German 20 Institute for Economic Research Annual Report 09 DIW Berlin Annual Report 2009 The President’s Preface The Global Recovery is Green 4 Research, Advice, Service: Milestones 2009 A Focus on New Ideas — The Quality Initiative Group 14 A Countercyclical Business: The Financial Markets Research Group 16 DIW Key Events in 2009 18 The Research Departments: Focal Areas in 2009 Department of Macro Analysis and Forecasting 24 Department of International Economics 27 Department of Public Economics 30 Department of Information Society and Competition 33 Department of Innovation, Manufacturing, and Service 36 Department of Energy, Transportation, and the Environment 39 Department German Socio-Economic Panel Study (SOEP) 42 The Service Departments DIW Berlin’s Four Service Departments 45 Sustainability and the Environment at DIW Berlin 48 Horizons A New International Network for Environmental Protection: the Climate Policy Initiative at DIW Berlin 50 Training the Researchers of Tomorrow: the DIW Berlin Graduate Center 52 DIW econ — Economic Analysis and Consulting Under One Roof 56 International Networking: DIW DC 59 Institutional Bodies of DIW Berlin Members’ Meeting 62 Board of Trustees 63 Scientific Advisory Board 64 Society of Friends of DIW Berlin 65 Cooperation Partners of DIW Berlin Research Professors and Research Affiliates 68 Cooperation with National and International Universities and Research Institutes 72 diw berlin – annual report 2009 3 The President’s Preface The Global Recovery is Green The discussion of global headline issues has become a fixed element of economic policy debate, and questions related to the environment are certainly no exception. There are great expectations that investment in environmentally conscious technologies represents one way out of the global economic downturn, and could herald the beginning of a green economic boom. The German In- stitute for Economic Research (DIW) has an established tradition of placing the economic analysis of sustainable energy, transportation, and ecological strategies at the center of its research and advisory services. In 2009, we began a collaborative effort with the international Climate Policy Initiative (CPI) in order to further intensify research in this area. Global economic development is attended by serious ecological challenges, challenges which rep- resent a trillion dollar market, with opportunities for growth and innovation particularly ripe in emerging markets and the developing world. Companies that produce environmentally conscious Prof. Klaus F. Zimmermann, President of DIW Berlin products will emerge as winners in this structural transformation. Yet thinking about our ecological future should not be reduced to the issue of climate change alone. The political world tends to have a short attention span and regularly shifts priorities, increasing the risk that capricious political winds could undermine the nascent development of a “Green New Deal.” Ecological investments should not become permanently dependent on government subsidies. The ecological moderniza- environmental projects in the Third World is significantly greater than in Europe. In regional terms, tion of our economy will only be sustainable if the projects that are pursued are subject to competi- by 2020 the center of green activity will move markedly toward Asia, but also toward North America. tion under the same market rules and standards that apply to every other endeavor. Anyone who wants a “Green New Deal” must recognize that environment and development go Though it came as welcome news that Germany invested 13.1 billion euros to expand renewable en- hand-in-hand. The visionary “Desertec” project, which seeks to generate electricity on a wide scale ergy in 2008 – 20 percent more than the year before – we must also recognize that the proportion in the North African Desert, provides a vivid example of the sort of reciprocal dependency this of public appropriations directed to these projects was disproportionately high. The new ecologi- implies – but also demonstrates the potential for mutual benefit. It also illustrates that Germany cally friendly drive systems that have been much in the news lately – such as electric- and natural is well positioned in the competition for leadership in ecological know-how. In many areas, we gas-powered vehicles – can for the foreseeable future only be made economically viable in the mass have a significant competitive edge. More than a sixth of world trade in green technology is now in market by means of massive government aid. But the likelihood of carrying through on ambitious the hands of German companies. Moreover, profits derived from the new wave in green products ecological proposals in a period of empty public coffers remains uncertain. Any ecological program more often than not go to small and mid-sized companies that are focusing on highly complex aiming for long-term economic success must abide by the rules of the marketplace. So the lesson technological solutions to existing problems – and reaping ever greater rewards for their efforts is clear: market-based incentives, yes – perpetual subsidies, no. around the world. In 2006, 1.8 million Germans were working in some capacity in the area of envi- ronmental protection. Through a consistent pursuit of ecological policies, this number could easily The opportunities offered by a broad program for green growth are enormous. Conservative es- double by the year 2020. However, since these are for the most part highly specialized types of jobs, timates show that in 2004 worldwide expenditures for environmentally responsible goods and they will not make up for employment losses in the more traditional industrial and service sectors. investments in renewable energy amounted to more than US$580 billion – with almost half of In particular, the new “green market” will provide only limited opportunities for less-qualified job that coming from Europe, and a quarter from North America and Asia, respectively. A DIW study seekers, who remain the Achilles heel of our labor market. Even so, the rich prospects it offers to a has determined that, by 2020, worldwide expenditures on environmentally friendly goods could technologically advanced and export-oriented economy like Germany are clearly compelling. increase at a rate three times that of the rest of the world economy. According to a scenario that forecasts low rates of expenditure on environmental protection, expenditures are estimated to rise The effective demand in Germany for environmentally friendly goods is currently around US$75 by 2020 to US$1.2 trillion. In an alternate scenario that forecasts high rates of expenditure, the mar- billion. Given favorable developments, this could increase to as much as US$171 billion by 2020. ket is expected to be worth US$1.9 trillion by 2020. Investments will be focused on infrastructure Demand for environmentally responsible goods made in Germany will be determined to a sig- and construction; on new transportation concepts, ranging from mass transit systems to more fuel- nificant degree by exports. Eighty percent of wind-turbines produced in Germany, for example, efficient automobiles; on waste and water management technologies; as well as on environmentally are slated for export. Furthermore, the global market share held by German companies in biogas friendly industrial plants. facilities lies at 45 percent; in photovoltaic facilities, this figure is 41 percent. Even though Germany currently enjoys a leading role in many segments of this sector, competition for the future of green According to UN calculations, for example, worldwide investment in renewable energy alone came technologies is only just beginning. The United States, in particular, is likely to become aggres- to US$155 billion in 2008, primarily for projects in geothermal energy, wind and solar power, as sively engaged in this area in the near future. The Obama administration has already earmarked well as bio-fuels. This total is four-times that of 2004 – while the long-term growth potential for $11.5 billion in economic stimulus for ecological restructuring, to be directed toward such things as 4 the president’s preface diw berlin – annual report 2009 5 renewable energy, building modernization, and the upgrading of the electric power grid. And the US is currently engaged in a major campaign to recruit German engineers. Meanwhile, Germany has designated 13.2 percent of its stimulus program for green investment. In Germany, experts expect that the greatest potential gains will be mainly among service industries in the environmen- tal sector. The German Environment Ministry predicts that companies active in this area could increase their annual revenues from 123 billion euros at present to 300 billion euros by 2020. Worldwide appreciation of the links between economic and ecological development has never been greater than it is today. If we really want to, we can indeed create a greener future for ourselves. The development of innovative environmental technologies is the prerequisite for a conversion to a climate-conscious economy. The World Climate Conference in Copenhagen made it clear once again that climate goals can only be achieved if all national economies, including those in the Due to the international financial crisis, economic policy advising stood at the center of DIW’s activities in 2009. developing world, can agree to the transformation of their economic systems. Even though the Among others, the president advised both German federal