Global Economy Gains Momentum – But Germany still Stuck in a Downturn

In 2020, the global economy is likely to benefit from the recent thaw in trade disputes. Germany’s manufacturing sector, however, will recover only slowly. In 2020, the German economy will probably grow at a rate of 1.1%. With an estimated growth rate of 1.3%, production in East Germany will outpace production growth in Germany as a whole.

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IWH hosts award-winning US economist

The renowned Max Planck-Humboldt Research Award 2019 goes to Ufuk Akcigit, Professor of Economics at the University of Chicago. At the IWH, Akcigit aims to use innovative methods to investigate why the economy in eastern Germany is still lagging behind that in western Germany – and what role the privatisation process 30 years ago played in this.

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United by Inequality

How is Germany’s economy faring 30 years after the fall of the Berlin Wall? An IWH publication analyses how the country’s unification has progressed. The study presents many new findings, including on productivity differences between east and west, urban and rural development, as well as the availability of skilled labour.

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IWH leads large scale EU project on productivity

Is productivity growth slowing in industrialised countries? And if so, why? From the start of 2019, the IWH will be addressing these decisive questions as the leading coordinator of a new European research collaboration: MICROPROD is the largest EU project in the history of the institute.

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A new department for IWH

The German Joint Science Conference (GWK) agreed on the expansion of IWH. From 2020 onwards, the institute will receive an additional amount of 1.3 million euros of institutional funds to establish a new department "Laws, Regulations and Factor Markets".

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Capital Concern

99
percent

In 2018 the per capita gross domestic product in Berlin reached only 99% of the pan-German level. It amounted to 146% in 1925.

Read (in German): Zur Wirtschaftskraft deutscher Regionen aus langfristiger Perspektive: Alte Muster werden in Ostdeutschland langsam wieder sichtbar

Press Releases

12.12.2019 • 24/2019

Global economy slowly gains momentum – but Germany still stuck in a downturn

Professor Dr Oliver Holtemöller
Abstract

In 2020, the global economy is likely to benefit from the recent thaw in trade disputes. Germany’s manufacturing sector, however, will recover only slowly. “In 2020, the German economy will probably grow at a rate of 1.1%, and adjusted for the unusually high number of working days the growth rate will only be 0.7%”, says Oliver Holtemöller, head of the Department Macroeconomics and vice president at Halle Institute for Economic Research (IWH). With an estimated growth rate of 1.3%, production in East Germany will outpace total German production growth.

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01.11.2019 • 23/2019

Presseeinladung zur Verleihung des Max-Planck-Humboldt-Forschungspreises und der Max-Planck-Humboldt-Medaille 2019 in Berlin, Akademie der Künste, 5. November 2019 um 17:00 Uhr mit anschließendem Empfang

Abstract

Zum zweiten Mal wird der neugestaltete Max-Planck-Humboldt-Forschungspreis von der Max-Planck-Gesellschaft und der Alexander von Humboldt-Stiftung in Berlin verliehen. Der diesjährige Träger des Preises ist Ufuk Akcigit von der Universität Chicago mit dem Thema: Warum besteht zwischen Ost- und Westdeutschland weiterhin eine wirtschaftliche Kluft?

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09.10.2019 • 22/2019

Presseeinladung zum Workshop: „Strukturwandel auf dem Arbeitsmarkt“ am 17. und 18. Oktober 2019 in Halle (Saale)

Abstract

Digitaler, flexibler, internationaler: Der Arbeitsmarkt ist in vielerlei Hinsicht im Umbruch. Wie dieser Wandel sich auf Regionen, Branchen, Betriebe und Beschäftigte auswirkt, diskutiert eine gemeinsame Veranstaltung des Instituts für Arbeitsmarkt- und Berufsforschung (IAB) und des Leibniz-Instituts für Wirtschaftsforschung Halle (IWH).

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02.10.2019 • 21/2019

Thanks to robust domestic demand, the impact of the manufacturing sector on East Germany is less severe than in the west – Implications of the Autumn 2019 Joint Economic Forecast and official regional data for the eastern German economy

Professor Dr Oliver Holtemöller
Abstract

In its autumn report, the Joint Economic Forecast Project Group states that the German economy has cooled further in the current year. The manufacturing sector is the main reason for the economic weakness. This affects the economy in East Germany as well.

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Facts and Figures

Absolute Employment Effects of a Hard Brexit

2019-hard-brexit-potential-employment-effects-absolute.jpg

1/3: Up to 600 000 jobs would indirectly be threatened by a hard Brexit, about 100 000 of those in Germany. Source: Brautzsch, Hans-Ulrich, Holtemöller, Oliver: Potential International Employment Effects of a Hard Brexit. IWH Discussion Papers, Nr. 4, 2019. Halle (Saale) 2019.

Relative Employment Effects of a Hard Brexit

2019-hard-brexit-potential-employment-effects-relative.jpg

2/3: Effects on employment rates would be particularly high in Malta and Ireland. Source: Brautzsch, Hans-Ulrich, Holtemöller, Oliver: Potential International Employment Effects of a Hard Brexit. IWH Discussion Papers, Nr. 4, 2019. Halle (Saale) 2019.

Regional employment effects of a hard Brexit in Germany

2019-hard-brexit-regional-employment.jpg

3/3: In Germany, a hard Brexit would particularly affect the car industry and, as a result, the districts of Wolfsburg (Volkswagen headquarters) and Dingolfing-Landau (BMW). Source: Brautzsch, Hans-Ulrich, Holtemöller, Oliver: Potential International Employment Effects of a Hard Brexit. IWH-Diskussionspapiere, Nr. 4, 2019. Halle (Saale) 2019.

New Regulatory Framework in Europe

Figure_1_European_Banking_Union.jpg

This figure shows the different pillars that form the basis of the new regulatory framework in Europe. The Single Rulebook applies to all 28 member states. The three pillars of the European Banking Union are obligatory for Euro Area countries and voluntary for the remaining EU member states. Source: Koetter, Michael; Krause, Thomas; Tonzer, Lena (2017): Delay determinants of European Banking Union implementation. IWH Discussion Papers 24/2017, Halle Institute for Economic Research (IWH).

Share of Zombie Firms 2010-2014 by Country

Figure_2_Share_of_Zombie_Firms.jpg

The graph shows the percentage share of firms that have been classified as zombies in a given year and country. Zombie firms are firms, that for at least two consecutive years have negative returns, negative investment, and debt servicing capacity (EBITDA/ financial debt) below 5 %. Source: Koetter, Michael; Setzer, Ralph; Storz, Manuela; Westphal, Andreas (2017): Do we want these two to tango? On zombie firms and stressed banks in Europe. IWH Discussion Papers 13/2017, Halle Institute for Economic Research (IWH).

Comparison of EFN Forecasts with Alternative Forecasts

Figure_3_EFN_Report_Winter2017-Economic_Outlook.jpg

EU: European Commission, Economic Forecast, November 2017; IMF: World Economic Outlook, October 2017, ECB: December 2017 staff macroeconomic projections. OECD: Economic Outlook, November 2017; Consensus: Consensus Economics, Consensus Forecasts, December 2017. Source: EFN-European Forecasting Network (2017): EFN Report: Economic Outlook for the Euro Area in 2018 and 2019.

Euro Area Inflation Dynamics and Possible Drivers (a)

Figure_4a_Inflation_Dynamics.jpg

This figure (a) shows headline inflation rates in the Euro area and in ten member countries of the European Monetary Union (EMU). The possible inflation drivers may all have contributed to the low inflation rate in recent years. The series of survey- and market-based inflation expectations were obtained from Consensus Economics, Thomson Reuters and own calculations. For the remaining data sources it is referred to the data and estimation section. Source: Dany-Knedlik, Geraldine; Holtemöller, Oliver (2017): Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations. IWH Discussion Papers 10/2017, Halle Institute for Economic Research (IWH).

Euro Area Inflation Dynamics and Possible Drivers (b)

Figure_4b_Inflation_Dynamics.jpg

This figure (b) shows unemployment rates in the Euro area and in ten member countries of the European Monetary Union (EMU). The possible inflation drivers may all have contributed to the low inflation rate in recent years. The series of survey- and market-based inflation expectations were obtained from Consensus Economics, Thomson Reuters and own calculations. For the remaining data sources it is referred to the data and estimation section. Source: Dany-Knedlik, Geraldine; Holtemöller, Oliver (2017): Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations. IWH Discussion Papers 10/2017, Halle Institute for Economic Research (IWH).

Bank Levies Paid by German Banks

Figure_5_Bank_Levies.jpg

This figure shows the payments of the bank levy (in million euros) by German banks for the years 2011-2015, broken down by banking group. During the years 2011-2014, banks had to contribute to the national restructuring fund as specified in the Restructuring Fund Act. In 2015, banks contributions were for the first time calculated as specified in the Banking Resolution and Restructuring Directive. Source of Figure: Deutscher Bundestag Drucksache 18/5993, BB8/5993he 18 5 December 2015. Source: Buch, Claudia; Tonzer, Lena; Weigert, Benjamin (2017): Assessing the effects of regulatory bank levies. VOX CEPR's Policy Portal: Research-based policy analysis and commentary from leading economists.

Aggregated Foreign Funding for Brazilian Banks (2007-2010)

Figure_6_Aggregated_Foreign_Funding_Brazil.jpg

This figure shows the development of aggregated foreign funding for Brazilian banks between January 2007 and December 2010. The vertical line is set at September 2008, the month when the collapse of Lehman Brothers triggered a freeze in global interbank markets. Foreign funding is aggregated from the bank-level data in the baseline sample. The variable is reported in real 2013 US$ millions. Source: Noth, Felix; Ossandon Busch, Matias (2017): Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil. IWH Discussion Papers 7/2017, Halle Institute for Economic Research (IWH).

Unemployment Rates by Nationality (2014)

Figure_7a_Unemployment_Rates_by_Nationality_mod.jpg

The unemployment rate of EU nationals in most countries is slightly higher than that of domestic nationals; these rates are almost perfectly correlated for all member states. As the figure displays, the unemployment rate of citizens from non-EU member states is significantly higher than that of domestic nationals in almost all countries; the dispersion of the rates is also significantly greater. Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.

Labour Market Situation for Non-EU Foreigners in Relation to the Number of Applications for Asylum (2014)

Figure_7b_Labour_Market_Situation.jpg

In fact, there is a positive correlation between the number of applications for asylum in recent years and the difference in the unemployment rates of domestic nationals and of citizens from non-EU member states (as shown in the figure at hand). This indicates that the marginal costs of integrating refugees do indeed increase as the number of refugees grows. Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.

Employment Rates by Nationality and Gender (2014)

Figure_7c_Employment_Rates_Nationality_Gender.jpg

Large differences between nationals and foreigners from non-EU countries can also be observed when it comes to the employment rate. In most countries, the employment rate is considerably lower for non-EU citizens than for domestic nationals; this is the case especially for women, but it applies to men as well. While the employment rate of male non-EU foreigners increases at least somewhat with the employment rate of male domestic nationals, the employment rate of female non-EU foreigners is largely disconnected from the domestic rate (see figure above). Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.

Average Work Performance of Employees Based on Meaning of Task (2014)

Figure_8_Average_work_performance_corresponding_to_meaning_of_task.jpg

The figure demonstrates that the average number of responses differs between the three treatment groups "Original Meaning", "No Meaning" and "Alternative Meaning". It shows the average work performance of workers fulfilling the same task with the same reward but with different information about the usefulness or meaning of their work done before. Since some workers did not respond at first and only participated in the experiment as latecomers after they were sent further invitations, these were considered as a special group. Therefore, two different groups were created "Immediate" and "Pooled" and were considered separately. In essence, the additional "Pooled" group consists of latecomers grouped together with the employees that immediately participated in the experiment. Source: Chadi, Adrian; Jeworrek, Sabrina; Mertins, Vanessa (2016): When the Meaning of Work Has Disappeared: Experimental Evidence on Employees’ Performance and Emotions. Management Science 63(6): 1696-1707.

Current Publications

cover_empirical-economics.jpg

Nowcasting East German GDP Growth: a MIDAS Approach

João Carlos Claudio Katja Heinisch Oliver Holtemöller

in: Empirical Economics, forthcoming

Abstract

Economic forecasts are an important element of rational economic policy both on the federal and on the local or regional level. Solid budgetary plans for government expenditures and revenues rely on efficient macroeconomic projections. However, official data on quarterly regional GDP in Germany are not available, and hence, regional GDP forecasts do not play an important role in public budget planning. We provide a new quarterly time series for East German GDP and develop a forecasting approach for East German GDP that takes data availability in real time and regional economic indicators into account. Overall, we find that mixed-data sampling model forecasts for East German GDP in combination with model averaging outperform regional forecast models that only rely on aggregate national information.

read publication
cover_american-economic-journal-macroeconomics.jpg

Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory

Ufuk Akcigit Sina T. Ates

in: American Economic Journal: Macroeconomics, forthcoming

Abstract

In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized facts related to declining business dynamism documented in the literature and discuss some of the existing attempts to explain them. We then describe a theoretical framework of endogenous markups, innovation, and competition that can potentially speak to all of these facts jointly. We next explore some theoretical predictions of this framework, which are shaped by two interacting forces: a composition effect that determines the market concentration and an incentive effect that determines how firms respond to a given concentration in the economy. The results highlight that a decline in knowledge diffusion between frontier and laggard firms could be a significant driver of empirical trends observed in the data. This study emphasizes the potential of growth theory for the analysis of factors behind declining business dynamism and the need for further investigation in this direction.

read publication
cover_B.E.-journal-of-economic-analysis-_-policy.png

Executive Compensation and Labor Expenses

Stefano Colonnello

in: B.E. Journal of Economic Analysis & Policy, forthcoming

read publication
cover_empirica.jpg

The Appropriateness of the Macroeconomic Imbalance Procedure for Central and Eastern European Countries

Martina Kämpfe Tobias Knedlik

in: Empirica, forthcoming

read publication
cover_british-journal-of-industrial-relations.jpg

Birds, Birds, Birds: Co-Worker Similarity, Workplace Diversity and Job Switches

Boris Hirsch Elke J. Jahn Thomas Zwick

in: British Journal of Industrial Relations, forthcoming

read publication
cover_labour.jpg

Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State

Daniel Fackler Eva Weigt

in: LABOUR, forthcoming

Abstract

Using survey data from the German Socio‐Economic Panel (SOEP), this paper analyses the extent to which alternative income sources, reactions within the household context, and redistribution by the state attenuate earnings losses after job displacement. Applying propensity score matching and fixed effects estimations, we find that income from self‐employment reduces the earnings gap only slightly and severance payments buffer losses in the short run. On the household level, we find little evidence for an added worker effect whereas redistribution by the state within the tax and transfer system mitigates income losses substantially.

read publication
cover_economic-modelling.gif

Employment Effects of Introducing a Minimum Wage: The Case of Germany

Oliver Holtemöller Felix Pohle

in: Economic Modelling, forthcoming

Abstract

Income inequality has been a major concern of economic policy makers for several years. Can minimum wages help to mitigate inequality? In 2015, the German government introduced a nationwide statutory minimum wage to reduce income inequality by improving the labour income of low-wage employees. However, the employment effects of wage increases depend on time and region specific conditions and, hence, they cannot be known in advance. Because negative employment effects may offset the income gains for low-wage employees, it is important to evaluate minimum-wage policies empirically. We estimate the employment effects of the German minimum-wage introduction using panel regressions on the state-industry-level. We find a robust negative effect of the minimum wage on marginal and a robust positive effect on regular employment. In terms of the number of jobs, our results imply a negative overall effect. Hence, low-wage employees who are still employed are better off at the expense of those who have lost their jobs due to the minimum wage.

read publication
cover_journal-of-financial-stability.gif

Does Machine Learning Help us Predict Banking Crises?

Johannes Beutel Gregor von Schweinitz

in: Journal of Financial Stability, forthcoming

read publication
cover_review-of-accounting-studies.jpg

Investor Relations and IPO Performance

Salim Chahine Gonul Colak Iftekhar Hasan Mohamad Mazboudi

in: Review of Accounting Studies, forthcoming

read publication
cover_applied-economics.jpg

Foreign Bank Ownership and Income Inequality: Empirical Evidence

Manthos D. Delis Iftekhar Hasan Nikolaos Mylonidis

in: Applied Economics, forthcoming

read publication
cover_empirical-economics.jpg

Nowcasting East German GDP Growth: a MIDAS Approach

João Carlos Claudio Katja Heinisch Oliver Holtemöller

in: Empirical Economics, forthcoming

Abstract

Economic forecasts are an important element of rational economic policy both on the federal and on the local or regional level. Solid budgetary plans for government expenditures and revenues rely on efficient macroeconomic projections. However, official data on quarterly regional GDP in Germany are not available, and hence, regional GDP forecasts do not play an important role in public budget planning. We provide a new quarterly time series for East German GDP and develop a forecasting approach for East German GDP that takes data availability in real time and regional economic indicators into account. Overall, we find that mixed-data sampling model forecasts for East German GDP in combination with model averaging outperform regional forecast models that only rely on aggregate national information.

read publication
cover_american-economic-journal-macroeconomics.jpg

Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory

Ufuk Akcigit Sina T. Ates

in: American Economic Journal: Macroeconomics, forthcoming

Abstract

In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized facts related to declining business dynamism documented in the literature and discuss some of the existing attempts to explain them. We then describe a theoretical framework of endogenous markups, innovation, and competition that can potentially speak to all of these facts jointly. We next explore some theoretical predictions of this framework, which are shaped by two interacting forces: a composition effect that determines the market concentration and an incentive effect that determines how firms respond to a given concentration in the economy. The results highlight that a decline in knowledge diffusion between frontier and laggard firms could be a significant driver of empirical trends observed in the data. This study emphasizes the potential of growth theory for the analysis of factors behind declining business dynamism and the need for further investigation in this direction.

read publication
cover_B.E.-journal-of-economic-analysis-_-policy.png

Executive Compensation and Labor Expenses

Stefano Colonnello

in: B.E. Journal of Economic Analysis & Policy, forthcoming

read publication
cover_empirica.jpg

The Appropriateness of the Macroeconomic Imbalance Procedure for Central and Eastern European Countries

Martina Kämpfe Tobias Knedlik

in: Empirica, forthcoming

read publication
cover_british-journal-of-industrial-relations.jpg

Birds, Birds, Birds: Co-Worker Similarity, Workplace Diversity and Job Switches

Boris Hirsch Elke J. Jahn Thomas Zwick

in: British Journal of Industrial Relations, forthcoming

read publication
cover_labour.jpg

Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State

Daniel Fackler Eva Weigt

in: LABOUR, forthcoming

Abstract

Using survey data from the German Socio‐Economic Panel (SOEP), this paper analyses the extent to which alternative income sources, reactions within the household context, and redistribution by the state attenuate earnings losses after job displacement. Applying propensity score matching and fixed effects estimations, we find that income from self‐employment reduces the earnings gap only slightly and severance payments buffer losses in the short run. On the household level, we find little evidence for an added worker effect whereas redistribution by the state within the tax and transfer system mitigates income losses substantially.

read publication
cover_economic-modelling.gif

Employment Effects of Introducing a Minimum Wage: The Case of Germany

Oliver Holtemöller Felix Pohle

in: Economic Modelling, forthcoming

Abstract

Income inequality has been a major concern of economic policy makers for several years. Can minimum wages help to mitigate inequality? In 2015, the German government introduced a nationwide statutory minimum wage to reduce income inequality by improving the labour income of low-wage employees. However, the employment effects of wage increases depend on time and region specific conditions and, hence, they cannot be known in advance. Because negative employment effects may offset the income gains for low-wage employees, it is important to evaluate minimum-wage policies empirically. We estimate the employment effects of the German minimum-wage introduction using panel regressions on the state-industry-level. We find a robust negative effect of the minimum wage on marginal and a robust positive effect on regular employment. In terms of the number of jobs, our results imply a negative overall effect. Hence, low-wage employees who are still employed are better off at the expense of those who have lost their jobs due to the minimum wage.

read publication
cover_journal-of-financial-stability.gif

Does Machine Learning Help us Predict Banking Crises?

Johannes Beutel Gregor von Schweinitz

in: Journal of Financial Stability, forthcoming

read publication
cover_review-of-accounting-studies.jpg

Investor Relations and IPO Performance

Salim Chahine Gonul Colak Iftekhar Hasan Mohamad Mazboudi

in: Review of Accounting Studies, forthcoming

read publication
cover_applied-economics.jpg

Foreign Bank Ownership and Income Inequality: Empirical Evidence

Manthos D. Delis Iftekhar Hasan Nikolaos Mylonidis

in: Applied Economics, forthcoming

read publication

Media Centre

Absolute Employment Effects of a Hard Brexit

2019-hard-brexit-potential-employment-effects-absolute.jpg

1/3: Up to 600 000 jobs would indirectly be threatened by a hard Brexit, about 100 000 of those in Germany. Source: Brautzsch, Hans-Ulrich, Holtemöller, Oliver: Potential International Employment Effects of a Hard Brexit. IWH Discussion Papers, Nr. 4, 2019. Halle (Saale) 2019.

Relative Employment Effects of a Hard Brexit

2019-hard-brexit-potential-employment-effects-relative.jpg

2/3: Effects on employment rates would be particularly high in Malta and Ireland. Source: Brautzsch, Hans-Ulrich, Holtemöller, Oliver: Potential International Employment Effects of a Hard Brexit. IWH Discussion Papers, Nr. 4, 2019. Halle (Saale) 2019.

Regional employment effects of a hard Brexit in Germany

2019-hard-brexit-regional-employment.jpg

3/3: In Germany, a hard Brexit would particularly affect the car industry and, as a result, the districts of Wolfsburg (Volkswagen headquarters) and Dingolfing-Landau (BMW). Source: Brautzsch, Hans-Ulrich, Holtemöller, Oliver: Potential International Employment Effects of a Hard Brexit. IWH-Diskussionspapiere, Nr. 4, 2019. Halle (Saale) 2019.

New Regulatory Framework in Europe

Figure_1_European_Banking_Union.jpg

This figure shows the different pillars that form the basis of the new regulatory framework in Europe. The Single Rulebook applies to all 28 member states. The three pillars of the European Banking Union are obligatory for Euro Area countries and voluntary for the remaining EU member states. Source: Koetter, Michael; Krause, Thomas; Tonzer, Lena (2017): Delay determinants of European Banking Union implementation. IWH Discussion Papers 24/2017, Halle Institute for Economic Research (IWH).

Share of Zombie Firms 2010-2014 by Country

Figure_2_Share_of_Zombie_Firms.jpg

The graph shows the percentage share of firms that have been classified as zombies in a given year and country. Zombie firms are firms, that for at least two consecutive years have negative returns, negative investment, and debt servicing capacity (EBITDA/ financial debt) below 5 %. Source: Koetter, Michael; Setzer, Ralph; Storz, Manuela; Westphal, Andreas (2017): Do we want these two to tango? On zombie firms and stressed banks in Europe. IWH Discussion Papers 13/2017, Halle Institute for Economic Research (IWH).

Comparison of EFN Forecasts with Alternative Forecasts

Figure_3_EFN_Report_Winter2017-Economic_Outlook.jpg

EU: European Commission, Economic Forecast, November 2017; IMF: World Economic Outlook, October 2017, ECB: December 2017 staff macroeconomic projections. OECD: Economic Outlook, November 2017; Consensus: Consensus Economics, Consensus Forecasts, December 2017. Source: EFN-European Forecasting Network (2017): EFN Report: Economic Outlook for the Euro Area in 2018 and 2019.

Euro Area Inflation Dynamics and Possible Drivers (a)

Figure_4a_Inflation_Dynamics.jpg

This figure (a) shows headline inflation rates in the Euro area and in ten member countries of the European Monetary Union (EMU). The possible inflation drivers may all have contributed to the low inflation rate in recent years. The series of survey- and market-based inflation expectations were obtained from Consensus Economics, Thomson Reuters and own calculations. For the remaining data sources it is referred to the data and estimation section. Source: Dany-Knedlik, Geraldine; Holtemöller, Oliver (2017): Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations. IWH Discussion Papers 10/2017, Halle Institute for Economic Research (IWH).

Euro Area Inflation Dynamics and Possible Drivers (b)

Figure_4b_Inflation_Dynamics.jpg

This figure (b) shows unemployment rates in the Euro area and in ten member countries of the European Monetary Union (EMU). The possible inflation drivers may all have contributed to the low inflation rate in recent years. The series of survey- and market-based inflation expectations were obtained from Consensus Economics, Thomson Reuters and own calculations. For the remaining data sources it is referred to the data and estimation section. Source: Dany-Knedlik, Geraldine; Holtemöller, Oliver (2017): Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations. IWH Discussion Papers 10/2017, Halle Institute for Economic Research (IWH).

Bank Levies Paid by German Banks

Figure_5_Bank_Levies.jpg

This figure shows the payments of the bank levy (in million euros) by German banks for the years 2011-2015, broken down by banking group. During the years 2011-2014, banks had to contribute to the national restructuring fund as specified in the Restructuring Fund Act. In 2015, banks contributions were for the first time calculated as specified in the Banking Resolution and Restructuring Directive. Source of Figure: Deutscher Bundestag Drucksache 18/5993, BB8/5993he 18 5 December 2015. Source: Buch, Claudia; Tonzer, Lena; Weigert, Benjamin (2017): Assessing the effects of regulatory bank levies. VOX CEPR's Policy Portal: Research-based policy analysis and commentary from leading economists.

Aggregated Foreign Funding for Brazilian Banks (2007-2010)

Figure_6_Aggregated_Foreign_Funding_Brazil.jpg

This figure shows the development of aggregated foreign funding for Brazilian banks between January 2007 and December 2010. The vertical line is set at September 2008, the month when the collapse of Lehman Brothers triggered a freeze in global interbank markets. Foreign funding is aggregated from the bank-level data in the baseline sample. The variable is reported in real 2013 US$ millions. Source: Noth, Felix; Ossandon Busch, Matias (2017): Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil. IWH Discussion Papers 7/2017, Halle Institute for Economic Research (IWH).

Unemployment Rates by Nationality (2014)

Figure_7a_Unemployment_Rates_by_Nationality_mod.jpg

The unemployment rate of EU nationals in most countries is slightly higher than that of domestic nationals; these rates are almost perfectly correlated for all member states. As the figure displays, the unemployment rate of citizens from non-EU member states is significantly higher than that of domestic nationals in almost all countries; the dispersion of the rates is also significantly greater. Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.

Labour Market Situation for Non-EU Foreigners in Relation to the Number of Applications for Asylum (2014)

Figure_7b_Labour_Market_Situation.jpg

In fact, there is a positive correlation between the number of applications for asylum in recent years and the difference in the unemployment rates of domestic nationals and of citizens from non-EU member states (as shown in the figure at hand). This indicates that the marginal costs of integrating refugees do indeed increase as the number of refugees grows. Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.

Employment Rates by Nationality and Gender (2014)

Figure_7c_Employment_Rates_Nationality_Gender.jpg

Large differences between nationals and foreigners from non-EU countries can also be observed when it comes to the employment rate. In most countries, the employment rate is considerably lower for non-EU citizens than for domestic nationals; this is the case especially for women, but it applies to men as well. While the employment rate of male non-EU foreigners increases at least somewhat with the employment rate of male domestic nationals, the employment rate of female non-EU foreigners is largely disconnected from the domestic rate (see figure above). Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.

Average Work Performance of Employees Based on Meaning of Task (2014)

Figure_8_Average_work_performance_corresponding_to_meaning_of_task.jpg

The figure demonstrates that the average number of responses differs between the three treatment groups "Original Meaning", "No Meaning" and "Alternative Meaning". It shows the average work performance of workers fulfilling the same task with the same reward but with different information about the usefulness or meaning of their work done before. Since some workers did not respond at first and only participated in the experiment as latecomers after they were sent further invitations, these were considered as a special group. Therefore, two different groups were created "Immediate" and "Pooled" and were considered separately. In essence, the additional "Pooled" group consists of latecomers grouped together with the employees that immediately participated in the experiment. Source: Chadi, Adrian; Jeworrek, Sabrina; Mertins, Vanessa (2016): When the Meaning of Work Has Disappeared: Experimental Evidence on Employees’ Performance and Emotions. Management Science 63(6): 1696-1707.

cover_empirical-economics.jpg

Nowcasting East German GDP Growth: a MIDAS Approach

João Carlos Claudio Katja Heinisch Oliver Holtemöller

in: Empirical Economics, forthcoming

Abstract

Economic forecasts are an important element of rational economic policy both on the federal and on the local or regional level. Solid budgetary plans for government expenditures and revenues rely on efficient macroeconomic projections. However, official data on quarterly regional GDP in Germany are not available, and hence, regional GDP forecasts do not play an important role in public budget planning. We provide a new quarterly time series for East German GDP and develop a forecasting approach for East German GDP that takes data availability in real time and regional economic indicators into account. Overall, we find that mixed-data sampling model forecasts for East German GDP in combination with model averaging outperform regional forecast models that only rely on aggregate national information.

read publication
cover_american-economic-journal-macroeconomics.jpg

Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory

Ufuk Akcigit Sina T. Ates

in: American Economic Journal: Macroeconomics, forthcoming

Abstract

In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized facts related to declining business dynamism documented in the literature and discuss some of the existing attempts to explain them. We then describe a theoretical framework of endogenous markups, innovation, and competition that can potentially speak to all of these facts jointly. We next explore some theoretical predictions of this framework, which are shaped by two interacting forces: a composition effect that determines the market concentration and an incentive effect that determines how firms respond to a given concentration in the economy. The results highlight that a decline in knowledge diffusion between frontier and laggard firms could be a significant driver of empirical trends observed in the data. This study emphasizes the potential of growth theory for the analysis of factors behind declining business dynamism and the need for further investigation in this direction.

read publication
cover_B.E.-journal-of-economic-analysis-_-policy.png

Executive Compensation and Labor Expenses

Stefano Colonnello

in: B.E. Journal of Economic Analysis & Policy, forthcoming

read publication
cover_empirica.jpg

The Appropriateness of the Macroeconomic Imbalance Procedure for Central and Eastern European Countries

Martina Kämpfe Tobias Knedlik

in: Empirica, forthcoming

read publication
cover_british-journal-of-industrial-relations.jpg

Birds, Birds, Birds: Co-Worker Similarity, Workplace Diversity and Job Switches

Boris Hirsch Elke J. Jahn Thomas Zwick

in: British Journal of Industrial Relations, forthcoming

read publication
cover_labour.jpg

Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State

Daniel Fackler Eva Weigt

in: LABOUR, forthcoming

Abstract

Using survey data from the German Socio‐Economic Panel (SOEP), this paper analyses the extent to which alternative income sources, reactions within the household context, and redistribution by the state attenuate earnings losses after job displacement. Applying propensity score matching and fixed effects estimations, we find that income from self‐employment reduces the earnings gap only slightly and severance payments buffer losses in the short run. On the household level, we find little evidence for an added worker effect whereas redistribution by the state within the tax and transfer system mitigates income losses substantially.

read publication
cover_economic-modelling.gif

Employment Effects of Introducing a Minimum Wage: The Case of Germany

Oliver Holtemöller Felix Pohle

in: Economic Modelling, forthcoming

Abstract

Income inequality has been a major concern of economic policy makers for several years. Can minimum wages help to mitigate inequality? In 2015, the German government introduced a nationwide statutory minimum wage to reduce income inequality by improving the labour income of low-wage employees. However, the employment effects of wage increases depend on time and region specific conditions and, hence, they cannot be known in advance. Because negative employment effects may offset the income gains for low-wage employees, it is important to evaluate minimum-wage policies empirically. We estimate the employment effects of the German minimum-wage introduction using panel regressions on the state-industry-level. We find a robust negative effect of the minimum wage on marginal and a robust positive effect on regular employment. In terms of the number of jobs, our results imply a negative overall effect. Hence, low-wage employees who are still employed are better off at the expense of those who have lost their jobs due to the minimum wage.

read publication
cover_journal-of-financial-stability.gif

Does Machine Learning Help us Predict Banking Crises?

Johannes Beutel Gregor von Schweinitz

in: Journal of Financial Stability, forthcoming

read publication
cover_review-of-accounting-studies.jpg

Investor Relations and IPO Performance

Salim Chahine Gonul Colak Iftekhar Hasan Mohamad Mazboudi

in: Review of Accounting Studies, forthcoming

read publication
cover_applied-economics.jpg

Foreign Bank Ownership and Income Inequality: Empirical Evidence

Manthos D. Delis Iftekhar Hasan Nikolaos Mylonidis

in: Applied Economics, forthcoming

read publication
cover_empirical-economics.jpg

Nowcasting East German GDP Growth: a MIDAS Approach

João Carlos Claudio Katja Heinisch Oliver Holtemöller

in: Empirical Economics, forthcoming

Abstract

Economic forecasts are an important element of rational economic policy both on the federal and on the local or regional level. Solid budgetary plans for government expenditures and revenues rely on efficient macroeconomic projections. However, official data on quarterly regional GDP in Germany are not available, and hence, regional GDP forecasts do not play an important role in public budget planning. We provide a new quarterly time series for East German GDP and develop a forecasting approach for East German GDP that takes data availability in real time and regional economic indicators into account. Overall, we find that mixed-data sampling model forecasts for East German GDP in combination with model averaging outperform regional forecast models that only rely on aggregate national information.

read publication
cover_american-economic-journal-macroeconomics.jpg

Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory

Ufuk Akcigit Sina T. Ates

in: American Economic Journal: Macroeconomics, forthcoming

Abstract

In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized facts related to declining business dynamism documented in the literature and discuss some of the existing attempts to explain them. We then describe a theoretical framework of endogenous markups, innovation, and competition that can potentially speak to all of these facts jointly. We next explore some theoretical predictions of this framework, which are shaped by two interacting forces: a composition effect that determines the market concentration and an incentive effect that determines how firms respond to a given concentration in the economy. The results highlight that a decline in knowledge diffusion between frontier and laggard firms could be a significant driver of empirical trends observed in the data. This study emphasizes the potential of growth theory for the analysis of factors behind declining business dynamism and the need for further investigation in this direction.

read publication
cover_B.E.-journal-of-economic-analysis-_-policy.png

Executive Compensation and Labor Expenses

Stefano Colonnello

in: B.E. Journal of Economic Analysis & Policy, forthcoming

read publication
cover_empirica.jpg

The Appropriateness of the Macroeconomic Imbalance Procedure for Central and Eastern European Countries

Martina Kämpfe Tobias Knedlik

in: Empirica, forthcoming

read publication
cover_british-journal-of-industrial-relations.jpg

Birds, Birds, Birds: Co-Worker Similarity, Workplace Diversity and Job Switches

Boris Hirsch Elke J. Jahn Thomas Zwick

in: British Journal of Industrial Relations, forthcoming

read publication
cover_labour.jpg

Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State

Daniel Fackler Eva Weigt

in: LABOUR, forthcoming

Abstract

Using survey data from the German Socio‐Economic Panel (SOEP), this paper analyses the extent to which alternative income sources, reactions within the household context, and redistribution by the state attenuate earnings losses after job displacement. Applying propensity score matching and fixed effects estimations, we find that income from self‐employment reduces the earnings gap only slightly and severance payments buffer losses in the short run. On the household level, we find little evidence for an added worker effect whereas redistribution by the state within the tax and transfer system mitigates income losses substantially.

read publication
cover_economic-modelling.gif

Employment Effects of Introducing a Minimum Wage: The Case of Germany

Oliver Holtemöller Felix Pohle

in: Economic Modelling, forthcoming

Abstract

Income inequality has been a major concern of economic policy makers for several years. Can minimum wages help to mitigate inequality? In 2015, the German government introduced a nationwide statutory minimum wage to reduce income inequality by improving the labour income of low-wage employees. However, the employment effects of wage increases depend on time and region specific conditions and, hence, they cannot be known in advance. Because negative employment effects may offset the income gains for low-wage employees, it is important to evaluate minimum-wage policies empirically. We estimate the employment effects of the German minimum-wage introduction using panel regressions on the state-industry-level. We find a robust negative effect of the minimum wage on marginal and a robust positive effect on regular employment. In terms of the number of jobs, our results imply a negative overall effect. Hence, low-wage employees who are still employed are better off at the expense of those who have lost their jobs due to the minimum wage.

read publication
cover_journal-of-financial-stability.gif

Does Machine Learning Help us Predict Banking Crises?

Johannes Beutel Gregor von Schweinitz

in: Journal of Financial Stability, forthcoming

read publication
cover_review-of-accounting-studies.jpg

Investor Relations and IPO Performance

Salim Chahine Gonul Colak Iftekhar Hasan Mohamad Mazboudi

in: Review of Accounting Studies, forthcoming

read publication
cover_applied-economics.jpg

Foreign Bank Ownership and Income Inequality: Empirical Evidence

Manthos D. Delis Iftekhar Hasan Nikolaos Mylonidis

in: Applied Economics, forthcoming

read publication

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