Guiding Theme and Research Profile
Guided by its mission statement, the IWH places the understanding of the determinants of long term growth processes at the centre of the research agenda. Long term growth processes in Germany (East and West), in Europe and worldwide can only be understood in the context of the efficient (re-)allocation of resources, capital and labour, and productivity growth.
Therefore, the researchers at the institute examine the determinants of resource (re-)allocation, structural change, innovation, productivity growth, and macroeconomic dynamics and stability.
Research Agenda
One important socially relevant scientific challenge is to understand the interaction between the natural environment, financial system, labour markets, productivity growth and resource allocation, and to help design a financial system that is growth and stability-oriented.
The analysis of institutional change as a long-term adjustment process constitutes a core competency of the institute. There exist important path dependencies related to the transition from a centrally planned to a market economy that still impact economic development in East Germany and eastern Europe today.
Salient trends, such as instabilities in the financial system, the transition away from fossil fuels, high energy consumption and towards renewable energy sources, low productivity growth in industrial countries, and the transition to a services-oriented economy may necessitate comprehensive reforms of institutions and major changes in the allocation of resources across sectors.
The reallocation of labour and capital from unproductive to productive firms and from dirty to clean firms plays a significant role in overall economic growth. A central aspect of the Institute’s research agenda is therefore to analyse structural change and its significance for the real economy, the green transition, the measurement of productivity, and the role of the financial sector in financing innovation.
Society needs to understand better what the obstacles are that hinder the adoption of innovation and the entry of productive and the exit of unproductive and dirty firms. Hence, the institute aims to identify the inhibitors of innovation and structural change.
The overarching themes of this research agenda are bundled into three research clusters, each of which comprises several research groups.
Typical Research Questions
- What are the causes and consequences of macroeconomic fluctuations and instabilities, how can these be empirically identified, and what measures can be taken to ensure macroeconomic stability during convergence and integration processes?
- How do different institutional settings and their changes influence resource (re)allocation, in particular of human and real capital?
- What are the effects of financial crises on the real economy? How does the structure and regulation of the financial system affect the allocation of resources within economies and internationally?
Methodology
In terms of methodology, the research at the IWH combines theory and state-of-the-art empirical methods in order to identify causal relationships between policy decisions and economic outcomes.
For this evidence-based research, the IWH relies on a broad spectrum of empirical methods that range from dynamic macroeconomic models to microeconomic methods for identifying the effectiveness of economic policies.
The research structure at the Institute is designed to foster close interplay between micro- and macroeconomic research, as well as between financial economics and labour economics.
