12.03.2020 • 4/2020
Global economy under the spell of the coronavirus epidemic
The epidemic is obstructing the economic recovery in Germany. Foreign demand is falling, private households forgo domestic consumption if it comes with infection risk, and investments are postponed. Assuming that the spread of the disease can be contained in short time, GDP growth in 2020 is expected to be 0.6% according to IWH spring economic forecast. Growth in East Germany is expected to be 0.9% and thus higher than in West Germany. If the number of new infections cannot be decreased in short time, we expect a recession in Germany.
Oliver Holtemöller
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Labor Market Power and the Distorting Effects of International Trade
Matthias Mertens
International Journal of Industrial Organization,
January
2020
Abstract
This article examines how final product trade with China shapes and interacts with labor market imperfections that create market power in labor markets and prevent an efficient market outcome. I develop a framework for measuring such labor market power distortions in monetary terms and document large degrees of these distortions in Germany's manufacturing sector. Import competition only exerts labor market disciplining effects if firms, rather than employees, possess labor market power. Otherwise, increasing export demand and import competition both fortify existing distortions, which decreases labor market efficiency. This widens the gap between potential and realized output and thus diminishes classical gains from trade.
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Sinkendes Potenzialwachstum in Deutschland, beschleunigter Braunkohleausstieg und Klimapaket: Finanzpolitische Konsequenzen für die Jahre bis 2024
Andrej Drygalla, Katja Heinisch, Oliver Holtemöller, Axel Lindner, Christoph Schult, Matthias Wieschemeyer, Götz Zeddies
Konjunktur aktuell,
No. 4,
2019
Abstract
Nach der Mittelfristprojektion des IWH wird das Bruttoinlandsprodukt in Deutschland in den Jahren bis 2024 preisbereinigt um durchschnittlich 1% wachsen; das nominale Bruttoinlandsprodukt wird um durchschnittlich 2¾% zunehmen. Die Durchschnittswerte verschleiern die Tatsache, dass das Wachstum gegen Ende des Projektionszeitraums aufgrund der dann rückläufigen Erwerbsbevölkerung spürbar zurückgehen wird. Dies wird sich auch bei den Staatseinnahmen niederschlagen. Allerdings wird die Bevölkerung nicht regional gleichverteilt zurückgehen. Strukturschwache Regionen dürften stärker betroffen sein. Die regionalen Effekte auf die Staatseinnahmen werden zwar durch Umverteilungsmechanismen abgefedert, aber nicht völlig ausgeglichen. Regionen mit schrumpfender Erwerbsbevölkerung müssen sich auf einen sinkenden finanziellen Spielraum einstellen. Der beschleunigte Braunkohleausstieg wird diesen Prozess verstärken, das Klimapaket der Bundesregierung hat hingegen vergleichsweise geringe Auswirkungen auf die öffentlichen Finanzen.
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Private Debt, Public Debt, and Capital Misallocation
Behzod Alimov
IWH-CompNet Discussion Papers,
No. 7,
2019
Abstract
Does finance facilitate efficient allocation of resources? Our aim in this paper is to find out whether increases in private and public indebtedness affect capital misallocation, which is measured as the dispersion in the return to capital across firms in different industries. For this, we use a novel dataset containing industrylevel data for 18 European countries and control for different macroeconomic indicators as potential determinants of capital misallocation. We exploit the within-country variation across industries in such indicators as external finance dependence, technological intensity, credit constraints and competitive structure, and find that private debt accumulation disproportionately increases capital misallocation in industries with higher financial dependence, higher R&D intensity, a larger share of credit-constrained firms and a lower level of competition. On the other hand, we fail to find any significant and robust effect of public debt on capital misallocation within our country-sector pairs. We believe the distortionary effects of private debt found in our analysis needs a deeper theoretical investigation.
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19.09.2019 • 19/2019
Long-term effects of privatisation in eastern Germany: award-winning US economist begins large-scale research project at the IWH
It is one of the most prestigious awards in the German scientific community: the Max Planck-Humboldt Research Award 2019 endowed with €1.5 million goes to Ufuk Akcigit, Professor of Economics at the University of Chicago. At the Halle Institute for Economic Research (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.
Reint E. Gropp
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05.09.2019 • 18/2019
Downturn in Germany continues
Trade disputes are causing international trade in goods to decline this year. The manufacturing industry in Germany is particularly affected by this. However, a robust labour market is supporting the economy. According to IWH autumn economic forecast, German gross domestic product (GDP) will increase by 0.5% in 2019. At 1%, output growth in East Germany is likely to be significantly higher than in West Germany.
Oliver Holtemöller
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East Germany Three Decades After the Wall Came Down: What has Been Achieved and What Should Economic Policy Do?
Reint E. Gropp, Gerhard Heimpold
Wirtschaftsdienst,
No. 7,
2019
Abstract
The persistent difference in productivity between East and West Germany not only results from the relative absence of large firms based in the East as many believe. Companies of all sizes exhibit an East-West productivity gap. The gap is larger in urban regions. Scarcity of skilled labour has emerged as the new barrier to business development. In order to boost productivity, economic policy should avoid additional subsidies that are conditional on creating jobs. Additionally, the potential of East German urban areas should be better explored. Mitigating the shortage in qualified workers requires in-migration of skilled labour from abroad, supported by an open mindset and environment.
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13.06.2019 • 12/2019
Weak foreign demand – economic downturn in Germany
In the summer of 2019, uncertainty due to ongoing trade disputes weighs on the global economy. The export-oriented German economy is particularly affected. According to IWH summer economic forecast, gross domestic product is expected to increase by only 0.5% in 2019; the forecast for East Germany is 0.8%. The German labour market remains largely robust despite the economic downturn.
Oliver Holtemöller
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04.03.2019 • 6/2019
New IWH publication takes stock: “United country – three decades after the Wall came down”
How is Germany’s economy faring 30 years after the fall of the Berlin Wall? A new publication by the Halle Institute for Economic Research (IWH) uses illustrative maps and graphs to show how the Federal Republic has developed compared to other countries and how economic unification has progressed. The publication presents many new findings, including on productivity differences between east and west, urban and rural development, as well as the availability of skilled labour.
Gerhard Heimpold
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11.02.2019 • 3/2019
No-deal Brexit would hit the German labour market particularly hard
The United Kingdom leaving the European Union without a deal would have consequences for international trade and labour markets in many countries, including outside Europe. Calculations by the Halle Institute for Economic Research (IWH) indicate: More than 600,000 jobs may be affected worldwide, but nowhere as many as in Germany.
Oliver Holtemöller
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