch up. procedures to lower the assessment costs would again raise doubts about the constitutionality of the The German Property Tax: A Public Finance property tax. Moreover, the results of the empirical Analysis and Reform Options analyses indicate that value-based procedures to de- C. Fuest, L. Immel, V. Meier, F. Neumeier for Haus & Grund termine the property tax would lead to an unequal Deutschland; ZIA Zentraler Immobilien Ausschuss e.V., distribution of the tax burden. Property owners or July 2018 to August 2018, publication ifo Schnelldienst tenants living in major cities would have to pay sig- 71(22), 2018. nifi cantly more property taxes than they currently do. Finally, value-based procedures would imply that In April 2018, the German Federal Constitutional Court economically strong states like Baden-Wurttemberg declared the current procedure of assessing property or Bavaria would have to make larger contributions to values to determine the tax base for the property tax the German fi scal equalisation scheme. as unconstitutional. The German legislature must revise the assessment procedure by December 2019, or R&D Tax Credits and the German 3.5% else the property tax must no longer be collected. This Objective study provides an evaluation of the property tax in C. Fuest, L. Immel, F. Neumeier, D. Stöhlker for the general, as well as specifi c reform proposals that have Vereinigung der Bayerischen Wirtschaft e.V. (vbw), been made up to date. June 2018 to July 2018.

At fi rst, a set of criteria for an economically sensible The governing parties in Germany have stated the ob- property tax is identifi ed. This is followed by a compre- jective to raise total spending on research and develop- hensive discussion of diff erent reform proposals and an ment (R&D) to 3.5% of German gross domestic product

ifo Annual Report 2018 97 RESEARCH GROUP TAXATION AND FISCAL POLICY

(GDP) by 2025. However, in light of the absolute as well There are important economic reasons for Germany to as the relative importance of private R&D spending, a introduce tax incentives for R&D. On the one hand, the Incentivising private signifi cant increase in private R&D spending is required level of R&D spending is generally lower than the so- R&D spending to reach this goal. This study analyses whether introduc- cially optimal level, due to the positive externalities of ing tax credits to incentivise private R&D spending can R&D as well as asymmetric information between R&D help to achieve the government’s ambitious objective. fi rms and external providers of capital. R&D tax incentives have the potential to rectify these problems. On The study starts by summarising the economic argu- the other hand, Germany is one of the few OECD and ments in favour of R&D tax credits, before taking stock EU countries to rely only on direct R&D subsidies and of the most common international practices, as well as forego promoting R&D via tax concessions. This rep- documenting the role played by tax credits around the resents a considerable disadvantage in international globe. Next, it reviews the existing empirical evidence competition over taxes and business locations. on the eff ectiveness of R&D tax credits and discusses whether tax credits are a suitable instrument to meet Moreover, the empirical evidence suggests that R&D the German government’s objective. tax incentives lead to a disproportionate rise in private R&D spending and are thus highly eff ective. R&D Subsidies in an International Comparison

B-Index SME B-Index Large Enterprises Consequently, from an economics perspective, the introduction of R&D tax credits in Germany seems advis- France able. All in all, the German government’s objective to Portugal Canada increase R&D spending to 3.5% of GDP appears to be Spain achievable only if R&D tax credits are adopted. United Kingdom Lithuania Chile Taxing the Digital Economy – Impact of Tax Latvia Changes on Selected Locations (Upper Bavaria/ Ireland Iceland Bavaria and/or Germany) Netherlands C. Fuest, V. Meier, F. Neumeier, D. Stöhlker for the Cham- South Korea ber of Commerce and Industry for Munich and Upper Australia Norway Bavaria, January 2018 to September 2018, publication China in Impulse für die Wirtschaft spolitik, IHK für München Slovenia Hungary und Oberbayern, Munich, 2018. Austria Czech Republic Firms in the digital tech sector are frequently accused South Africa Belgium of not paying enough in terms of taxes, e.g. by exploit- Italy ing favourable tax conditions in tax havens. The Euro- Greece Romania pean Commission (EC) estimates eff ective taxes to be Poland no higher than 9.5% for fi rms in the digital sector as Sweden compared to 23% for fi rms outside the tech industries. Turkey Mexico Beyond this background, the EC has recently proposed Slovakia introducing a tax on specifi c sales revenues of those United States fi rms. According to its proposal from March 2018, it Russia Finland plans to charge a tax rate of 3% on revenues from sell- Japan ing user data, placing online advertising and providing Denmark Brazil online marketplace infrastructure. Companies with to- Switzerland tal revenues smaller than 750 million euros worldwide Luxembourg and less than 50 Mio. euro in beforementioned digital New Zealand Germany sectors are exempted from the tax. -100 1020304050 % 1 í B-Index This study highlights some important economic draw- Source: Calculations of the ifo Institute on OECD data (2017). © ifo Institute backs that the current proposal of a digital tax has. By

98 ifo Annual Report 2018 RESEARCH GROUP TAXATION AND FISCAL POLICY

focusing on a fi rm’s revenues instead of its profi ts the Current Projects tax favours fi rms with relatively high profi t margins – potentially those with higher market power and established business models – as compared to new market Regional Inequality and Extremist Voting in entrants such as start-up fi rms. Moreover, given that Germany profi t margins are smaller in times of crisis, the tax has F. Dorn, C. Fuest, L. Immel, F. Neumeier, internal project, a pronounced procyclical character with higher taxes since October 2016. relative to profi ts in downturns, thereby amplifying the eff ect of the recession for fi rms. Over the past decades, many industrialised countries have experienced both an increase in economic in- Eƛective Tax on Profits Following the Introduction of the equality and an increase in the popularity of nation- Digital Service Tax for Diƛerent Returns to Sales alist and left ist parties and movements. Many pundits Digital service tax only posit that these two phenomena are in fact closely Digital service tax plus corporate income tax (w/o deductability) linked. The economic strains many groups in society Digital service tax plus corporate income tax (w/ deductability) experience are believed to have fuelled resentments 200 % against mainstream political parties and against the political order itself. While established parties are los- 150 ing the trust of their voters, many extremist and pop-

100 ulist movements on both sides of the political spectrum have gained popularity and support. According 50 to the current narrative, the more unequally economic resources are distributed, the greater the appeal of 0 extremist and populist views. The extant empirical 2 4 6 8 10 12 14 evidence suggests that inequality and political polar- Estimating the Return to sales in % isation are indeed correlated. Evidence on the causal impact of economic Source: Calculations of the ifo Institute. © ifo Institute relationship between inequality and polarization is inequality on political scarce, though. The aim of this project is therefore to polarisation The study also estimates the potential revenues from estimate the causal impact of economic inequality on the introduction of the tax. Depending on whether political polarisation using IV estimation. To this end, digital revenue taxes can be deducted from usual cor- we compute diff erent inequality measures between porate profi t taxes or not, we estimate the revenues to and within counties using the German Microcensus and be between three to four billion euro in total, which is combine these with county-level election outcomes equivalent to only 0.1% of total tax revenues in the EU. from federal and state elections. Importantly, given that the tax would hit mostly fi rms from the United States and therefore has the same ef- Evaluation of Tax Concessions fect as an import tariff on their services, the introduc- C. Fuest, L. Immel, F. Neumeier in cooperation with the tion of the tax could trigger potential retaliation mea- FiFo Cologne, the ZEW Mannheim and the Fraunhofer sures, which could easily off set the minimal revenues Institute for Applied Information Technology, Karls- from the tax. ruhe, for the German Federal Ministry of Finance, June 2017 to March 2019. Short-time Work Subsidies in a Matching Model According to the guidelines for government subsidies V. Meier, internal project, March 2017 to September 2018. (erweiterte subventionspolitische Leitlinien) of the Ger- man federal government, all government grants need We analyse how changes in maximum eligibility peri- to be evaluated on a regular basis. This applies to direct od of short-time work subsidies aff ect wages and un- subsidies as well as tax concessions. In 2007 and 2008, employment. Moreover, a rule of optimal eligibility for 20 of the most important tax concessions were evalu- short-time work subsidies is derived. ated. Now, the remaining 32 concessions currently ef- fective are to be examined. The aim is to quantify and to evaluate those concessions with respect to several

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factors including their eff ectiveness, eff iciency, trans- types of models that coalition governments have an in- parency and sustainability. centive to delay the stabilisation and adjustment process in response to fi scal shocks because each mem- As part of the project, the Research Group evaluates ber of the coalition seeks to transfer onto the others three diff erent tax allowances for capital gains result- the political costs of the adjustment. Despite leaving ing from the sale of a business and granted in the event the economy in an unstable and fi scally unsustainable that the business owner is at least 55 years old or un- mode aft er the negative revenue shock, both parties able to work at the time of the sale. will not give in until the fi rst player, i.e. the “loser” of the game, accepts to bear a disproportionally large share For these tax concessions, a fi nal report is prepared. of the fi scal burden. Our results do not provide empiri- The report includes an outline of the legal basis, back- cal support for the phenomenon. The adjustment pro- ground information, quantitative analyses and eval- cess among coalition governments is neither initiated uations with regard to transparency, suitability, and later nor smaller in size as compared to non-coalition the eff ectiveness of the tax concession in questions as governments. well as policy recommendations. In addition, a concise evaluation sheet (Subventionskennblatt), summarising Political Economy of Redistribution between the main results, is published for each of the three tax Traditional and Modern Families concessions. In order to ensure the consistency of the V. Meier in cooperation with M. Rablen, University of evaluation of all 32 tax concessions, a uniform evalua- Sheff ield, internal project, April 2018 to March 2019. tion scheme will be applied. We consider an environment in which families may ei- Tax Cuts Starve the Beast! Evidence from ther be “traditional” single-earner or “modern” dou- Germany ble-earner households and voters determine subsidies C. Fuest, F. Neumeier, D. Stöhlker, internal project, paid to each group. Voters take both redistributive as since October 2016. well as eff iciency aspects into account. We discuss how the size of these subsidies is determined and how it var- In the context of this research project we evaluate how ies over the course of development when the share of fi scal policy reacts to exogenous changes in the gov- modern households is growing. ernment’s fi scal situation. Utilising panel data from the German states covering the period from 1992 to 2011, we assess to what extent exogenous changes in tax revenues aff ect total public revenues, aggregate public expenditure as well as specifi c subcategories of government spending in which the German states hold major competencies. Establishing a causal link between resources and spending turns out to be a challenging exercise due to reverse causality issues. In order to overcome this problem, we apply the narrative approach pioneered by Romer and Romer (2010) in order to construct a measure of exogenous tax shocks Changes in tax cause which eventually allows us to identify the causal eff ect spending to move in of tax changes on fi scal policy. Our fi ndings indicate the same direction that tax changes trigger expenditure adjustments into the same direction aft er two to three years, specifi cally with respect to spending on government administration and health expenditures. The panel dataset that we construct together with the exogenous tax shock series allows us to test several other hypotheses in the empirical public economics literature such as the so- called “war of attrition”. It is usually argued in these

100 ifo Annual Report 2018 Library

The library of the ifo Institute is primarily a service The ifo Institute’s library is a member of the library provider for ifo and CESifo, visiting researchers and association of the northern German Länder, GBV. This students of the Munich universities. With more than allows users to access ifo’s library via the internet and Harmonising 139,500 bibliographical units, some 320 periodicals marked an important step in the harmonisation of the economics libraries and 30 statistical reports, the ifo library is one of the Ifo holdings with those of other large libraries in eco- largest libraries for economics in southern Germany. nomics. The ifo online public access catalogue (OPAC) is a component of the ifo website (under Publication The Institute’s electronic catalogue uses various de- Series/Database Search). scriptors, PTS country codes, and abstracts, as well as the classiﬁ cation system of the Journal of Economic The library of the ifo Institute cooperates closely with Literature (JEL). the German National Library of Economics (ZBW) in Kiel and Hamburg. Thanks to its literature and database research, along with its procurement of data and information on selected economic and economic-political areas, the library fulﬁ ls an important service function.

ifo Annual Report 2018 101 Press, Publications, Conferences

The ifo Institute forms a bridge between academic re- social groups (especially teachers), and further devel- search and politics. The applied, scientifi c economic oping transfer off ers. research carried out by the ifo Institute aims to intensively contribute to policy advice and the economic pol- To assess the need for economic information at icy debate, as well as to provide services to researchers schools in greater depth, the ifo Institute and Medi- and the general public. Successfully transferring infor- enLB conducted a random survey of media centers in mation to the public realm is the key task of the Press, Germany in 2017. The evaluation of the survey results Publications, Conferences department. It prepares and was completed in 2018. The survey questionnaire was conveys the results of ifo’s research to its target audi- developed by the ifo Institute. The nationwide survey Communicating ence of political and business decision-makers, public of managers and media consultants in 65 media cen- research to various administrators, members of the academic communi- ters was performed by MedienLB. This survey has re- stakeholders ty and the media. Providing schools and the general sulted in a series of new titles for multimedia off erings public with economic information is another area of to which ifo will contribute its expertise. growing importance. The department also offers services for ifo’s Executive Board and its research depart- The ifo Classroom has been published regularly every ments, as well as supporting them in their publications, two months as an online newsletter since July 2017. organising major events and by taking responsibility It features both opinion articles by ifo experts and for the public image of the ifo Institute. This particu- research contributions on a specifi c topic, and sup- larly includes the layout of ifo’s print and online me- plements them with data and editable graphics. As a dia, as well as the design and editorial maintenance of special service, teachers have a protected area on the its website. In addition, the department is responsible ifo website at their disposal where they can access all for the numerous video projects and the social media newsletter content and where existing data off erings activities of the entire CESifo Group. In January 2019 are regularly updated. the department was renamed “Communications” and Dr. Cornelia Geißler was entrusted with its manage- The ifo Institute endeavours to invest in teacher train- ment. In the newly created position, she will contribute ing. To this end, the ifo Praxistage training series for to the further development of the “ifo” brand with a ho- modern economics education was launched 2017 and listic communications concept. continued in 2018. It is recognised as an off icial further training course by the Akademie für Lehrerfortbildung DEVELOPMENT, IMPLANTATION AND und Personalführung in Dillingen (ALP) and is aimed at PROFESSIONALISATION OF KNOWLEDGE TRANSFER teachers from Bavaria who teach economics at gener- CONCEPTS al and vocational schools. In 2019, the Centre for Eco- nomic Education in Siegen (ZöBiS) will provide addi- The three-year project “Development, Implementa- tional support for the didactic implementation of the tion and Professionalisation of Knowledge Transfer training, which is conducted in cooperation with the Concepts”, funded by the German Federal Ministry of Wirtschaft sphilologenverband Bayern (wpv). Education and Research and supervised by ifo’s Exe- cutive Board and Press, Publications, and Conferences department, was completed in May 2018. The project’s aim was to develop a usage concept geared towards the future needs of the ifo Institute that could at the same time serve as a model for other economic research institutes. The project aligned the ifo Institute’s diverse Strategy for eff ective transfer activities with the information needs of the knowledge transfer target groups and, at the same time, integrated them into an institutionalised strategy. This increased the eff iciency of the current ifo knowledge transfer system and unleashed new potential for knowledge transfer.

In 2018, the project focused on establishing (internal) transfer processes, evaluating the needs of diﬀ erent “ifo Praxistage”

102 ifo Annual Report 2018 PRESS, PUBLICATIONS, CONFERENCES

Since 2018 there has been a cooperation agreement crucial to the success of the project. The transfer of with the ALP to regulate both the provision of ifo ex- research results is a complex process that can be suc- perts for the continuing education programme in Dil- cessful only if competencies from very diff erent areas lingen and the organisation and implementation of a are brought together in a well-coordinated manner. joint continuing education programme. The ifo Insti- This role was so demanding that the knowledge trans- tute will provide experts, while ALP will organise the fer off icer reported directly to ifo’s Executive Board. premises and the organisation. The event will also be off ered annually in the future for use in the grammar Knowledge transfer culture: It has been shown that, to school economics seminar or in the seminar subject at establish a knowledge transfer culture, it is necessary vocational schools. to make employees aware that the transfer of research results is not only in ifo’s best interest, but also in their Another knowledge transfer tool that was developed as own and, as a result, forms an integral part of the In- part of the project and targets pupils themselves is ifo’s stitute’s tasks. Concrete measures, like transfer con- participation in the YES! Young Economic Summit. Start- trolling and the introduction of a transfer cost unit in ing with the school year 2018/19, the ifo Institute in co- cost and performance accounting, ensure that transfer operation with KU Eichstätt-Ingolstadt will participate and exploitation are anchored in the everyday work of in YES! This national student competition on economic ifo researchers and bring transparency to the work that policy issues is a joint project by the ZBW – Leibniz In- is invested in knowledge transfer tasks. formation Centre for Economics and the Joachim Herz Foundation under the patronage of the German Federal PRESS RELATIONS Ministry of Economics and Energy. YES! now has a num- The task of the press office is to present the Institute’s Research results in a ber of cooperation partners from the Leibniz Association. research results to the media and the general public in non-technical form an understandable, non-technical form. Over 200 press To make these transfer tools known to its teacher releases in 2018 offered information on research results, target group, the ifo Institute was represented with a current survey results, economic policy statements, stand at the 39th Business Philology Conference in new publications and events. As an intermediary be- Passau. Direct exchanges with over 200 teachers pres- tween journalists and the ifo Institute, the press office ent signifi cantly raised the Institute’s visibility as a pro- coordinates press interviews with Institute staff, organ- vider of curriculum-accompanying material. ises press conferences and answers queries. It also provides the general public with relevant information and Project funding by the German Federal Ministry for Ed- material. ucation and Research ended on 31 May 2018. Beyond the project period, some of the newly developed trans- Its continuous and active PR work is one of the reasons fer instruments were further optimised and stabilised: why the ifo Institute has a very high media profi le. In 2018 the ifo Institute improved upon its leading posi- Cooperation: Although the ifo Institute is excellently po- tion as Germany’s most frequently cited economic re- sitioned, it is essential for eff icient knowledge transfer search. This is partly due to the monthly publication of Very high media to enter into cooperation. Three examples illustrate the ifo Business Climate Index, the ifo Export Expec- profi le this necessity: 1) The learning of special methodolog- tations, the ifo Employment Barometer and other ifo ical know-how (e.g. design thinking) supports the survey results. ifo’s forecasts of the economic outlook, ability to identify and consider user needs during the and above all ifo’s economic policy statements, also at- transfer; 2) Study design is of enormous importance if tract a great deal of media attention. a comprehensive insight into usage and needs is to be gained; and 3) The visibility of the instruments heavi- In the reporting year Hans-Werner Sinn, ifo’s former ly infl uences their success. Partners from practice or president, and Clemens Fuest, ifo’s current president, from the target groups help to develop newly devel- contributed to the very high media presence of the ifo oped transfer tools and, above all, to raise their profi le. Institute. With numerous interviews and op-eds in national print media, on television and on the radio, both Transfer management: In addition to the cooperation presidents repeatedly generated fresh momentum for partners, appointing a knowledge transfer off icer was the economic policy debate. As regular columnists for

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the German economics magazine Wirtschaft sWoche, economics via practical examples. In addition to Klaus both Hans-Werner Sinn and Clemens Fuest have con- Wohlrabe’s explanation of ifo’s business surveys, Mar- tributed regularly to current economic policy topics. cel Thum’s presentation of his study on bitcoin was Their contributions to Project Syndicate are placed in given a very positive reception. Another highlight was important national daily newspapers across the world. Clemens Fuest’s explanation of Brexit and the reform Radio, TV and As interview partners in the radio, television and daily of the euro zone. newspaper interviews newspapers Hans-Werner Sinn and Clemens Fuest are in high demand across Europe. PUBLICATIONS Another of the department’s responsibilities is the con- Clemens Fuest’s statements on the Franco-German ception, production and distribution of ifo’s print and reform concept for European Monetary Union, on the digital publications. This includes developing topics of Brexit negotiations, on Germany’s new property tax, general current interest, editing and translating (Ger- and on income inequality attracted a great deal of man/English or English/German). The pre-printing work interest. Also of great interest in 2018 were the state- is also done in the department, including the prepara- ments by Gabriel Felbermayr, Director of the ifo Center tion of graphs and tables, as well as type-setting and for International Economics, on the trade war between layout, interfacing with the printers and address man- the US and China and on the transatlantic customs dis- agement. The Press, Publications and Conferences pute. Other ifo researchers, and especially the heads of team assists other departments in the professional ifo’s research departments, were also actively involved presentation of their publications and lectures. in the ifo Institute’s media work in 2018 via interviews and press articles. The ifo Institute publishes the following series of publications: To support the media in reporting on the ifo Institute’s results, ifo’s press releases were more strongly orient- – ifo Schnelldienst: a bi-monthly journal containing ed towards journalists’ information needs, and an ad- discussions of current policy issues and ifo research ditional service for the media offering regular notice of fi ndings forthcoming regular press releases was launched. In – ifo Konjunkturperspektiven: a monthly journal pre- addition, a television studio has been set up in the ifo senting the current results of the ifo Business Survey Institute, which is connected live to the television chan- in graphs, tables and descriptive analyses with a nels via Skype. focus on a selection of sectors every month that recurs on a regular basis Press releases have also been sent out in French since – ifo Dresden berichtet: a journal of the ifo Dresden the fourth quarter of 2017 in order to raise ifo’s media Branch on economic policy and structural change in profi le in the French-speaking world. The releases are eastern Germany that appears six times a year sent to a mailing list of around 600 Francophone journalists. – ifo World Economic Survey: a quarterly publication in English containing the results of an ifo expert poll on The “ifo Practical Experience Days for High-Quality the world economy in graphs and tables with a de- Journalism”, moderated by Jürgen Seitz, editor of tailed analysis Bayerischer Rundfunk, and ifo press off icer Harald – CESifo Forum: a quarterly English-language journal Schultz, had to be postponed from November 2018 to published by CESifo GmbH focusing on current Helping journalists January 2019 for scheduling reasons. 15 young jour- economic topics of worldwide interest with con- communicate nalists from the German School of Journalism and six tributions by internationally renowned authors economics editors from Bayerischer Rundfunk attented the event, which aimed to deepen participants’ understanding – ifo DICE Report: a quarterly English-language journal of economic relations through the practice-oriented with articles on institutional regulations and eco- communication of economic and journalistic knowl- nomic policy measures using a country-comparative edge. Leading researchers from all ifo research de- approach partments presented their work and research results. This highlighted typical mistakes made in reporting on

104 ifo Annual Report 2018 PRESS, PUBLICATIONS, CONFERENCES

– CESifo Economic Studies: a quarterly, refereed aca- results or policy recommendations and enter into a demic journal in English. Articles present the results direct exchange with other Twitter users. The ifo Cen- of economic research and address policy-relevant ter for Educational Economics has its own Twitter ac- Online and social issues. CESifo Economic Studies is published by counts (@ifo_Bildung or @ifo_education), since the media presence Oxford University Press. Its managing editor is Panu target group of people interested in educational eco- Poutvaara, who has been director of ifo’s Center for nomics can be served according to their needs. The International Institutions Comparisons and Migra- users of the website can keep up to date with the latest tion Research since 2010 news from the ifo Institute and the CESifo Group via the RSS feeds of the CESifo Group. Job advertisements of – ifo Beiträge zur Wirtschaft sforschung: a book series in the ifo Institute are published via Xing and LinkedIn. which important research projects of the ifo Selected photos and images are available on FlickR and Institute are published YouTube for easy access.

Since 2014 selected journals have also been available CONFERENCES in EPUB format. The Press, Publications, Conferences department is The ifo Institute also publishes the results of expert responsible for organisation and holding of the ifo In- reports that do not appear in book form in the ifo For- stitute’s major conferences, presenting the Institute schungsberichte and research conducted by the ifo at external conventions and conferences like, for in- Dresden Branch in ifo Dresden Studien, which deals stance, the Annual General Meeting of the Verein für primarily with topics affecting the new German federal Socialpolitik (Association for Social Politics), and for states and their eastern neighbours. taking care of groups of visitors to the Institute. Key events in 2018 were symposia on tax and fi nancial poli- The ifo Newsletter, a free electronic information ser- cy and European unemployment insurance, the ifo An- vice, is distributed at the end of each month by email. It nual Meeting and the Munich Economic Summit. Public reports, in German, on the latest research fi ndings, key events are mostly livestreamed on the internet to make publications, selected events, personnel particulars, them accessible to members of the public who are un- important dates and a range of other news from the able to attend in person. ifo Institute. The ifo Dresden Newsletter is a service For several years now, the ifo Institute and its President Direct exchange with offered by the Dresden Branch of the ifo Institute that have maintained an intensive and direct exchange with politicians regularly reports on the latest publications and events members of the German Bundestag. In 2018, two “Par- organised by the branch. In addition, the publication liamentary Breakfasts” took place at the Bavarian of new issues of CESifo Forum, ifo DICE Report and ifo Representation in Berlin, to which members of select- World Economic Survey is accompanied by a summary ed committees were invited. In March and October, Cle- of contents and download options. mens Fuest discussed the need for economic, fi nancial and European policy action and the current challenges Some ifo publications are distributed by international, with parliamentarians. online service providers. A complete overview of the publications and ordering information is available at On 6 March 2018, the Bayerischer Handwerkstag and http://www.cesifo-group.de/publications. the ifo Institute held a symposium in Munich entitled “Sparkling Revenues, Major Challenges – Expectations SOCIAL MEDIA ACTIVITIES of a Sustainable Fiscal and Financial Policy”. In his in- The ifo Institute is active in selected social media chan- troductory words, Franz Xaver Peteranderl, President nels. On Twitter, the CESifo Group informs about news of the Bayerischer Handwerkstag, pointed out that tax on the website in German (@ifo_Institut) and English policy has a considerable infl uence on competition and (@CESifoGroup). ifo President Clemens Fuest, Cen- infl uences both investment decisions and competition ter Directors Andreas Peichl and Gabriel Felbermayr between diff erent forms of enterprise. In general, it is and retired ifo President Hans-Werner Sinn also have necessary to put the complex tax system to the test. ifo Twitter accounts through which they refer to current President Clemens Fuest critically discussed the tax pol- research of their own or important external research icy plans of the Grand Coalition in his lecture. He concen-

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trated his remarks on the need for reform in the areas of On 12 June 2018, the ifo Institute, together with SPD income taxation, corporate taxation and wealth-related MEP Jakob von Weizsäcker, organised the discussion taxes. In the area of income taxation, politicians should round “Self-insurance and Reinsurance against La- Tax reform in use tax relief leeway to reduce the middle-class belly in bour Market Shocks: A New Proposal for the Euro Germany is essential the income tax tariff . In the area of corporate taxation, Zone” in Berlin. Sebastian Dullien, Professor at the measures are necessary to improve Germany’s position Hochschule für Technik und Wirtschaft in Berlin, pre- in international tax competition. With regard to proper- sented the concept of a European unemployment in- ty-related taxes, there is a need for reform of real estate surance developed jointly with Weizsäcker et al. With taxes, real estate transfer taxes, and inheritance tax. this, a signifi cantly better cushioning of economic Franz Josef Pschierer, State Secretary at the Bavarian shocks in the Eurozone could be achieved and, due to State Ministry of Economic Aff airs and Media, Energy the high share of national self-insurance, practically and Technology, underlined that the German economy without incentive eff ects or even permanent transfers. is currently developing extremely positively. Neverthe- ifo President Clemens Fuest and Jakob von Weizsäck- less, Germany must act to safeguard its competitive- er discussed this concept, alternatives and political ness. International tax competition had been fuelled, implementation under the chairmanship of Cerstin and the coalition agreement lacked a commitment to Gamelin, Süddeutsche Zeitung, together with CDU courageous tax relief. Deborah Schanz, head of the Insti- Member of Parliament Ralph Brinkhaus and Sebastian tute for Business Taxation at the Ludwig Maximilian Uni- Dullien. versity in Munich, expressed doubts as to whether the German federal government could stay in the black, as On 28 June 2018, the 69th Annual Meeting of the ifo In- the coalition agreement was peppered with tax gift s and stitute took place in the Great Hall of the Ludwig Maxi- massive investment promises at various points. She also milian University in Munich. Clemens Fuest, President of International tax said that an urgently needed reform of trade tax was not the ifo Institute, reported on the Institute’s activities in competition is being being discussed and that international tax competition 2017 at the morning general meeting. The annual fi nan- ignored was being virtually ignored. In the subsequent panel cial statements presented by ifo Executive Board mem- discussion, moderated by Steff en Range, editor-in-chief ber Dr. Stephanie Dittmer for the year ended 31 Decem- of the Deutsche Handwerks-Zeitung, the speakers once ber 2017 were unanimously adopted and the actions of again explained their assessments of the Grand Coali- the Executive Board unanimously approved. tion’s tax policy plans. Overall, the tax policy plans were disappointing. They are rather a patchwork rug, there At the end of the general meeting – aft er the election is no underlying vision. The conclusion: the German tax of the members of the Board of Trustees – the prize of system is too complicated, the bureaucracy too large the Gesellschaft zur Förderung der wirtschaft swissen- and the tax administration too backward. The contribu- schaft lichen Forschung (Friends of the ifo Institute) e.V. tions presented at the symposium were published in ifo was awarded. Detailed information on the award can Schnelldienst 71(6), 2018. be found in the chapter Personnel Development and in ifo Schnelldienst 71(13), 2018.

The public part of the 2018 ifo Annual Meeting was devoted to “Digitalisation and Innovation and their Signif- icance for Growth and Competitiveness”. The keynote speaker Gisbert Rühl, Chairman of the Management Board of Klöckner & Co SE, opened his speech with an address on the topic of “Platform”. From his point of view, the establishment and operation of consumer-related internet-based platforms is competitive to the detriment of Germany and Europe – just think of Google, Facebook or Netfl ix – but in the area of industry 4.0, there is certainly the possibility that Germany will Panel discussion: Franz Josef Pschierer, Clemens Fuest, Franz Xaver take the lead. With its medium-sized industrial struc- Peteranderl, Steff en Range, Deborah Schanz ture, but also its innovative large corporations, it off ers

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good conditions for this. In the further course of his lec- but it oﬀ ers more advantages than disadvantages. To ture, Gisbert Rühl described how Klöckner was pushing identify these advantages in concrete terms would ahead with digitalisation. help people to overcome their fears of digitalisation and adapt to the changes. The ability to do so is certainly there. We should start to work and experiment with the new instruments. A detailed report of the ifo Annual Meeting with speeches by the speakers is published in ifo Schnelldienst 71(13), 2018.

Clemens Fuest ifo President Clemens Fuest dealt in his keynote speech with a partial aspect of the economic changes brought about by digitalisation, tax policy. In his view, tax policy is heading in the wrong direction. There is no doubt that Panel discussion: Clemens Fuest, Gisbert Rühl, Friedrich W. Hesse, the economic changes brought about by digitalisation Rupert Lehner, Irene Bertschek, Marc Beise are of undisputed importance, e.g. the growing importance of data for value creation and the growing importance of intangible assets with a high degree of mo- On 4 and 5 July 2018, aft er a two-year break, the Mu- bility. Moreover, digital business models oft en do not nich Economic Summit took place under the patron- require a physical presence in sales markets. There was age of Bavarian Prime Minister Markus Söder. The aim also concern about the growing market power of digital of the conference is to bring together high-ranking companies, i.e. a shift away from consumers towards government representatives, outstanding internation- companies. The European Commission is now pushing al scientists and decision-makers from business, the ahead with a project: the Digital Service Tax as a com- media and society to discuss important European pol- pensatory tax. The Commission assumes that there is icy issues personally and with a high degree of interna- a dramatic tax diff erential between the traditional and tional visibility. In order to give young scientists access the digital economy, since, for example, the deprecia- to these networks and the exchange associated with tion rules for digital and non-digital capital goods are them, ifo doctoral candidates were specifi cally invited diff erent. However, this thesis is “cautiously expressed, to the event. poorly documented” and does not off er any argument for the introduction of a new equalisation tax. The topics of the current summit were manifold: Eu- European rope’s role and competitiveness in a new world order, competitiveness in a The subsequent panel of experts, which includ- the impact of the Brexit crisis, migration and digitalisa- new world order ed Clemens Fuest and Gisbert Rühl as well as Irene tion, stability of the fi nancial sector, populist and au- Bertschek, ZEW, Mannheim, Rupert Lehner, Bitkom, thoritarian tendencies, European Economic and Mon- and Friedrich W. Hesse, Leibniz Institute for Know- etary Union. 25 speakers exchanged views amongst ledge Media and Vice President of the Leibniz Asso- themselves and with the public in fi ve keynote speech- ciation, deepened the discussion on the challenges es and four panel discussions. posed by and the eff ects of digitalisation. As a conclusion of the discussion, the speakers stated that Keynote speakers on the fi rst day were EU Budget Com- digitalisation is an enormous challenge – especially missioner Günther Oettinger, Sigmar Gabriel, Member for a country like Germany with an ageing society – of the Bundestag and former Vice-Chancellor, and Pier

ifo Annual Report 2018 107 PRESS, PUBLICATIONS, CONFERENCES

Carlo Padoan, Member of the Italian Parliament and for- Richard Gutjahr, journalist, then discussed the compet- mer Economics and Finance Minister. In their speeches, itiveness of the European economy in a digital world they addressed the various aspects of a possible reor- with Michael Böhmer, Economic Advisory Partner for ganisation of Europe. Günther Oettinger stressed that EY in Germany, Switzerland and Austria, Viktor May- the four European freedoms – free movement of capital, er-Schönberger, Professor at Oxford University, Ma- people, goods and services – represent signifi cant add- rie-Elisabeth Rusling, CEO and Member of the Board of ed value for the EU in global competition. In Sigmar Ga- Business Angels Europe, and Tommaso Valletti, Chief briel’s view, the current global situation requires Europe Economist of the EU Commission. Europe, and Germany, to assert itself and develop a major strategy – Germany must become more must become more assertive here. Pier Carlo Padoan In his keynote speech “The reform of the euro zone: assertive sees great progress in risk reduction, but much less in what’s missing”, ifo President Clemens Fuest pointed risk sharing. Multi-stage, non-national solutions are nec- out the Eurozone’s vulnerability to the next downturn. essary, and these require trust. Unfortunately, this is low The necessary reforms must be a balance of more mar- in the EU. Compliance with and implementation of joint- ket discipline and more risk sharing. One of the main ob- ly agreed rules is an essential element in building trust. stacles to reform is a lack of confi dence in the reliability of European rules and agreements. This confi dence can Protectionism, the threat of a trade war between Eu- be built through successful cooperation in other areas rope and the US, multilateral trade agreements and the such as defence, border management and European in- rise of their bilateral counterparts, the importance of frastructure projects. The speech was directly followed the World Trade Organization and the need for its re- by the EconPol Europe panel on the future of the euro. organisation were the central topics of the fi rst panel Clemens Fuest discussed this with Anne-Laure Delatte, discussion chaired by Katinka Barysch, Head of Politi- Deputy Director of CEPII, Marek Mora, Member of the cal Relations, Allianz SE, Munich. Participants included Board of the Czech National Bank, and Markus K. Brun- Richard Baldwin, Professor for International Econom- nermeier, Professor of Economics at Princeton Universi- ics, Graduate Institute of International and Develop- ty. A video documentation of the event can be found at ment Studies, Geneva, Anthony L. Gardner, former US www.munich-economic-summit.org. Ambassador to the EU, Arancha González, Executive Director of the International Trade Centre, and Karl On 7 November 2018, the ifo Institute hosted the Haeusgen, Vice President of the German Engineering 18th ifo Industry Colloquium (ifo Branchen-Dialog) in Federation (VDMA). cooperation with the Chamber of Industry and Com- merce for Munich and Upper Bavaria and sponsored In Panel 2, John Peet, The Economist, discussed the cur- by the Bavarian State Ministry of Economic Aff airs, En- rent state and future direction of the EU with Giuseppe ergy and Technology. This is a platform for discussing Bertola, Professor for Economics at the University of current developments from a sector-specifi c perspec- Turin, Jerzy Kwiecinski, Polish Minister for Investment tive. In the four industry forums of Industry, Trade, and Economic Development, Liliana Pavlova, Bulgarian Construction and Services, experts from companies, Minister for Regional Development, and Sir Ivan Rog- associations, politics and research discuss current ers, former British representative to the EU. industry developments, trends and challenges. In the ifo Schnelldienst 72(1), 2019, detailed information on The second day began with a keynote speech by Timo- the conference will be provided in the Industrial Eco- theus Höttges, CEO of Deutsche Telekom, on “Europe’s nomics and New Technologies section. role and competitiveness in a digital world”. He stressed that the European business model off ers every oppor- INTERNET tunity for future success and that its values guarantee The ifo Institute has digitalised most of its activities “peace and individual freedom”. However, the condi- in research, policy advice and service and made this Improving tions in a digital economy are no longer the same and information available online. This applies not only Europe’s digital require new impetus from European businesses. Im- to internal and external communication, to searches competitiveness proving Europe’s digital competitiveness would require and to knowledge management, but also to business better governance, the best broadband infrastructure surveys, research projects and data provision to users and the courage to invest in strategic industries. worldwide. The ifo Institute’s activities are linked with

108 ifo Annual Report 2018 PRESS, PUBLICATIONS, CONFERENCES

those of its other partners in the CESifo Group. For this manner. Every news item is also published on Twitter, Targeted news fl ows reason, the CESifo Group has a joint internet portal creating a direct connection with the ifo Institute’s so- (www.cesifo-group.de) that combines the information cial media activities. offered by the ifo Institute, CESifo GmbH and the Cen- ter for Economic Studies (CES). The range of services for the transfer of knowledge is being continuously expanded. In internet databases, publications can be easily searched and ordered and some can be retrieved in full-text form. Several ifo journals have also been offered as downloads in the EPUB format as of 2014, which is particularly suitable for viewing on mobile devices like tablets and e-readers. The library of the ifo Institute also makes its electronic catalogue available to external users. The DICE database (Database for Institutional Comparisons in Europe) offers information in a systematic and comparable form on institutional regulations, especially within the European Union. The ifo Business Surveys of the ifo Institute are carried out via an internet platform.

Numerous lectures given by guest researchers at the Center for Economic Studies (CES), as well as selected lectures at ifo events, are made available in a video format to an international audience in the CESifo Group’s CESifo Group Website: http://www.cesifo-group.de media library. CESifo GmbH and CES provide a wide range of information on their work in the joint internet portal, especially with regard to the CESifo Research Net- The internet portal aims to provide the public with work and the scientifi c conferences organised by CESifo. comprehensive information from the working areas of the CESifo Group and to improve the general level of Preparations for a complete relaunch of the CESifo Website relaunch knowledge in economics. It also has the goal of quality Group website continued in 2018. In the course of these ongoing assurance, by enabling complete transparency regard- preparations, the entire technical foundation of the ing the resources and output of the members of the CE- internet portal, including the soft ware used, will be Sifo Group, so that a control function can be exerted changed and updated. Several content management by its users. systems were evaluated in terms of their suitability for meeting the specifi c needs of the ifo Institute and new On the internet portal of the CESifo Group, the ifo In- approaches to optimising the content and structure of stitute presents timely information on the Institute, its the website were developed. This work will continue in services, its research topics, its economic policy advice 2019 with external support. based on this research, and its future plans. This also includes comprehensive information on the theoretical VIDEOS and policy-oriented output of ifo’s research centers and its staff, as well as the media resonance of this output. Video contributions are becoming an increasingly important instrument for conveying information. Re- On the start page information from the Institute is cordings of speeches, lectures, panel discussions and prepared editorially in the form of ifo News and is other events document the CESifo Group’s work. CES complemented by images. In addition to topical press and ifo began recording events and producing video releases, these news pieces feature other research refi lms back in the 1990s, meaning that the CESifo Group sults, events, personnel changes, references to TV ap- now has a vast pool of video recordings. One well-es- pearances and much more. This gives rise to a fl ow of tablished focus of ifo’s use of video is livestreaming, or news that can be directed by the Institute in a targeted live broad-casts of events via the internet, which are

ifo Annual Report 2018 109 PRESS, PUBLICATIONS, CONFERENCES

subsequently made available in its media library. This technology has signiﬁ cantly raised the public proﬁ le of CESifo events.

Virtual auditorium CESifo’s Media Library also serves as a virtual auditorium: lectures and presentations are oft en viewed in their entirety. The CESifo Lectures, which can be accessed via the CESifo website, are recordings of lectures given by international academics at CES and ifo. In 2018 the collection of online lectures was expanded to include the Munich Lectures in Economics by Tor- sten Persson on “Institutions and Culture”. Recordings of events were also made available on the video platform YouTube.

110 ifo Annual Report 2018 ifo Dresden ifo Dresden Branch

The Dresden Branch, established by the ifo Institute In 2018 three issues were published: No. 80 “Kosten in 1993, conducts empirical economic research that kommunaler Leistungserstellung unter dem Einfl uss focuses on the special conditions in the new Länder, von demografi schem Wandel und Urbanisierung”, especially in the Free State of Saxony. ifo Dresden pre- No. 81 “Personalbedarfe im öff entlichen Dienst des pares economic analyses that deal with economic de- Freistaates Sachsens bis 2030 und Konkurrenzsituation velopments in eastern Germany and the Free State of zur Privatwirtschaft ” and No. 82 “Strategien für die best- Saxony. It also off ers policy advice and information to mögliche Ausstattung mit und Nutzung von Fördermit- the public. The branch receives fi nancial support from teln nach 2020”. the Free State of Saxony and draws on the experience of the ifo Institute, its parent institute in Munich. To mark the 25th anniversary of ifo Dresden, a scientifi c conference entitled: “Disparitäten: Herausforderungen The Dresden Branch currently specialises in the für die Wirtschaft s- und Sozialpolitik” took place in following research areas: Dresden on 19 September 2018. Almost 30 years aft er Disparities not just reunifi cation, eastern and western Germany still diff er between eastern and – business cycle activity and economic growth in along various dimensions including economic power, western Germany Saxony and the new Länder wages and the property of private households. Dispar- – human capital, structural change and the position ities are not limited to the new and old Länder. There of Saxony and the new Länder in locational com- are also regional diff erences between north and south, petition as well as between rural and urban areas. – labour market and social policy in Saxony and the new Länder Prof. Marcel Thum, Executive Director of ifo Dresden, opened the conference by recalling the founding of – integration of Saxony and the other New Länder into the Dresden Branch in 1993. In a welcome address, Dr. the international division of labour (especially with Matthias Haß, Minister of Finances in the Free State of Central and Eastern Europe) Saxony, emphasised the importance of ifo Dresden’s – public fi nance and support of economic develop- policy advisory work for politics. Over 100 participants ment in Saxony and the new Länder. discussed social disparities with Prof. Hans Vorländer, Technical University of Dresden, Prof. Andreas Wage- More generally, ifo Dresden also conducts research into ner, Leibniz University of Hannover, Dr. Judith Niehues, the implications of demographic change for economic Institute of the German Economy, Cologne, Prof. Bern- development. The shrinking and ageing of the popula- hard Müller, Leibniz Institute of Ecological and Regional tion will have a signifi cant impact on nearly all fi elds of Development, Dresden, and Prof. Clemens Fuest, Presi- social and economic development, and thereby poses dent of the ifo Institute. new economic policy challenges. Conferences and workshops regularly take place at the In addition to economic research, ifo Dresden off ers premises of ifo Dresden. The workshops held in 2018 extensive services. Economic policy oriented analyses included the 12th ifo Dresden Workshop “Macroeco- are published in the journal ifo Dresden berichtet and nomics and Business Cycle Research” (26–27 January in the book series ifo Dresden Studien. ifo Dresden pro- 2018), the 8th ifo Dresden Workshop on “Labour Eco- vides information and advice on current economic poli- nomics and Social Policy” in cooperation with TU Dres- cy issues to policymakers and the business community. den (22–23 March 2018), the 8th ifo Dresden Workshop It also organises workshops and conferences. on “Regional Economics and Structural Change” also co-organised with TU Braunschweig (20–21 September The journal ifo Dresden berichtet has been published ev- 2018) and the 12th ifo Dresden Workshop on “Political ery two months since 1994. In this journal, ifo Dresden Economy” (30 November–1 December 2018) together researchers and external authors publish their current with CESifo, TU Dresden and TU Braunschweig. research fi ndings on the economic situation in the new Länder for a wider public in politics, business and ac- In the series Dresdner Vorträge zur Wirtschaft spolitik, ademia. The results of more comprehensive research prominent economists present their latest research projects are published in the series ifo Dresden Studien. fi ndings in economics and fi nance. In 2018, three lec-

ifo Annual Report 2018 113 IFO DRESDEN BRANCH

tures were held in this series. Prof. Tobias Just, head ence and Digitalisation of Saxony-Anhalt. The reports of the “Immobilienwirtschaft ” department at the are published on ifo’s homepage. The project will be IREBS International Real Estate Business School, Uni- concluded with the fi nal report for the year 2018. versity of Regensburg, and Director of the IREBS Im- mobilienakademie, Dr. Johannes Beermann, board Besides these third-party funded projects, ifo Dresden member of the Deutsche Bundesbank, and Prof. Lutz also creates the monthly, regionalised evaluation of Bellmann, Professor of labour economics at the Univer- the ifo Business Climate Survey for eastern Germany sity of Erlangen-Nuremberg and head of the “Betriebe and the Free State of Saxony. Its results are published und Beschäft igung” research unit at the Institute for as a press release and appear as a regular contribution Employment Research (IAB), discussed their views on to the magazines “Wirtschaft+Markt” and “Wirtschaft current policy issues with audience participants from in Sachsen-Das Entscheidermagazin der sächsischen academia, policy-making and public administration. Zeitung” addressing a broad audience of media, business leaders and politicians. Under the management of Marcel Thum and Joachim Ragnitz, 13 economists currently perform in research ifo Business Climate Eastern Germany at the Branch, of which seven are doctoral candi- Industry and Tradeɭ dates. The team is completed by two non-scientifi c Assessment of business situation Index, 2015 = 100ɮ staff members and a number of student research as- 130 ifo Business Climate sistants. ifo Dresden Branch closely cooperates with 125 Business expectations 120 the Technical University (TU) of Dresden and the Sta- 115 tistical Off ice of the Free State of Saxony. Cooperation 110 105 agreements specifi cally cover the visiting fellowships 100 of researchers, joint activities and presentations. In 95 90 addition, the ifo Dresden Branch extends project-re- 85 lated work experience to interested students of eco- 80 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 nomics. ɭ Manufacturing, construction, wholesaling and retailing. ɮ Seasonally adjusted. Source: ifo Business Survey, October 2018. © ifo Institute BUSINESS CYCLE AND GROWTH IN SAXONY AND THE NEW LÄNDER In addition to its monthly business cycle surveys, One of ifo Dresden’s core research areas is monitor- the Dresden Branch also forecasts economic devel- ing and forecasting the business cycle in Saxony and opments in eastern Germany and the Free State of Germany’s other new federal states. For this purpose, Saxony for the current and the following year. These Monitoring and the Branch carries out monthly evaluations of the ifo forecasts are released in June and December. The forecasting eastern Business Climate Index, as well as semi-annual busi- results are published both as a press release and as German business ness cycle forecasts for the Free State of Saxony and a contribution to the magazine ifo Dresden berichtet cycles eastern Germany as a whole. Additionally, the Branch (Issues 1/2018 and 4/2018). They are also present- conducts research at the intersection of business cycles and growth policy. ed to the professional public in a press conference and at the ifo working group “Konjunkturbeobach- In 2018, ifo Dresden undertook the study “Berechnung tung Sachsen”. In this working group, members of und Fortschreibung der Produktivitäts- und Innova- ifo Dresden discuss business cycle developments in tionslücken der deutschen Bundesländer” (Calculation eastern Germany and the Free State of Saxony with and Projection of the Productivity and Innovation Gaps Munich-based representatives of the ifo Institute, the of the German Federal States) on behalf of the Bertels- German Federal Employment Agency, the Regional mann foundation (jointly with the Munich-based ifo Employment Agency of the federal state of Saxony, Center for Macroeconomics and Surveys). the Statistical Bureau of the Free State of Saxony, representatives from various Saxon ministries, Creditre- Furthermore, the Dresden Branch produces the quar- form, the Dresden chamber of trade and commerce terly business cycle report for the federal state of Sax- and other associations. This year the working group ony-Anhalt on behalf of the Ministry of Economy, Sci- met for the 41st and 42nd time.

114 ifo Annual Report 2018 IFO DRESDEN BRANCH

An important topic in 2018 was the potential restric- nich-based ifo Institute and the University of Passau) is tion of international trade through tariff s and quotas. also evaluating diff erences in attitudes between east- Against this backdrop, Niels Gillmann, Jannik Nauerth ern and western Germany. and Michael Weber looked at the export structure of the Saxon economy. The article was published in issue In 2018 ifo Dresden continued to work on the project 3/2018 of the magazine ifo Dresden berichtet. “Innovationswerkstatt Dresden” (Innovation Work- shop Dresden), which it is conducting on behalf of In cooperation with the Helmut Schmidt University of the German Federal Ministry of Economic Aff airs and Hamburg, the Branch is hosting the annual ifo Dresden Energy. The project is carried out in cooperation with Workshop on “Macroeconomics and Business Cycle Re- the Helmholtz-Zentrum Dresden-Rossendorf (HZDR), search”, which focuses on the research output of junior University of Applied Sciences (HTW) Dresden and TU Strengthening researchers. This year the 12th workshop took place on Dresden. Its main goal is to strengthen cooperation cooperation between 26 and 27 January. between basic research institutions and small and me- research and SMEs dium-sized enterprises. Katharina Heisig and Joachim HUMAN CAPITAL, STRUCTURAL CHANGE AND THE Ragnitz are in charge of the economic analysis and POSITION OF SAXONY AND THE NEW LÄNDER IN the evaluation of new instruments. The project will be LOCATIONAL COMPETITION completed in February 2020. This fi eld of work analyses regional and sectoral dis- ifo Dresden participated in another joint project on aggregated growth and convergence processes. The technology transfer from research institutions to busi- focus is on comparative analyses of eastern and west- nesses from August to December 2018. The project ern Germany, as well as rural and urban areas. The re- “Förderung der Validierung von Forschungsergeb- search group’s aim is to propose policy options for ad- nissen im Freistaat Sachsen” (Funding the Transfer of justing the living conditions of regions that are lagging Ideas into Marketable Products in Saxony) was con- behind economically. Economic indicators are conducted in cooperation with HZDR-Innovation, Univer- stantly monitored, e.g. on demographic change and the convergence progress of eastern German regions. sity of Applied Sciences (HTW) Dresden, and HighTech Moreover, the research group focuses on relevant ten- Startbahn GmbH Dresden on behalf of the State Minis- dencies in education economics and the long-term try of Economic Aff airs, Labour and Transport in Sax- causes of spatial socioeconomic diff erences. ony. The research team’s results will provide the basis for future funding programmes in Saxony. The 8th ifo Dresden Workshop on “Regional Eco- nomics” took place on 20 and 21 September 2018. In two articles featured in ifo Dresden berichtet 1/2018, The workshop was jointly organised by Dr. Christian Christian Ochsner and Joachim Ragnitz present the Ochsner (CERGE-EI und University of Zurich) and Prof. key results of the study “Unternehmerische Wachs- Christian Leßmann from the Technical University of tumsstratgien in den ostdeutschen Bundesländern” Braunschweig. (Entrepreneurial growth strategies in the East German federal states). The articles deal with the growth pros- On behalf of the Umweltbundesamt (UBA), ifo Dresden – pects of eastern German companies. The study was together with the Wuppertal Institut für Klima, Umwelt, carried out in cooperation with Rambøll Management Energie gGmbH and the TU Dresden – is working on a Consulting and Creditreform Rating AG on behalf of the case study on structural change in the Saxon region of German Federal Ministry of Economics and Energy. Lusatia. This case study, which was launched in Novem- ber 2016, examines the causes and eff ects of structural Christian Ochsner completed his dissertation: “So- change processes. Previously implemented measures cioeconomic Persistence of Historical Shocks – Three Historical shocks aimed at mitigating or fostering structural change in Lu- Essays on Quantitative Economic History” in May 2018. persist satia will also be evaluated. The study will be completed Using digitised election and census data from Austria, in August 2019. he shows that regions that were liberated by the Red Army aft er World War II are still economically lagging On behalf of the German Federal Ministry of Economic behind neighbouring areas liberated by the Western Aff airs and Energy, ifo Dresden (together with the Mu- Allies. To this day, regional electoral behaviour is also

ifo Annual Report 2018 115 IFO DRESDEN BRANCH

inﬂ uenced by the division of occupation zones aft er the was conducted on behalf of the Saxon State Ministry of Second World War and the mass migration that result- Finance. Results were published in ifo Dresden Studie 81 ed from it. and as a short summery in ifo Dresden berichtet 3/2018.

In July 2018 Carolin Fritzsche successfully completed Furthermore, Katharina Heisig analysed the considerable her dissertation: “On the Economics of Housing Mar- diff erences in inclusion policies across federal states. The kets and Urban Policy – Three Essays in Real Estate share of children graduating from a special-needs school Economics”. Among other things, this thesis deals with without a regular school-leaving qualifi cation diff ers sig- the eff iciency of rural districts in the provision of roads. nifi cantly. Determinants of graduation rates are diff ering Carolin Fritzsche identifi es considerable eff iciency re- shares of children with special “intellectual develop- serves in eastern German rural districts, but also high- ment” needs, the ratio of pupils per teacher, and the in- lights that the results obtained depend strongly on tensity of transitions between special-needs schools and the underlying estimation method and the database. secondary schools. Results were published in ifo Dresden These research results were published in the German berichtet 05/2018 and in joint work with Jaqueline Han- Economic Review in 2018. sen in ifo Dresden berichtet 6/2018.

Lars Vandrei completed his dissertation on the “Eco- INTEGRATION OF SAXONY AND EASTERN GERMANY nomics of Housing Policy” in November 2018. In ad- INTO THE INTERNATIONAL DIVISION OF LABOUR dition to housing vacancies and real estate transfer taxes, his dissertation deals with the eff ect of rent regu- Economic integration between Saxony and its neigh- lations on purchase prices. Lars Vandrei examines price bours Poland and the Czech Republic was signifi cantly regulations for both existing and new rental contracts, fostered by the eastward enlargement of the European Union in 2004. Rent regulations which have been introduced in selected municipalities impact the price of in Brandenburg. His results show that apartments lo- Jaqueline Hansen und Katharina Heisig published re- housing cated in regulated municipalities lose over 20% in val- search results on the integration of Central and East- ue. The results were published as ifo Working Paper ern European (CEE) states into the European Union (ifo No. 262; an executive summary in German can also be Dresden berichtet 05/2018). They show that EU enlarge- found in issue 6/2018 of ifo Dresden berichtet. ments had positive eff ects on trade relations between Germany and the accession countries. Federal states LABOUR MARKET AND SOCIAL POLICY IN SAXONY in eastern Germany benefi tted disproportionately AND EASTERN GERMANY from CEE countries’ membership due to their histor- In this research area, ifo Dresden focuses on how ed- ical trade relations and their geographical proximity ucation policy and demographic trends aff ect labour to Eastern Europe. Exports from eastern Germany to market outcomes. This year’s emphasis lay on current CEE countries rose by 17% following the EU accession, policy-relevant topics, such as the inclusion and per- while exports from western Germany increased by formance of children with special educational needs just 6%. A similar pattern can also be seen in imports. in schools. Initial research results were published in ifo Economically stronger countries like Poland and the Dresden berichtet. Czech Republic have seen sharp increases in their trade with Germany since joining the EU in 2004. The Additionally, the research group organised the 8th ifo same can be said of Romania and Bulgaria. Dresden Workshop on “Labour Economics and Social Policy” (22-23 of March 2018), which was attended by PUBLIC FINANCE AND THE SUPPORT OF ECONOMIC both national and international participants. DEVELOPMENT IN SAXONY

David Bauer, Julia Sonnenburg and Michael Weber ex- In 2018 the research area focused on local-level and amined the public staff requirements due to retirement state-level fi nance, as well as on political economy. As in the Free State of Saxony through 2030. They show political landscapes around the world are changing, we that there could be a shortage of qualifi ed workers. need to learn more about voting decisions and political The shortage is expected to be more pronounced in the decision-making. public sector than in its private counterpart. The study

116 ifo Annual Report 2018 IFO DRESDEN BRANCH

Felix Rösel is conducting a project concerning po- David Bauer and Joachim Ragnitz published an article litical extremism, which is fi nanced by the German in ifo Dresden berichtet on the eff ectiveness of bench- Benchmarking Research Foundation (DFG). The project started in marking concerning the workforce in federal states. comparisons can June 2018 and has will run for three years. Dr. Rösel Due to the heterogeneous division of state and munic- mislead examines causal relationships between social cohe- ipal responsibilities across federal states, naïve com- sion and the rise of right-wing populism in Europe. parisons based on benchmarks may be misleading. The project addresses the question of whether associations foster or prevent populism. The fi rst article Questions of municipal structures were also addressed with Lasare Samartzidis “Wert- statt Geldmangel: in 2018. Felix Rösel and Sebastian Blesse of ZEW Mann- AfD triumphiert im Osten dort, wo es an Toleranz heim show that territorial reforms had hardly any fi scal und Vertrauen in die Politik fehlt” was published in impact, but may have impaired the functioning of de- ifo Dresden berichtet. Together with Niklas Potrafke mocracy at the local level. The results were published Felix Rösel published a second article in the Review in Local Government Studies. Another article on the of International Organizations. The article shows that subject was published in 2017 and was honoured with voter participation rises with extending the opening the “Prize in federalism research and regional science” (Austrian federalism prize). hours of polling stations. However, the longer opening hours almost exclusively increased votes for populist parties. Territorial Reforms Have Hardly any Fiscal Impact Non-merged counties Merged A study for the Federal Ministry of Economics and (control group) countries Technology (BMWi) examines the suitability of dif- ferent indicators for the demarcation of structurally Administrative expenditure in euro per inhabitantț)"ƞ+!/&$%10 )"Ȝ 700 600 weak regions. The aim is to make a contribution to the Reform Reform takes future design of the regional funding policy in Germa- 600 decided eƛect 500 500 ny. The experts propose that the existing set of indi- 400 cators should be slightly modifi ed to achieve a more 400 300 appropriate demarcation of assisted areas. The study 300 was prepared in cooperation with the Gesellschaft 200 200 für Finanz- und Regionalanalysen (GEFRA) and the 100 100 Bundesinstitut für Bau-, Stadt- und Raumforschung (BBSR). 0 0 2003 2005 2007 2009 2011 2013 Note: The figure shows the average administrative expenditure in the nine The provision of fi nancial support remains a matter counties of Saxony-Anhalt merged in 2007 (right scale) and the two non-merged counties (leƞ scale). Administrative expenditure includes personnel, material, of outstanding importance to the Free State of Sax- rental, maintenance and interest expenses. ony. The federal state will face further reductions of Source: ifo Institute. © ifo Institute fi nancial support from both the federal government and from the European Union for its operational pro- Regional disparities are a matter of great political inter- grammes aft er the year 2020. David Bauer, Christian est and an issue that is also addressed by ifo Dresden. Ochsner und Joachim Ragnitz recommended adjust- In an article published in ifo Dresden berichtet on the ef- Impact of autonomy ments in the Saxon funding policy to the State Chan- fect of municipal autonomy, Xenia Frei and Felix Rösel on local growth is low cellery of Saxony. The authors conducted a SWOT anal- highlight that the impact of autonomy on local growth ysis on the strengths, weaknesses, opportunities and is fairly small. In an article for Jahrbuch für Öff entliche threats to the Saxon economy. Based on this analysis, Finanzen the authors fi nd no evidence for increasing considerations on the evaluation of the current fund- disparities between German cities since 1950. ing policies and the adequate implementation of Saxon funding policies aft er 2020 were discussed. The evalua- In June 2018 Felix Rösel became a member of the tion is based on eff icacy and economic eff iciency of the “Junge Rentenkommission”, which is organised by DIE funding programmes. The results of the analysis were JUNGEN UNTERNEHMER. The committee will critically published as ifo Dresden Studie 82 and in issue 3/2018 evaluate and comment on the pension policies imple- of ifo Dresden berichtet. mented by the federal government.

ifo Annual Report 2018 117 IFO DRESDEN BRANCH

Projects Completed in 2018 Funding the Transfer of Ideas into Marketable Products in Saxony K. Heisig, J. Ragnitz in cooperation with HighTech Start- Human Capital, Structural Change and the bahn GmbH Dresden, HZDR Innovation GmbH Dresden Position of Saxony and the New Länder in and HTW Dresden for the State Ministry of Economic Locational Competition Research Area Aff airs, Labour and Transport in Saxony, July 2018 to December 2018. Germany 2017 (Deutschland 2017) J. Ragnitz, ifo Center for Labour and Demographic Eco- By national and international comparison, Saxony’s re- nomics for the German Federal Ministry for Economic search landscape is relatively strong, but the transfer Aff airs and Energy, March 2016 to March 2018. potential of research results in Saxony is insuff iciently exploited. As a result, promising research results are The main goal of this study is to investigate the current too infrequently used in applications and thus the pos- attitudes of Germany’s citizens. The preceding study itive eff ect on Saxony’s competitiveness is lower than it “Germany 2014” described the development of atti- could be. One key factor in the missing implementation tudes of German citizens in the east and west from the of research results could be the absence of adequate time of separation until 2014. Building on this work, the sources of funding. Against this background, the re- new study extends the analysis to include the most research team prepared a scientifi c report that will form cent data. Apart from a purely descriptive analysis of the basis of future funding programmes in Saxony. attitudes towards politics, the economy, values, norms and identities, as well as the current challenges faced by society, it also examines their determinants. In the Labour Market and Social Policy Research Area fi rst part of the project, a literature review summarises recent research at the intersection of economics, so- Public Staff ing through 2030 in the Free State ciology, psychology and political science. The second of Saxony and the Competitive Situation to the part concentrates on an empirical analysis using a vari- Private Sector ety of diff erent datasets. D. Bauer, J. Sonnenburg, J. Ragnitz, M. Weber for the Sax- on State Ministry of Finance, April 2017 to February 2018, Calculation and Projection of the Productivity publication as ifo Dresden Studie 81, ifo Institute, Munich, and Innovation Gaps of the German Federal Dresden, 2018, and in ifo Dresden berichtet 3/2018. States R. Lehmann, N. Gillmann, J. A. Nauerth, J. Ragnitz, The Free State of Saxony’s public sector is facing demo- J. Sonnenburg, M. Weber for the Bertelsmann Founda- graphic challenges. Between 2015 and 2030, nearly half tion, June 2018 to October 2018. of the workforce in Saxony’s public sector will retire. In light of demographic developments in Saxony, fi lling The working population in Germany will shrink in the these vacancies with younger workers may well prove coming decades. This process will negatively impact very diff icult. The public sector and the private sector economic growth. The growth of the production po- will be competing for the same groups of skilled workers tential of the German economy could halve by 2035. in some areas. On behalf of the Saxon State Ministry of Since the size of the total population is decreasing Finance, ifo Dresden investigated the future challenges more slowly than the working age population, the de- of fi lling vacancies in the Saxon job market. This analy- crease in the growth rate may also slow down the rise sis was conducted at the level of qualifi cations, occupa- in living standards. There is signifi cant heterogeneity tions and economic sectors. The study sought to identify Demographic regarding growth potential across regions due to dif- the domains in which the private sector and the public change could ferences in demographic developments. In the long sector are in competition. It also investigated the poten- endanger term, this could endanger the convergence process tial eff ectiveness of various personnel strategies in the economic between weak and strong economic regions. Slower public sector. For instance, the potential for reducing convergence growth in production potential could only be overcome overcapacities among public staff were evaluated. More- by a stronger increase in total factor productivity via in- over, we examined the eff ects of market adjustment pro- creased innovative activity, for example. cesses and technological and structural changes.

118 ifo Annual Report 2018 IFO DRESDEN BRANCH

Public Finance and Support of Economic The Free State of Saxony will face further reductions Development in Saxony and the New Länder of fi nancial support from both the federal govern- Research Area ment and the European Union for its operational programmes aft er 2020. ifo Dresden recommended Economic Studies adjustments in the Saxon funding policy to the State J. Ragnitz in cooperation with the ifo Center for Indus- Chancellery of Saxony. The authors conducted a SWOT trial Organisation and New Technologies for the Cham- analysis on the strengths, weaknesses, opportunities ber of Industry and Commerce (IHK) of Munich and Up- and threats for the Saxon economy. Based on this anal- per Bavaria, April 2018, publication DICE-Report 3/2018. ysis, adequate implementation of Saxon funding policies aft er 2020 was discussed. The valuation was based On behalf of the Chamber of Industry and Commerce on the eff icacy and economic eff iciency of the funding (IHK) of Munich and Upper Bavaria, the ifo Institute is programmes. working on a large-scale project that provides independent, scientifi cally sound economic advice. With- Demographic Change, Urbanisation, and the in the framework of this project, ifo is involved in the Costs of Public Services in Municipalities preparation of economic studies (meta-analyses, em- X. Frei, J. Ragnitz, F. Rösel for the KfW Group Frankfurt/ pirical policy evaluations, implementation and evalu- Main, September 2016 to December 2017, publication ation of surveys, etc.), the conception and implemen- as ifo Dresden Studie 80, ifo Institute, Munich, Dresden, tation of events oriented towards economic policy, as 2018, and in ifo Dresden berichtet 2/2018. well as the implementation of a regular exchange of knowledge on economic policy topics. Demographic change in Germany will aff ect society and the public sector in many ways. This project for the All of the ifo research centers are involved in this proj- KfW group examined the relationship between demo- ect. In the year under review, the Dresden Branch drew graphic change, urbanisation, and the costs of public up a statement on the future orientation of EU Struc- service provision. ifo Dresden investigated whether in- tural Fund funding (ESI funding) with a special focus on creases and decreases in population size aff ect public Bavaria. Against the backdrop of the current prepara- expenditure asymmetrically. tions for the forthcoming funding period (2021–2028), it examined how (and whether) the provision of EU Regional Indicators for the Preparation and Structural Funds for economically strong regions can Redefi nition of the GRW Assisted Area from be justifi ed by economic reasons; and how funding 2021 (Spatial Observation) successes to date can be assessed. Appart from the J. Ragnitz in cooperation with GEFRA Gesellschaft für fi scal interest of the Free State of Bavaria in fi nancial Finanz- und Regionalanalysen Münster for the German participation of the EU in country-specifi c support Federal Ministry of Economic Aff airs and Energy, De- programmes, there are hardly any good reasons for EU cember 2017 to July 2018. support in economically strong regions. In accordance with the subsidiarity principle, support programmes In its present coalition agreement, the CDU/CSU and should better be left to the respective regions them- SPD agreed to redesign regional policies using a uni- selves. In addition, the “European added value” of the fi ed system of indicators for the whole of Germany. The projects carried out seems to be rather low. At best, EU model for this should be the joint task “Improvement participation in country-specifi c funding programmes of the Regional Economic Structure” (GRW). The GRW can be justifi ed with regard to cooperation projects be- indicator for the demarcation of structurally weak and Indicators for tween Bavaria and its European neighbours. therefore eligible regions currently comprises an income demarcating indicator (gross wage per employee), two labour market structurally weak Strategies for the Best Equipment and Use of indicators (unemployment rate and medium-term fore- regions Funds aft er 2020 cast of employment development) and a summarised D. Bauer, C. Ochsner, J. Ragnitz for the State Chancel- infrastructure indicator. The aim of the research project lery of Saxony, April 2017 to March 2018, publication was to examine the suitability of these indicators for as ifo Dresden Studie 82, ifo Institute, Munich, Dresden, demarcating structurally weak regions and, if necessary, 2018, and in ifo Dresden berichtet 3/2018. to propose alternative demarcation criteria.

ifo Annual Report 2018 119 IFO DRESDEN BRANCH

The current GRW indicators show a number of concep- Human Capital, Structural Change and the tual weaknesses and should therefore be revised. Af- Position of Saxony and the New Länder in ter examining a large number of alternative indicators, Locational Competition Research Area the proposal was made to use gross domestic product per employed person as the income indicator, and the Structural Change in Coal Regions as a Process more broadly defi ned underemployment rate as the of Economic and Socioeconomic Transitions – labour market indicator. This could be supplemented Opportunities for Socially Compatible by an indicator on demographic development (e.g. Structural Change in the Light of Climate Policy projection of population development through 2035) Goals and a modifi ed infrastructure indicator. Applying J. A. Nauerth, J. Ragnitz for the Wuppertal Institute for such an indicator system, eastern German regions in the Umweltbundesamt (UBA), November 2016 to Au- particular but also old industrial areas in western Ger- gust 2019. many are classifi ed as eligible for support. The economic and industrial structure of Lusatia, a re- There are plans to release the research results as a pub- gion in southern Brandenburg and eastern Saxony, is lication of the German Federal Ministry of Economics characterised by the mining and energy sectors. Be- and Technology, as an ifo Dresden Studie and in an ar- fore German reunifi cation, over half of the employees ticle for ifo Dresden berichtet at the beginning of 2019. of Lusatia worked in these sectors. With the collapse of former GDR, employment in this region dropped sharply. Structural change in Lusatia is an ongoing process. Climate policy measures have speeded up the Current Projects retirement of coal-fi red power plants, thus triggering further structural changes. On behalf of the Umwelt- bundesamt (UBA), ifo Dresden – together with the Wup- Business Cycle and Growth in Saxony and the pertal Institut für Klima, Umwelt, Energie gGmbH – is New Länder Research Area working on a case study of historical structural change in Lusatia. It examines the causes and impacts of struc- Quarterly Business Cycle Report for Saxony- tural change processes and evaluates previously im- Anhalt plemented measures, which aim to mitigate or foster J. A. Nauerth, J. Ragnitz, M. Weber for the Ministry of structural change in the region. Science, Economics and Digitalisation of Saxony-Anhalt, January 2016 to March 2019. Innovation Workshop Dresden – Joint Project: Strengthening the Cooperation of Basic Research German off icial statistics provide data on the devel- Institutions and Small and Medium-Sized opment of gross domestic product (GDP) and gross Enterprises (SMEs) – Subproject: Economic value added (GVA) for Germany and each of its 16 Analysis and Evaluation of New Instruments states. German data is published on a quarterly ba- K. Heisig, J. Ragnitz, Deutsches Zentrum für Luft - und sis, but state-level time series are released only once Raumfahrt (DLR) for the German Federal Ministry of a year. ifo Dresden calculates quarterly GDP and GVA Education and Research, March 2017 to February 2020. data for the state of Saxony-Anhalt on behalf of the Ministry of Science, Economics and Digitalisation of Entrepreneurial innovation activities are crucial to a Combining annual Saxony-Anhalt. The calculation combines off icial GVA country’s successful economic activity. In Germany, gross value added data with quarterly and monthly time series using the the majority of businesses are small and medium-sized data with quarterly Chow-Lin method. The same method is employed by enterprises (SME), whose overall innovation activity is and monthly time Eurostat for GDP data in European regions and by the declining. The major obstacles to investing in research series ifo Institute to generate quarterly GDP and GVA data and development (R&D) for SMEs are problems in hir- for the Free State of Saxony. The Quarterly Business ing qualifi ed personnel, in implementing innovation Cycle Report for Saxony-Anhalt is published on ifo’s management, and high economic risk. R&D expendi- website. ture by publicly fi nanced basic research institutions in Germany, by contrast, has been increasing in recent

120 ifo Annual Report 2018 IFO DRESDEN BRANCH

years. Research institutions are increasingly making an spread populism even more rapidly. Evidence support- eff ort to improve knowledge transfer to enterprises. ing or contradicting this hypothesis is scarce, especial- However, SMEs are still underrepresented in these joint ly when it comes to causal eff ects. This project aims R&D activities. The focus of this project lies on SMEs in to investigate the relationship between social capital Dresden and its surrounding area. It aims to implement and right-wing populism. Felix Rösel exploits qua- Interplay between strategies for giving SMEs access to the R&D know-how si-natural experiments in several European countries social capital and of fundamental research institutions and universities. using modern econometric identifi cation strategies right-wing populism The project seeks to encourage SMEs to use the exist- (diff erence-in-diff erences estimations, fuzzy and sharp ing research infrastructure, qualifi ed personnel and regression discontinuity design, and an instrumental expertise in market development. This project is con- variable approach). ducted in cooperation with the Helmholtz-Zentrum Dresden-Rossendorf (HZDR), University of Applied Sci- Evaluating the Economic Eligibility of Subsidy ences (HTW) Dresden, and TU Dresden. Applications on behalf of the Federal State of Brandenburg Industry Reports D. Bauer, J. Ragnitz, F. Rösel for the Ministry for Eco- C. Boede, U. Mandalka for the Volks- und Raiff eisenban- nomic Aff airs and Energy of the Federal State Branden- ken, ongoing since 2006. burg, March 2016 to March 2020.

As part of the “Branchen special” project, analyses and On behalf of the Ministry for Economic Aff airs and En- forecasts are provided for the structure of various in- ergy of the Federal State of Brandenburg, ifo Dresden dustry sectors, their business prospects, profi ts and evaluates the economic eligibility of applications for competitiveness. The information featured in these fi nancial support. The relevance of the applicant com- special reports can indicate intermediate-term pros- pany is evaluated in terms of gross value added, local pects for respective sectors, as well as opportunities labour market relevance and productivity. and risks arising from structural transformation. The “Branchen special” reports are employed primarily Evaluation of the Operational Programme by cooperative banks in their lending and consulting of the Free State of Saxony for the European business. Company consultants are provided with a Regional Development Fund in the Funding survey of the prospects and risk profi les of individual Period from 2014 to 2020 sectors. J. Ragnitz for the GEFRA for the Saxon State Ministry for Economic Aff airs, Labour and Transport, November 2016 to August 2019. Public Finance and Support of Economic Development in Saxony and the New Länder From 2014 to 2020, the Free State of Saxony will receive Research Area 2.1 billion euros from the European Regional Develop- ment Fund (ERDF). According to the European Union’s Local Social Capital and the Rise of Right-wing guidelines, the programme has to be evaluated with Populism regard to its eff ectiveness, eff iciency and impact. This Eff ectiveness of F. Rösel for the Deutsche Forschungsgemeinschaft evaluation constitutes the focus of this project, which European regional (DFG), June 2018 to June 2021. also provides ad hoc assessments of proposed amend- development funding ments to the so-called operational programme. Western societies have seen a rapid surge in right-wing populism in recent years. Studies show that voters The project is carried out jointly by ifo Dresden, the in once booming, but now declining industrial “rust Institute for Financial and Regional Analyses (GEFRA), belts” are particularly supportive of populist move- the Joanneum Research Forschungsgesellschaft , and ments. In times of rapid change, strong and reliable Dr. Stefan Meyer from Kovalis. local networks and identities (social capital) may provide solidarity and eliminate breeding grounds for populism. However, if associations such as sports clubs are closely knit and exclusive, they may also foster and

ifo Annual Report 2018 121

Munich Society for the Promotion of Economic Research – CESifo GmbH

CESifo GmbH (off icial name: Münchener Gesellschaft respective fi eld and who have been invited to visit CES zur Förderung der Wirtschaft swissenschaft – CESifo or the ifo Institute as a guest researcher on the basis One of the world’s GmbH, i.e. Munich Society for the Promotion of Economic of a refereed selection procedure. The CESifo Research biggest researcher Research) links the Department of Economics of the Network continued to expand in 2018 and totalled networks Ludwig Maximilian University (LMU Munich) and the 1,564 members by 31 December 2018, making it one of ifo Institute with the international economic research the biggest networks of this kind in the world. community. CESifo GmbH is a private corporation founded in 1999 and owned in equal parts by the ifo The CESifo Research Network’s membership compris- Institute and LMU Munich. The main tasks of CESifo es 1,100 fellows and 446 aff iliates. Fellows are senior GmbH include: researchers who typically hold a full professorship at a university, while aff iliates are ambitious young re- – support of exchanges between the LMU and the ifo searchers who wish to join the network at the early Institute and the promotion of junior economists stages of their career. Most of the fellows come from Eu- – administration of the worldwide CESifo Research rope and North America. However, the network also has Network members in a large number of other countries, which – analysis of economic events in the European Union ensures that CESifo products are well known and used and stimulation of the debate over European eco- worldwide. The network members come from over nomic policy 40 countries and their fi elds of expertise span most areas of economics. – publication of economic research – organisation of conferences and seminars CESifo Research Network Members by Region

North America EXCHANGES BETWEEN THE LMU AND THE IFO 4% 1% INSTITUTE 9% Germany 31% CESifo GmbH supports the active participation of re- Western and Southern searchers from the LMU and the ifo Institute in various Europe academic conferences. Middle and Eastern Europe 33% The joint appointment of professors, who both work at Scandinavia 22% the ifo Institute and have a chair at the LMU, remains Others particularly important. These endowed professorships are a key way of attracting outstanding researchers to become Center Directors at the ifo Institute and Source: CESifo. ©ifo Institute take up chairs at the LMU. These joint appointments strengthen not only the links between the ifo Institute To promote an intensive exchange of ideas between its and the LMU in research, but also in the teaching and members, the network is subdivided into several areas. promotion of Ph.D. students. A total of eight endowed These are headed by internationally renowned econo- professorships have been jointly established by the ifo mists, or so-called “Area Directors”, who contribute to the Institute and the LMU to date, with CESifo GmbH con- network with their international standing and expertise. tributing to the ﬁ nancing of two of them. The network’s area directors are: RESEARCH NETWORK – Christian Gollier, University of Toulouse, Area Director The CESifo Research Network aims to bring research- of Applied Microeconomics ers with common research interests into contact with – Ernst Fehr, University of Zurich, and Klaus Schmidt, one another and to promote cooperation between LMU, Area Directors of Behavioural Economics network members and Munich-based researchers via events and publications. The network is primarily com- – Stephen P. Ryan, Washington University in St. Louis, posed of economists with a proven track record in their Area Director of Economics of Digitalisation

ifo Annual Report 2018 125 CESIFO GMBH

– Eric Hanushek, Stanford University, Area Director of The CESifo Distinguished Aff iliates of 2018 were: the Economics of Education – Applied Microeconomics: – Kai A. Konrad, Max Planck Institute for Tax Law and Anna Sanktjohannser, Yale University Public Finance, Munich, Area Director of Employment – Behavioural Economics: and Social Protection Teodora Boneva, University of Oxford – Michael Hoel, University of Oslo, Area Director of – Economics of Digitalisation: Energy and Climate Economics Vegard Høghaug, Norge Bank, Oslo – Peter Egger, ETH Zurich, Area Directors of Global – Economics of Education: Economy Jason B. Cook, University of Pittsburgh – Markus Brunnermeier, Princeton University, Area Ulf Zölitz, University of Zurich Director of Macro, Money and International Finance – Employment and Social Protection: – Rick van der Ploeg, University of Oxford, Area Ruixue Jia, University of California, San Diego Director of Public Sector Economics Melanie Wasserman, University of California, Los Angeles – Energy and Climate Economics: The international reputation of the Area Directors has Stephie Fried, Arizona State University boosted the attractiveness of the CESifo Research Network, which is refl ected in its growing number of – Global Economy: members. Kevin Lim, University of Toronto – Macro, Money and International Finance: CESifo Research Network Members by Research Area Qunetin Vandeweyer, Sciences Po Applied Microeconomics – Public Sector Economics: Uwe Thuemmel, University of Zurich Behavioural Economics 13% Economics of Digitisation 22% The close links between Munich-based researchers and 8% Economics of Education external researchers are further strengthened by its 4% Employment and Social visitor programme. In 2018, 44 international research- 7% Protection ers were welcomed at the ifo Institute and another 20 17% Energy and Climate guest researchers at CES in order to initiate or contin- Economics 10% Global Economy ue joint projects with Munich-based researchers. The 12% 7% programme is closely linked to the evolution of the re- Macro, Money, and International Finance search network, as a successful visit is typically a pre- Public Sector Economics requisite for any invitation to join the network. Source: CESifo. © ifo Institute ANALYSIS OF ECONOMIC DEVELOPMENTS IN THE EU AND PARTICIPATION IN THE EUROPEAN ECONOMIC CESifo GmbH provides network members with CESifo POLICY DEBATE publications. It organises numerous international EU topics are becoming increasingly important to the conferences. The annual Area Conferences provide future of Europe’s citizens. Discourse at the European a platform for lively discussions among network level, which centres on Brussels, is leading to a new po- Prize for promising members. As part of each of the Area Conferences, the litical reality that is changing Europe. It is important for young researchers “CESifo Distinguished Aff iliate” prize has annually economists to participate in this discourse, as much of been awarded to a young economist since 2008. what happens has an economic dimension, costs a lot The aim of this prize is to identify promising young of money and leads to fi scal redistribution in Europe. researchers and to establish early links to the CESifo CESifo GmbH was founded to provide economic policy Network. impulses at the European level and the latter’s importance is growing steadily.

126 ifo Annual Report 2018 CESIFO GMBH

As part of CESifo’s activities, numerous documents have 2019 already been released in past years that engage critical- Vol. 18 ly 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 European debate, which is gradually shaping a new form of state. A Fragmenting Europe in A particularly important role in this debate has been a Changing World played by the European Economic Advisory Group at Macroeconomic Conditions and Outlook CESifo. The EEAG is a European council of economic Coping (or not) with Change experts that provides policymakers and the general Struggling with Constraints public with an independent and science-based Looking Outward: Western Disarray, China Rising assessment of current economic developments in the EU. The EEAG is unique in both its composition and its focus. This year’s council members are outstanding economists from several European countries and the US, namely: – Torben Andersen, Aarhus University – Giuseppe Bertola (Vice-Chairman), University of Turin – John Driﬀ ill (Chairman), Birkbeck College, University of London – Harold James, Princeton University European Economic Advisory Group @ – Clemens Fuest, LMU Munich – ifo Institute

– Jan-Egbert Sturm, KOF, ETH Zurich Various ifo research centers contribute to the report – Branko Urosevic, University of Belgrade with background research, as well as to the editing and typesetting process. The European economic forecast is prepared almost entirely by the ifo Institute. The EEAG releases an annual report in which it not only analyses the current state of the European economy, In 2018, the Munich Economic Summit (MES) was or- but also provides an in-depth evaluation of several ganised in close cooperation with the ifo Institute. The In-depth discussion of other economic policy issues of topical importance for summit is an international policy forum for in-depth European economic Europe. discussion of European economic policy issues. Its pro- policy issues gramme features top-class and insightful speeches, As in previous years, the EEAG Report was presented at intensive talks in interactive sessions, and a forum for press conferences in a number of European cities. De- professional exchange. tailed articles in leading European newspapers and interviews on major TV channels refl ect the need for sci- The 2018 Summit under the topic “Reshaping Europe” ence-based economic policy analyses. Like every year, dealt with issues like Europe’s role and competitive- the report was also sent to policymakers and experts in ness in an uncertain and digital world, the stability of science, economics and politics across Europe. the fi nancial sector, governance of the European Mon- etary Union and Eurozone fi scal policy, as well as the A preview of the results of the EEAG Report 2019 was internal constitution, future role and (dis-)integration presented at the EconPol Europe founding conference process of the EU. in Brussels, 19–20 November. This event brought together around 200 high-profi le researchers, politicians, The 2018 Summit was made possible by the generous experts and journalists to exchange their ideas on the support of GLL Real Estate Partners, vbw, BMW Group, economic and institutional development of the EU and Deutsche Telekom AG, EY, VDMA, Swiss Re, BayernLB the Eurozone. and Fabricius Vermögensverwaltung.

ifo Annual Report 2018 127 CESIFO GMBH

The Munich Seminars, jointly organised by CESifo and – “Expectation Formation”, organised by Michael the Süddeutsche Zeitung, one of Germany’s leading dai- Weber and Theresa Kuchler lies, are also part of the regular event calendar. Their popularity among guests from business, public ad- The Musgrave Lecture in honour of Richard Musgrave ministration, academia and the press demonstrates was a special highlight in 2018. The associated prize the overwhelming demand for accessible discussion of is awarded to an internationally renowned economist economic problems and solutions. In 2018 a total of 14 working in the area of public fi nance, following a selec- Munich Seminars were organised. Full reports on most tion by the President of the ifo Institute and the President Munich Seminar lectures are published in Süddeutsche and Vice-Presidents of the International Institute of Pub- Zeitung, making their fi ndings accessible to a wide lic Finance (IIPF). Prof. Michael P. Devereux (Oxford Uni- readership. This, in turn, enhances the standing of the versity) was awarded the prize in 2018 and delivered a Munich Seminars and helps to attract renowned per- lecture entitled: “Taxing Profi t in a Global Economy.” sonalities as speakers.

CONFERENCES AND EVENTS As in past years, a major focus of CESifo GmbH’s activities was the organisation and administration of academic conferences. With the goal of strengthening Supporting Munich’s standing as an excellent science and research empirical and location and supporting empirical and theoretical re- theoretical search in economics, CESifo (co-)organised 25 scientif- economics research ic conferences and events in 2018. in Munich CESifo hosts two diﬀ erent types of conferences. In addition to the established annual nine area conferences relating to the individual areas of the CESifo Research Network, CESifo also hosts conferences that are initiated and supported by network members and deal with topical issues in the ﬁ eld of economic research. These include, for example, the CESifo Venice Summer Institute.

The CESifo Venice Summer Institute has become a tradition in the CESifo event calendar and has earned a solid reputation among international economists. In 2018, the Venice Summer Institute comprised ﬁ ve workshops, dealing with the following topics:

– “Country Clubs”, organised by Clemens Fuest and Daniel Gros (in cooperation with EconPol Europe)

– “Globalisation and Populism”, organised by Sascha Prof. Michael P. Devereux O. Becker and Thiemo Fetzer In addition, CESifo organised or assisted partner – “International Tax Reform-Challenges for Trade organisations with several of their scientiﬁ c events Integration and Implications for International Tax including: Coordination”, organised by Johannes Becker and Niels Johannesen – “EconPol Europe PhD Workshop: Economic and Fiscal Policy in Europe”, with EconPol Europe – “Evidence-Based Policy Advice: How it is Produced and Used”, organised by Florian Englmaier, Monika – “Doctoral Workshop on the Economics of Digitiza- Schnitzer and Joachim Winter (in cooperation with tion”, with ParisTech, Universities of Toulouse, Liège the Center for Advanced Studies (CAS) at LMU Munich) and Leuven

128 ifo Annual Report 2018 CESIFO GMBH

– “CESifo Delphi Conference”, with University of Athens CESifo has two book series with MIT Press: the CESifo Seminar Series and the CESifo Book Series. All books – “Chiemsee-Conference”, with vbw and Hans-Martin- cover a topical policy issue in economics and are sub- Schleyer-Foundation jected to a careful, multi-stage refereeing process. In – “CEMIR Workshop”, with ifo Institute 2018, three new books were published on “The Eco- nomics of Philanthropy”, “The Taxation of Pensions” – “Subjective Expectations” with LMU Munich and “Developments in Global Sourcing”. – “Conference in Celebration of 75th Birthday of Eric A. Hanushek”, with University of Texas and Hoover Institution – “CESifo Economic Studies Conference on New Pers- pectives on Tax Administration Research” – “Workshop on Political Economy”, with Technical University of Dresden and ifo Dresden – “ifo Macroeconomics and Survey Data”, with ifo Institute

These international conferences oﬀ er Munich-based researchers an opportunity to interact with researchers from all over the world and establish cooperations. Furthermore, the events promote the international reputation of Munich as an economic research location.

PUBLICATIONS CESifo has developed a number of publications aimed at contributing to the discussion of economic issues in Europe. An important role is played by the CESifo Working Paper Series, which disseminates the early-phase ﬁ ndings of academic research conducted by network members, making them available for professional discussion.

In 2018, 601 papers were published in this series. All CESifo Seminar Series papers are distributed electronically via the CESifo Group’s website and various online databases including SSRN (Social Sciences Research Network), RePEc The CESifo Group website is a portal of choice in its (Research Papers in Economics), and Econstor (Open fi eld. It contains a wealth of information on the entire Access server of the German National Library of Eco- range of products and activities of CES, ifo and CESifo nomics – Leibniz Information Centre for Economics). as far as conferences, seminars and publications are concerned, and off ers a wide spectrum of further top- The CESifo Newsletter, distributed electronically, pro- ics that are of interest to economists, politicians and vides up-to-date information and commentary for a the business community. More detailed information on wide spectrum of readers, ranging from academics to the website is provided in the Press, Publications, Con- members of the European Commission and the media. ferences section. It also reports on CESifo events and provides articles on selected CESifo Working Papers in a form that is eas- In short, the research cooperation between the ifo In- ily accessible to the non-specialist reader. stitute, the LMU and the international scientifi c com-

ifo Annual Report 2018 129 CESIFO GMBH

munity continued to ﬂ ourish very successfully in 2018. The CESifo research network provides a unique platform in Europe for exchange among economists and Unique platform for for public discourse. It has now secured an outstanding European exchange international reputation that extends well beyond Eu- ropean borders. In light of the epochal changes that are taking place in the EU, this kind of platform is now more important than ever before.

Further details of CESifo’s activities can be found in the German online version of the Annual Report on pages 231–251 (http://www.cesifo-group.de/Jahresbericht).

130 ifo Annual Report 2018 Conferences, Publications and External Relations of the ifo Institute

Information on the ifo Institute’s events, publications, – SEEM – Seminar on Energy and Environmental teaching activities and links to institutions/individuals, Economics “Cumulative Carbon Emissions and as well as further details of CESifo’s activities can be Economic Policy: In Search of General Principles” found in the German online version of the Annual Re- – “Sardinia Empirical Trade Conference” port on pages 165–251 (http://www.cesifo-group.de/ Jahresbericht). – Workshop on “Regional Economics” – SEEM – Seminar on Energy and Environmental CONFERENCES Economics “Integrated Assessment in a Multiregion Besides regular events, like the Annual Meeting, World with Multiple Energy Sources and Endogenous Euroconstruct, ifo Industry Colloquium (ifo Branchen- Technical Change” Dialog), a number of special conferences, workshops – Conference on “Macroeconomics and Survey Data” and press conferences were held during 2018. These included: – Conference on “Heterogeneous Agents and the Macroeconomics of Climate Change” – SEEM – Seminar on Energy and Environmental Economics “An Electricity Market with Zero (Mar- ginal) Costs” Lunchtime Seminars are held on a weekly basis. They – Workshop on “Macroeconomics and the Business serve the purpose of putting current research and new Cycle” economic developments up for discussion. Partici- pants are researchers from the ifo Institute, CES, the – Workshop “EGIT – Economic Geography and University of Munich and CES visitors. International Trade Research Meeting”

– SEEM – Seminar on Energy and Environmental In 2018 a large number of ifo staﬀ members gave Economics “The Risks that Farmers Take: An Ex- 246 papers and presentations at external conferences. periment on Externalities with Individual Thresh- olds Inspired by Fertiliser Use” PUBLICATIONS

– Symposium “Bubbling Revenues, Major Challenges” ifo publications include:

– “Expectations of a Sustainable Fiscal and Financial – ifo Schnelldienst – a journal on policy issues, Policy“ research results and forecasts; twice monthly

– Workshop on “Labour Market and Social Policy” – ifo Konjunkturperspektiven – a monthly publication presenting in detail the results of the ifo Business – Research Seminar “Economics of Education” Survey – ifo CEMIR Seminar on “Regional Media Reporting – ifo Dresden berichtet – a bi-monthly report on the and Xenophobic Events in the Course of the Refugee economy, structure and economic policy in the Crisis” Free State of Saxony – SEEM – Seminar on Energy and Environmental – CESifo Forum – a quarterly English-language Economics “Eﬀ icient Storage Operation and In- magazine focusing on major current topics of inter- vestments – Analytics of the Electricity Market” national interest, including European policy issues and economic trends – ifo CEMIR Seminar on “Child Labour and the Arrival of Refugees: Evidence from Tanzania” – ifo DICE Report – a quarterly English-language journal for institutional comparisons – SEEM – Seminar on Energy and Environmental Economics “Strategic Delegation in the Formation – ifo World Economic Survey – a quarterly English- of International Environmental Agreements” language journal publishing the results of the ifo Institute’s quarterly poll of international economic – 18th Doctoral Meeting on International Trade and activity International Finance

– Munich Economic Summit “Reshaping Europe”

ifo Annual Report 2018 131 CONFERENCES, PUBLICATIONS AND EXTERNAL RELATIONS OF THE IFO INSTITUTE

– CESifo Economic Studies – a quarterly refereed Paul Hufe, University of Munich journal in economics Lea Immel, University of Munich – ifo Beiträge zur Wirtschaft sforschung – a series in Dr. Björn Kauder, University of Munich which important research projects of the ifo Institute are published Dr. Robert Lehmann, Deggendorf Institute of Technology – ifo Forschungsberichte – other studies of the Philipp Lergetporer, Ph.D., University of Munich Institute are documented in this series and made Valentin Lindlacher, University of Munich available to the public Christina Littlejohn, University of Munich – ifo Dresden Studien – studies of the ifo Dresden Branch that deal primarily with topics aﬀ ecting Thomas Lohse, University of Munich the new German federal states and their eastern Andreas Mazat, University of Munich neighbours Prof. Volker Meier, University of Munich – ifo Working Papers Prof. Chang Woon Nam, University of Applied Sciences, Ismaning TEACHING AND EXTERNAL RELATIONS Dr. Till Nikolka, Macromedia University of Applied A number of ifo staﬀ taught or presented lectures at Sciences, Munich universities in 2018: Prof. Andreas Peichl, University of Munich Andrea Ariu, Ph.D., University of Munich Dr. Marc Piopiunik, University of Munich and University Benjamin Arold, University of Munich of Freiburg David Bauer, Dresden University of Technology Prof. Karen Pittel, University of Munich Martin Braml, University of Munich Prof. Niklas Potrafke, University of Munich Katharina Candel-Haug, University of Applied Sciences, Prof. Panu Poutvaara, Ph.D., University of Munich Munich, and University of Munich Prof. Joachim Ragnitz, Dresden University of Tech- Dr. Anna Sophia Ciesielski, University of Munich nology Dr. Markus Drometer, University of Munich Prof. Helmut Rainer, Ph.D., University of Munich Marc Fabel, University of Munich Dr. Sven Resnjanskij, University of Munich Dr. Thomas Fackler, University of Munich Dr. Felix Rösel, Dresden University of Technology Prof. Oliver Falck, University of Munich Alex Schmitt, Ph.D., University of Munich Prof. Gabriel Felbermayr, Ph.D., University of Munich Dr. Tobias Schuler, University of Applied Sciences, Coburg Prof. Dr. Dr. h.c. Clemens Fuest, University of Munich Julia Sonnenburg, Dresden University of Technology Dr. Yvonne Giesing, University of Munich Marc Stöckli, University of Munich Dr. Jasmin Gröschl, University of Munich Daniel Stöhlker, University of Munich Eleonora Guarnieri, University of Munich Prof. Marcel Thum, Dresden University of Technology Dr. Christa Hainz, University of Applied Sciences, Munich Madhinee Valeyatheepillay, University of Munich Franziska Hampf, University of Munich Dr. Michael Weber, Dresden University of Technology Alexandra Heimisch, University of Munich Dr. Sebastian Wichert, University of Munich Julia Heller, Dresden University of Technology Prof. Ludger Wößmann, University of Zurich and Dr. Christian Holzner, PD, University of Munich University of Munich

132 ifo Annual Report 2018 CONFERENCES, PUBLICATIONS AND EXTERNAL RELATIONS OF THE IFO INSTITUTE

Dr. Klaus Wohlrabe, University of Munich Dr. Larissa Zierow, University of Munich

The ifo Institute was host to 54 visiting researchers from a variety of countries. 56 students in Munich and in Dresden were able to gather initial experience in empirical economic research.

ifo Annual Report 2018 133

Personnel, Finances and Organisational Bodies

Personnel Development

Following the changes in the Executive Board positions nical staff /assistants remained unchanged. Specialists in 2016 and 2017, the year 2018 was characterised by are academically trained staff who are appointed to continuity in management. In 2019, however, Gabriel key positions at the interface between research and Felbermayr, Director of the ifo Center for International service. The number of non-scientifi c staff decreased Economics, will leave the Institute and become Pres- by one person. The number of trainees did not change ident of the Institute for the World Economy in Kiel. compared to the previous year. The procedure for appointing a successor is already under way. The appointment of a new professor is in- The fall in the number of part-time staff , by 13 to 95 tended to strengthen research and teaching on the (–12%), was greater than the overall fall in staff num- economic causes and consequences of globalisation. bers. This mainly aff ected the scientifi c fi eld: eight doc- A joint appointment with Ludwig Maximilian Universi- toral students, four scientifi c staff , and two technical ty of Munich (LMU) is expected for the winter semester staff /assistants in research. However, the number of 2019/2020. part-time specialists increased by two. The number of In the administrative area, the beginning of 2018 saw non-scientifi c staff decreased by one person. Angela Wagner – previously a consultant for personnel and law – appointed head of the “Human Resources Doctoral students and scientifi c staff (postdocs) em- and Law” department. Until then, this area had been ployed by the ifo Institute are always given limited managed directly by the Administrative Board under duration contracts on the basis of the Academic Fixed- the name “Human Resources”. This measure is intend- Term Contract Law. Only under special circumstances, ed to strengthen the area of human resources and which are defi ned in the ifo Institute’s career guide- intensify the promotion of junior economists. At the lines, can the time limits of researcher contracts be same time, it takes into account the increasing impor- removed. In 2018, the time limit was lift ed from three tance of legal issues. It was also decided to strengthen such contracts. Two of these contract changes served the “Press, Publications, Conferences” (PRK) area and to ensure continuity in the management of the Dres- give it its own department head. This role is assumed den Branch. by Dr. Cornelia Geißler, who joined the Institute in Jan- uary 2019. At the same time, the PRK department was All in all, the number of fi xed-term contracts fell by nine renamed “Communications”. to 89, which means they now make up 42% of the total workforce. In general, fi xed-term contracts are mainly In 2018, two ifo staff received off ers for professorships, found in the areas of research and service. In the area of underscoring the Institute’s research strength. Dr. Er- infrastructure, they apply to staff that have been hired dal Yalcin, senior research associate at the ifo Center to temporarily replace employees on parental leave. for International Economics, has accepted an appointment at the University of Konstanz. Prof. Gabriel Fel- As the total number of employees fell, the number of bermayr, Director of the ifo Center for International women also fell by a total of fi ve (–4.1%). The propor- Economics, will be taking over the presidency of the tion of women in the total workforce thus fell slight- Institute for the World Economy in Kiel and at the same ly to 54.7% (2017: 55%). While two women joined as time taking up an appointment to Kiel University. In scientifi c staff , six of the eight doctoral students who August 2018, Dr. Natalia Danzer, research professor at left the Institute were women. The number of female the ifo Center for Labour and Demographic Economics, technical staff and assistants remained constant; two took up an appointment to Freie Universität Berlin that women joined as specialists. Having exceeded the 50% she received in 2017. mark for the fi rst time last year, when 51.7% of doctoral students were women, this fi gure fell back to 48%. This means that the Executive Board’s goal of achiev- TRENDS IN EMPLOYEE NUMBERS ing a balanced gender ratio among doctoral students As of 31 December 2018, the number of staff at the In- has almost been reached. In addition, staff on parental stitute fell by eight (–3.6%) to 212. The number of sci- leave or other leave are not included in the statistics. entifi c staff remained constant. However, the number Four female doctoral students are currently on paren- of doctoral students decreased by eight, the number of tal leave. If they were included in the calculation, the specialists increased by one, and the number of tech- proportion of women would be 51.9%. A high propor-

ifo Annual Report 2018 137 PERSONNEL DEVELOPMENT

tion of female doctoral students increases the chances Number of Staﬀ at Year-End 2018 and 2017

of employing women who have successfully complet- Total staﬀ Women

ed their doctorates on the research staff , thus further 2018 2017 2018 2017 strengthening the share of female postdocs. The share Research and service of women among scientifi c staff also increased in Scientific staff 57 57 14 12 * 2018: from 21% in 2017 to 24.6%. If the staff on leave Doctoral students 50 58 24 30 Specialists 22 21 15 13 (two women and two men) were also included here, Technical staff/assistants 21 21 20 20 A high proportion the ratio would be 26.2%. The proportion of women Infrastructure of female doctoral among specialists rose from 61.9% to 68.2%. Among Non-scientific staff 60 61 41 44 of which staff with management students non-scientifi c staff, the number of women fell by three. responsibilities** 15 15 10 11 This reduced the very high proportion of women from Trainees 2 2 2 2 72.1% to 68.3%. Total 212 220 116 121

Part-time Limited duration The Institute’s personnel policy goals include gradual- workers contracts ly increasing the share of research associates with doc- 2018 2017 2018 2017 torates in the total number of scientifi c staff to 100%. In Research and service the year under review, the share of research associates Scientific staff 10 14 33 33 Doctoral students* 44 52 50 58 with a doctorate remained constant at 86%. If doctoral Specialists 8 6 1 1 students are included in the fi gure, a total of 92.5% of Technical staff/assistants 11 13 0 0 scientifi c staff either held a doctorate or were working Infrastructure on their doctorates as of 31 December 2018 (previous Non-scientific staff 22 23 3 4 of which staff with management year: 93%). The share of professors and researchers responsibilities** 5 4 1 2 with habilitation degrees decreased from 29.8% in the Trainees 0 0 2 2 previous year to 28.1% in 2018. Total 95 108 89 98 Post-docs/ of which habilitations, women ifo’s international orientation is also refl ected in the professors

fact that a signifi cant share of scientifi c staff are either 2018 2017 2018 2017

non-German nationals or Germans who have previ- Scientific staﬀ 49/16 49/17 9/1 9/1

ously held positions abroad or who completed their * Without guest doctoral students. – **Non-scientific staff compensated according studies abroad and returned to Germany to work at to TV-L E13 and upwards. the Institute. As of 31 December 2018, their number fell by three to 29. Four heads of ifo research centers are foreign nationals (3) or have held positions in foreign FURTHER EDUCATION FOR RESEARCHERS universities before being appointed by the ifo Institute The ifo Institute endeavours to be a very attractive Creating a productive (1). As in the previous year, there were ten non-German employer for policy-oriented research economists. environment for top nationals and three “returnees” among the scientifi c In the race to attract outstanding researchers, pro- researchers staff (2017: 4). Eight doctoral students are non-Ger- viding the ideal conditions for research excellence is man nationals (2017: 11) and another eight (2017: 7) are essential. Creating a productive environment for top German nationals who studied abroad before being researchers is a comprehensive strategic task. This in- appointed by the ifo Institute. As of 31 December 2018, volves, for example, close cooperation with universi- 27.1% of scientifi c staff were non-German nationals ties, which is a precondition for the joint appointment or Germans who had worked at a foreign university or of ifo research center heads as mentioned earlier, in- who had completed their studies abroad (2017: 27.8%) tensive use of the CESifo Research Network, interna- prior to joining ifo. tional orientation and also the recognition of special achievements through bonuses. The Institute off ers ongoing support in developing the scientifi c profi le of the researchers it employs at all levels, which includes networking with international researchers and promoting a culture of discussion at a very high scientifi c level within the Institute. The principles of the strate-

138 ifo Annual Report 2018 PERSONNEL DEVELOPMENT

gy for scientifi c and continued professional qualifi ca- once again performed this task with great commitment tion at the ifo Institute are stipulated in an agreement in 2018. Dr. Marc Piopiunik has held this off ice for many with the Works Council. years. In 2018, Dr. Timo Hener stepped down from this role and was succeded by Dr. Katharina Werner imme- To highlight the importance of excellent framework diately aft er completing her doctorate. conditions for attracting researchers from Germany and abroad and supporting their further qualifi cation, Integrating doctoral students into applied research and in 2016 the ifo Institute signed up to the “European into work on policy-oriented projects strengthens the Charter for Researchers” passed by the European Com- empirical side of their economics education. As a rule, mission, which is linked to the “Code of Conduct for the they complete their doctorates at the LMU’s Faculty of Recruitment of Researchers”. The personnel policy and Economics, become members of the Munich Graduate organisational conditions for the activities of research- School of Economics and also attend graduate courses ers at the ifo Institute are continuously being devel- there. In addition to many other interested members of oped in line with the targets set out in the “European ifo staff, its doctoral students all attend the Lunchtime Charter for Researchers”. Seminars run by the Center for Economic Studies and the ifo Institute. The regular research seminars held The promotion of junior economists – especially the within each department also play an important role for training of doctoral students – is particularly import- doctoral students. ant. The ifo doctoral programme serves the general promotion of young researchers in the fi eld of empir- The joint appointment of all departmental heads as pro- Laying the ical economic research. This training lays the founda- fessors at the LMU has made it possible for almost all ifo foundations for tions both for an academic career and for a role in busi- doctoral students’ work to be supervised by their de- academic careers and ness or public administration. Only a small percentage partment heads. The situation is similar at the Dresden roles in business or of doctoral students have the opportunity to continue Branch: its Director, Marcel Thum, holds a chair at the public administration their professional career at the ifo Institute. The Exec- Technical University of Dresden (TUD) and his deputy, utive Board continued to off er strong support to doc- Joachim Ragnitz, holds an honorary professorship there. toral candidates completing their studies at ifo, helping them in planning their next career move. In the year Supported by department heads and experienced under review, the ifo Executive Board was again able to postdocs, the doctoral students are introduced ear- provide successful assistance in this respect. ly on to presenting research fi ndings at international forums. Presentations at high-level economic confer- The very high level of graduate training off ered by the ences with selection procedures prepare the young ifo Institute is refl ected in the signifi cant volume of economists at an early stage of their career to prepare peer-reviewed scientifi c publications that ifo doctor- to publish articles in internationally renowned refereed ifo researchers gave al students produce year aft er year. A series of DFG journals. In the year under review, ifo researchers gave 246 presentations projects, successful bids in the competitive process 246 presentations at international conferences. The at international of the Leibniz Association (SAW projects) and projects further education of doctoral students is also support- conferences in 2018 fi nanced by private foundations (including Deutsche ed by internal training seminars, professional editing of Telekom Foundation and Thyssen Foundation) is what English-language papers and participation in external makes it fi nancially possible for the ifo Institute to em- summer schools and workshops. Of course, ifo also of- ploy a large number of doctoral students. In 2019, the fer individual further training measures. Nine male ifo Friends of the ifo Institute will award a Roland Berger researchers and seven female researchers were work- doctoral fellowship for three years in honour of Prof. ing on their habilitation in 2018. Dr. h.c. Roland Berger, Chairman of the Executive Board of the Friends of the ifo Institute. Doctoral stu- Two years ago, in order to support doctoral students, dents receive support not only from their respective the Institute was granted membership to the group of department heads and postdocs, but also from the institutes supported by the Bernt-Rohrer Foundation. “doctoral-student officers” with cross-departmental The basic aim of this foundation is to support excellent responsibilities. Two postdocs, both of whom them- students and doctoral candidates in their study and/or selves completed ifo’s doctoral students programme, academic careers. In 2017, the Foundation awarded two

ifo Annual Report 2018 139 PERSONNEL DEVELOPMENT

publication fellowships to doctoral students at the ifo tice for ifo researchers to spend several months on re- Institute; these will support the recipients in the publi- search leave abroad. In 2018, there were a total of 17 cation of a top scholarly publication with them as sole guest stays, nine of which lasted several months and ifo researchers oft en authors. In 2018, two fellowships abroad were awarded, were completed at top universities in the US, Austra- spend several months which enabled two doctoral students to plan and co-fi - lia, Israel and Europe (Spain, Norway, Belgium). Re- on research leave nance a research stay of several months each in the US. search stays at top universities benefi t the academic abroad performance of ifo’s research departments, since the Another initiative of the new Executive Board is the academics on leave can further deepen their academic special promotion of the group of postdocs. The more expertise during their research stays abroad, can pave eff ectively they can communicate their scientifi c fi nd- the way for new joint projects with international co-au- ings and contribute them to consulting and service thors and, at the same, can continue to work on their activities, the more actively and specifi cally they can ongoing projects. shape their own careers and at the same time establish and disseminate the “ifo brand”. For this reason, the The promotion of junior economists begins in the ifo Institute and the LMU are together currently establish- Institute with the employment of interns. Their impor- ing a postdoctoral programme (Junior Development tance for the Institute should not be underestimated, Program) that not only provides a mentoring frame- since former interns oft en apply and are accepted for work but also supports the participants with a variety posts as doctoral students. A total of 56 interns gained of off ers, e.g. in planning their own careers, develop- their fi rst experiences of empirical economic research ing leadership skills or communicating their research at ifo in 2018 (2017: 66). Of this total, 53.6% were women results to the public. The fi rst workshops and fi reside (2017: 40.9%). This not only increased the proportion of chats have already taken place in this programme. women compared to the previous year, but it even exceeded the 50% mark. The Institute’s goal is to maintain Numerous researchers at the ifo Institute teach at uni- an approximately 50% share of female interns. versities with which ifo cooperates closely, which gives them the opportunity to constantly revise and expand FURTHER EDUCATION FOR NON-RESEARCHERS their own expert knowledge base. In the summer se- The further education of staff working in the non-re- mester 2018 and in the winter semester 2018/2019, a search areas also has a high priority for the Institute. total of 87 university courses, especially with an empir- The abovementioned agreement with the Works Coun- ical orientation, were off ered by ifo staff . Additionally, cil also regulates all aspects of the professional educa- all researchers at the Institute are given the opportuni- tion of non-research personnel. The aim is to provide ty to keep abreast of research developments by attend- non-scientifi c staff with the ideal qualifi cations for ing the appropriate lectures and seminars at the LMU. managing their current tasks and to open up further Weekly lunchtime The weekly lunchtime seminars are also of great help career options. seminars promote in promoting the exchange of new research ideas. They the exchange of new serve as a forum for the discussion of current research To this end, the Personnel and Law department sys- research ideas and research fi ndings as well as new developments in tematically surveys the qualifi cation requirements of economics. Speakers and attendees are primarily from all staff members at the beginning of each year. Over- the ifo staff and the LMU. Workshops lasting several all, 188 further training measures were approved in days at which ifo research teams can exchange infor- 2018, of which 125 were also conducted in that year. mation on current projects are also organised outside Most of the remaining measures are to be completed the Institute and make a signifi cant contribution to fur- in 2019. Some training courses could not be attended ther scientifi c training. due to the high number of research stays in Germany and abroad. A large share of the training measures Academic prowess is developed primarily in research requested are usually in the fi eld of IT, where the fo- projects. Here, internal ifo expertise is extended in co- cus lies on training for the specifi c IT requirements operation with external experts. Guest researchers at of individual employees. These measures were com- the Institute therefore play a special role. The number plemented by customised courses to deal with chal- of guest researcher stays totalled 54 in 2018 (2017: 61). lenges encountered in individual tasks. These courses In recent years, it has also become established prac- are usually integrated directly into the specifi c work-

140 ifo Annual Report 2018 PERSONNEL DEVELOPMENT

place and thus have a high degree of eﬀ iciency. The Institute’s strategy includes increasing the number of in-house courses as a way of strengthening staﬀ networking within the Institute at the same time as providing further education.

The Institute also endeavours to promote junior staff in the non-scientifi c area. It regularly offers an Office Communication Trainee Programme. One young trainee successfully completed this course in January 2018. Two other young women are currently undergoing training.

Clemens Fuest, Sarah Kersten, Ludger Wößmann, Philipp Lergetporer AWARDS The Friends of the ifo Institute awards annual prizes to EQUAL OPPORTUNITIES AT THE IFO INSTITUTE researchers at the Institute who have attracted attention thanks to their outstanding scientifi c achievements. The ifo Institute has actively promoted equal oppor- ifo has actively A prize can be awarded only if a scientifi c article was tunities for women and men for many years. In this im- promoted equal published in an internationally renowned peer-refereed portant task, the Executive Board is supported by an opportunities for journal. In 2018, the decision was taken to pay particu- Equal Opportunity Officer at its Munich location and women and men for lar attention to junior economists. Dr. Felix Rösel was a by a women’s representative at its Dresden Branch. many years worthy recipient of a prize: Last year, during his doctor- The current equal opportunities plan, which is valid al studies, he managed to publish a total of fi ve articles until autumn 2019, has the primary objective of grad- in peer-reviewed journals (European Journal of Political ually reducing the under-representation of women at Economy, Health Economics, Fiscal Studies, Economics of all levels of the scientifi c career ladder. The working Transportation and Perspektiven der Wirtschaft spolitik). conditions and development opportunities for women are ideally designed in such a way that work at the ifo Institute is attractive to female researchers and that the share of women on the research staff is further increased. ifo’s internal rules on equality are also part of the Institute’s certifi ed management system, which is annually audited by external auditors. This means that the continued certifi cation of ifo’s management system also depends on the strict observation and continuous further development of gender equality regulations.

The ifo Institute places a particular focus on qualifying Clemens Fuest, Veronika Grimm, Felix Rösel, Stephan Rupprecht female researchers for management positions in scien- Qualifying female tiﬁ c institutions. ifo expressly supports applications for researchers for man- The annual prize for outstanding achievement in man- projects in the Leibniz tendering process that serve to agement positions in aging third-party research projects went to the project promote women for leadership positions in research. scientiﬁ c institutions team comprising of Prof. Ludger Wößmann, Elisabeth This Leibniz line of funding aims particularly to in- Grewenig, Dr. Sarah Kersten, Franziska Kugler, Philipp crease the likelihood of the respective project/working Lergetporer Ph.D., Laura Oestreich, Lisa Simon and group leader being appointed to a W2 or W3 profes- Katharina Werner for their successful work on the sorial position. In the Leibniz tendering procedures of project “The Political Economy of Educational Poli- 2015 and 2016, the ifo Institute was successful with cor- cy: Insights from a Public Opinion Survey”, which was responding project proposals. One of the two female funded by the Leibniz Association as part of the Leibniz project leaders has since taken up an appointment at Competition. Freie Universität Berlin. The Institute also encourages

ifo Annual Report 2018 141 PERSONNEL DEVELOPMENT

its female economists to apply for the Leibniz Mento- ment in 2013 with a municipal operator of day-care ring Programme, which has consistently been judged centers for children of working parents. The Institute fi - helpful by previous participants. nances the prospective entitlement to three child-care places off ered to its staff . At present, three ifo employ- The promotion of equal opportunities for men and ees are taking advantage of day-care places off ered at Women are women in scientifi c positions also involves the setting a reasonable municipally regulated price. increasingly being of fl exible target quotas along the lines of the cascade appointed to ifo’s principle of research-oriented equality standards es- Another contribution to equal opportunity at the Insti- various off icial tablished by the German Research Foundation (DFG). tute is that women are increasingly being appointed to bodies The ifo Institute has anchored such fl exible target ifo’s various off icial bodies. In the Administrative Board, quotas for the compensation levels of senior scientif- the Institute has little infl uence over this as the majori- ic staff in its Programme Budget, which is the basis for ty of seats are linked to an external function. Currently, institutional support from Germany’s federal and state 40% of Administrative Board members are women. Of governments. The time frame for these target quotas the twelve members of the Scientifi c Advisory Council, extends until the year 2020. four are female academics. One of the eight members of the ifo User Advisory Council is female and 15 of the In 2018, the share of female researchers increased 73 members of the ifo Institute Board of Trustees are again, as mentioned above. Dr. Christa Hainz, an expe- women. rienced researcher from the ifo Center for International Institutional Comparisons and Migration Research, is The Institute’s cooperation with the Dual Career Off ic- the mentor for the female doctoral students and helps es of the two major Munich universities is important ifo’s Executive Board improve the general conditions for both women and men. This service is becoming infor these staff members. She is their contact person creasingly signifi cant in terms of attracting renowned and takes care of the special concerns of young fe- researchers to the Institute. The cooperation with both male scientists, such as qualifi cation events that have universities has already met with great success. been directed exclusively at female doctoral students to date. Overall, the share of women among scientifi c staff , including doctoral students, fell from 36.5% to 35.5% in 2018. However, if all staff on leave were included, the proportion of women would be 38.3%.

The availability of part-time positions remains an important element of the family-friendly organisation Part-time positions of work at the ifo Institute. The proportion of women and teleworking among part-time staﬀ remained constant at 69.4% make work more in the year under review. If doctoral students are ex- family-friendly cluded from this calculation, the proportion of women fell slightly to 86.3% compared to the previous year (87.5%). The ifo Institute will continue to oﬀ er and promote part-time employment to advance and achieve a positive work-life balance.

Other family-friendly aspects of work organisation at the ifo Institute include the option of teleworking, the framework conditions are laid out in an agreement with the Works Council, as well as the option for staﬀ on parental leave to continue to use the further training opportunities oﬀered by the Institute during their leave of absence. To enable parents to resume their careers swift ly, the ifo Institute signed a cooperation agree-

142 ifo Annual Report 2018 Financial Development

The ifo Institute is a non-profi t institution that aims to From the annual surplus of 126,000 euros cited above, serve academia and research. The ifo Institute’s objec- 115,000 euros was channelled off into research reserves, ifo’s objective is to tive is to provide research and services as public goods, bringing the latter up to a total of 1.671 million euros by provide research and and not to generate fi nancial profi ts. This also applies 31 December 2018. Voluntary payments beyond mem- services as public to contract research conducted on behalf of state or bership fees, which are managed by the ifo Institute’s goods private institutions. ifo’s fi ndings are also made public, Administrative Council, amounted to 11,000 euros. which strengthens the foundations of all of the Insti- This sum was added, in accordance with the ifo statutes tute’s work. The Institute’s fi nancial strategy aims to (Art. 4. Sec. 2), to the earmarked reserves, which totalled achieve a balanced long-term cost and earnings struc- 828,000 euros. This increased the Institute’s assets to a ture that permits a large service and research output total of 2.499 million euros by 31 December 2018. that benefi ts the general public. Sufficient fi nancial reserves help offset income fl uctuations and allow a Liquid funds were available at all times throughout fl exible response to special demands. 2018. The stock of liquid assets rose by 688,000 euros versus the previous year to 7.148 million euros. Cash SUMMARY OF KEY DEVELOPMENTS fl ow from current operations was positive (1.107 million euros), while cash fl ow from investment activity The Institute’s fi nancial statement for 2018 shows a (–419,000 euros) was negative in 2018. surplus of 126,000 euros. This was channelled into reserves, increasing the Institute’s assets to a total of Balance Sheet of the ifo Institute for 2018 2.499 million euros as of 31 December 2018. in EUR Thousands (abridged version)

In 2018, the ifo Institute received public funds totalling 31.12.2018 31.12.2017 10.756 million euros as part of joint research funding Assets based on Art. 91b Basic Law (German constitution). Of Fixed assets 81 89 this amount, 10.441 million euros was used for current Current assets operations and 315,000 euros was used for invest- Inventory 1,532 1,308 ment. A cash balance of 850,000 euros, which was Receivables and accruals 704 949 accumulated in 2017 and carried over into 2018, also Liquid funds 7,148 6,461 Total assets 9,465 remained at the disposal of the ifo Institute. This cash 8,807 balance was spent in the fi rst quarter of 2018. The ifo Liabilities Institute therefore had a total of 11.606 million euros Net worth at its disposal in 2018 from joint research funding and Earmarked funds 828 816 withdrawals/ 0 0 the balance fi gure related to the use and appropria- additions 11 14 tion of a cash balance. Research reserves 1,671 1,557 withdrawals/ 0 0 ASSETS AND FINANCES additions 115 165 Short-term debt The balance sheet total rose by 658,000 euros (+7.5%) Reserves 3,879 3,869 versus last year to 9.465 million euros. On the asset Liabilities vis-à-vis banks 0 1 Down payments received 2,665 2,113 side, this was due to the fact that within the fl oating as- Other liabilities 422 451 sets, inventory rose by 224,000 euros and liquid funds Total liabilities 9,465 8,807 rose by 687,000 euros, while short-term receivables and accruals and deferred income fell by 245,000 euros. Fixed assets also fell by 7,000 euros. PROFIT AND LOSS STATEMENT

On the liabilities side, an increase was seen in the Operating income grew by 278,000 euros in 2018 to Institute’s assets (126,000 euros), down-payments reach a total of 19.127 million euros. Only a small part received (552,000 euros) and other accruals (10,000 of the increase resulted from public grants (80,000 eu- euros). By contrast, there were decreases in liabili- ros), which would in fact have decreased due to the dis- ties vis-à-vis banks (–1,000 euros) and other liabilities continuation of special funding, had it not been for the (–29,000 euros). cash balance from the previous year.

ifo Annual Report 2018 143 FINANCIAL DEVELOPMENT

Income from third-party activities, comprising ear- Profit and Loss Statement of the ifo Institute for 2018 marked subsidies, revenues from publications, data- in EUR Thousands (abridged version) base services and events, revenues from commissioned 31.12.2018 31.12.2017 activities (contract-based research), and other reve- Public grants 12,356 12,258 nues, as well as the corresponding changes in inven- Earmarked financial support 2,717 2,315 tory, rose by 190,000 euros from 6.452 million euros in Obligatory membership fees 118 125 2017 to 6.642 million euros in 2018. Voluntary membership fees 11 14 Income from publications, database services, conferences 380 335 The number of Association members fell from 325 in Income from commissioned activities 3,203 3,242 2017 to 314 as of 31 December 2018. As a result, in- Other revenues 118 117 Change in stocks of non-invoiced come from membership fees (obligatory and volun- services 224 443 tary) decreased by 10,000 euros from 139,000 euros Operating income 19,127 18,849 to 129,000 euros. Expenditure for material and purchased services 1,834 1,698 Personnel expenditure 13,980 13,367 The increase in third-party funding corresponds to an Regular depreciation 7 25 increase in the cost of materials and purchased ser- Unplanned depreciation 198 255 vices associated with third-party funding activities of Other operating expenses minus income 3,045 3,257 Operating expenses 19,064 18,602 136,000 euros compared with the previous year. Operating profit 63 247 Financial profit –13 –18 Personnel expenses rose by 613,000 euros (5%) to Taxes on income and profit –2 –45 Neutral income and income unrelated 13.980 million euros. The main reasons for this are, on to the accounting period 78 –5 the one hand, the increase in collectively agreed remu- Annual profit 126 179 neration (2.35%) and, on the other hand, the introduc- Withdrawals from research reserves 0 0 tion of a new level 6 in pay groups 9 to 15. The number Additions to research reserves 115 165 Withdrawals from statutory reserves 0 0 of staﬀ fell by three versus the previous year to 224 on Additions to statutory reserves 11 14 the reporting date (2017: 227). Profit brought forward 0 0

Regular depreciation (7,000 euros) refers to fi xed assets fi nanced out of the Institute’s own funds, while unplanned depreciation (198,000 euros) corresponds For the output that the ifo Institute produces in re- to the investment subsidies for fi xed assets received in search, policy advice and services as an institution ifo receives the reporting year from public research funding bod- of the Leibniz Association, it receives institutional institutional support ies. Other operating expenses (balanced by other op- support from the German federal government and from the German erating income) fell by 212,000 euros to 3.045 million the federal states as part of joint research funding federal government euros. according to Art. 91b Basic Law. Institutional support and the federal from the Bavarian Ministry for Economic Affairs, Re- states This means that income exceeded costs by 63,000 euros gional Development and Energy as well as from the (income from current operations). Owing to negative in- German Federal Ministry of Economic Aff airs and terest rates, fi nancial profi t was negative at –13,000 eu- Energy amounted to 10.756 million euros. ifo also ros. In addition, the Institute posted 78,000 euros in pos- had reserves of 850,000 euros from 2017. Of the over- itive neutral and out-of-period results due to a change all sum of 11.606 million euros of available funds, in provisions from previous years. The Institute also had 10.872 million euros was used for day-to-day oper- to pay taxes of 2,000 euros, giving it an annual profi t of ations and 734,000 euros was spent on investments 126,000 euros. and IT investment services as well as fi rst-year licenc- es for new soft ware.

In addition to this basic public support, the Dresden Branch receives separate institutional support from the Free State of Saxony according to Art. 91b Basic Law. Institutional support of the Dresden Branch by the

144 ifo Annual Report 2018 FINANCIAL DEVELOPMENT

Saxon Ministry of Finance amounted to 750,000 euros (of the 750,000 euros in funding originally granted, 232 euros was not used).

The Institute’s ﬁ nancial statements were audited by KPMG AG Wirtschaft sprüfungsgesellschaft and received unreserved certiﬁ cation.

ifo Annual Report 2018 145 ifo Institute Poschingerstr. 5, 81679 Munich Postbox 860460, 81631 Munich Organisation Chart Phone +49 89 9224 - 0 1 April 2019 Fax +49 89 98 53 69 http://www.cesifo-group.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 Labour 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 Labour economics: time allocation, labour Education and individual outcomes: Forecasting 3)21&,+,#Ɯ0 )+!151&,+-,)& 6 supply, search and matching, migration labour markets and lifecycles Inequality and redistribution Government debt in Germany and Europe and integration Education and long-term development: Survey data and methodological expertise Political economy Demographic economics: marriage, fertility, economic growth and prosperity Business cycle indicators and macroeconomic family structure, domestic abuse, health Determinants of education: culture, forecasts resources and institutions ,3"/++ ",#"!2 1&,+ǿ"ƛ& &"+ 6 and equity

Industrial Organisation and Energy, Climate and International Economics International Institutional Comparisons New Technologies Resources and Migration Research

Prof. Dr. Oliver Falck Prof. Dr. Karen Pittel N. N. Prof. Panu Poutvaara, Ph.D. Industrial organisation and Climate and resources Globalisation and labour markets Research on institutions and industry-level analysis Environment Trade costs and trade policy international comparisons New technologies Energy Trade and environmental policy Research on migration and coordination ,))" 1&,+,#Ɯ/*Ȓ)"3")+!&+!201/6Ȓ)"3")!1 of the Center of Excellence for Migration LMU-ifo Economics and Research Director and Integration Research Business Data Center (EBDC) Prof. Dr. Christian Traeger Database for Institutional Comparisons In Europe (DICE) Publication of the ifo DICE Report and the CESifo Forum

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 Julia Schricker Prof. Dr. Joachim Ragnitz Advisors: (Managing Director) Controlling/Equal Opportunity AGG Data Protection Dr. Wolfgang Auer Dr. Dorothea Pohlmann Dr. Thomas Wirth (extern) Barbara Hebele Anja Hülsewig

Central Departments Human Resources and Law Finances and Centralised Services Information Technology Library Communications

Angela Wagner Sabine Dehof Christian Pitsch Dr. Cornelia Geißler

Ombudsman Prof. Dr. Heinrich Ursprung (extern)