Economic Effects of the Halle Institute for Economic Research
Ulrich Blum
Wirtschaft im Wandel,
No. 10,
2008
Abstract
The most important approach to assess the scholarly performance of an institute is to evaluate its academic output. Economic research institutes such as the Halle Institute for Economic Research (IWH) furthermore are targeted at providing policy advice to public authorities. This adds an additional criterion, the ability to impact policy discussions in Germany and beyond.
A rarely discussed issue is the effect of an institute on the local economy. The IWH is located in a region of East Germany that is still catching up economically. Transformation problems are still very visible. In such an economic environment, the expenditures of an institute play an important role in stabilizing local demand. The analysis shows, by using input-output-methods, that the most important factor for the local economy is the demand stemming from wages earned by the employees of the institute. Especially the local area, where most of the staff lives, heavily benefits from this effect. Expenditures of about 4.6 million Euros which include the salaries of the staff of about 70 persons generates sufficient demand in the area to guarantee employment for another 35 persons. In addition, as crowding out of activities by additional demand is presently not an issue in East Germany, the taxes generated account for a considerable part of the budget.
Read article
Firm Density in East Germany: Findings from the Business Register
Gerhard Heimpold
Wirtschaft im Wandel,
No. 10,
2008
Abstract
The contribution focuses on the business density in East Germany in comparison with West Germany. For the purpose of the investigation, a new information source was used – the so-called Business Register. Business density in East Germany is of relevance for two reasons: First, when the wall came down in 1989, the East German economy suffered from the lack of private firms. Second, after 2000, a gap in terms of work places is still existent. The empirical data on business density in East Germany do not reveal an unequivocal picture. Measuring business density by comparing the number of firms with the respective number of population reveals a gap in terms of the number of businesses per 10 000 inhabitants in East Germany. The gap is above average with respect to firms in the manufacturing sector, and it is particularly high regarding larger manufacturing firms. Measuring the business density as a quota of the number of firms and the volume of Gross Domestic Product (GDP) reveals a reverse picture: The business density in relation to GDP is on average higher in comparison with the respective value in West Germany. Maybe, the size of the East German market sets limits regarding the number of firms which may act there. However, the size of the domestic market is not so relevant for the firms belonging to the manufacturing sector and to the business-related services since they are expanding to a large extent due to their export activities. Though from the manufacturing sector, relativly positive development perspectives can be expected, the number of large firms per 10 000 inhabitants is relatively low in comparison with West Germany. Public support for strengthening the business landscape in the East German manufacturing sector remains on the agenda of economic policy in Germany.
Read article
Long-term Effects of Business Incubators: What Happens to Incubated Firms after they Have Graduated from the BIs?
Michael Schwartz
Wirtschaft im Wandel,
No. 8,
2008
Abstract
Many cities and municipalities devote considerable public resources to the establishment and operation of business incubators (BIs) to promote the survivability and the positive development of newly founded firms. In the context of incubator evaluations, survival is one of the most important performance indicators, and survival rates of incubated firms are frequently communicated to the public by local authorities to demonstrate the success of those policy initiatives. However, in most cases, these data refers to the initial incubation period. Little is known about survival or exit dynamics of incubated firms after they have graduated from the BIs. On the basis of a comprehensive research project concerned with the development of graduate firms from incubators in Dresden, Halle (Saale), Jena, Neubrandenburg and Rostock, this article not only investigates how many firms survive after leaving the incubator facilities, but also investigates if graduation causes an immediate negative effect on subsequent survivability. The results show that about one third of all graduate firms fail after leaving the incubator. Furthermore, it can be found that graduate firms from the BIs in Halle (Saale) and Neubrandenburg face a relatively high risk of business closure especially in the first years after the completion of the incubation period.
Read article
Wirtschaftspolitische Beratung im Zeichen der Transformation: das Institut für Wirtschaftsforschung Halle
Ulrich Blum, Martin T. W. Rosenfeld
Zeitschrift für Politikberatung,
2008
Abstract
The paper analyzes the role of scientific policy advice in modern democratic societies in general and the role of the Halle Institute for Economic Research as one of the major German economic research institutes in particular. It shows that public funded institutions must be politically independent in order to turn theory and evidence based knowledge into political advice. Typical communication channels are contract research and public hearings as well as publications in economic policy journals, a frequent presence in other print media, radio, television and internet.
The Halle Institute for Economic Research focuses on macroeconomic analyses and forecasting. In addition it scrutinizes structural change and transformation processes from a regional, innovation system, competition and urban perspective.
Read article
Business Cycle Forecast, Summer 2008: Price Hikes and Financial Crisis Cloud Growth Prospects
Wirtschaft im Wandel,
No. 7,
2008
Abstract
In the summer of 2008 the turmoil on financial markets and that on the markets for energy dim the prospects for the world economy. The acceleration of the oil price hike during the first half of the year has led to an increase in expected inflation and to higher interest rates on capital markets, while stock prices are going down. At the same time, the financial crisis is far from over, and banks in the US and in Western Europe continue in their efforts to consolidate their balance sheets. Thus, the expansion of credit supply will be scarcer in the next quarters. All this means that demand will slow in the developed economies during the next quarters. However, the massive fiscal stimulus will help the US economy to stabilize, and the world economy still benefits from the high growth dynamics in the emerging markets economies. All in all, the developed economies will not reach their potential growth rate before the second half of 2009. In Germany, the upswing comes to a temporary halt during summer of this year. Slowing foreign demand and the oil price hike induce firms to postpone investments, and private consumption, the soft spot of the upswing in Germany, is still sluggish due to high inflation rates that impair purchasing power. For the end of 2008, chances are good that growth in Germany accelerates again, because German exporters are still penetrating emerging markets as competitiveness does not diminish. All in all, the German economy will grow by 2.3% in 2008 (mainly due to the very high dynamics at the beginning of the year) and by 1.3% in 2009. A main risk of this forecast is that monetary policy fails in easing the high inflationary pressures. As to fiscal policy, efforts to reach sustainable public finances should not weaken.
Read article
A Minimum Wage of 7.50 Euro per Hour Does Particularly Affect Jobs in Business Related Services
Hans-Ulrich Brautzsch, Birgit Schultz
Wirtschaft im Wandel,
No. 3,
2008
Abstract
In the present public debate on the implementation of a minimum wage, different proposals concerning its design and level are discussed. Often, a minimum wage of 7.50 euro per hour is mentioned. Thereby, it is widely unknown how many employees do earn less than 7.50 euro per hour in different branches. Their jobs could be affected by the introduction of a minimum wage. By means of data of the German Socio-Economic Panels Study, it can be shown that the shares of the low-income earners are considerably high in some branches. Especially in Eastern Germany, in branches like retail trades as well as business related services many employees earn less than 7.50 euro per hour. Wage increases on the demanded minimum level would probably cause employment losses in these labour-intensive branches.
Read article
On the Economics of Ex-Post Transfers in a Federal State: A Mechanism Design Approach
Martin Altemeyer-Bartscher, T. Kuhn
WWDP, 95,
No. 95,
2008
Abstract
As a common feature in many federal states grants-in aid are payed to jurisdictions ex post, i.e. after local policy measures have chosen. We show that the central government cannot offer grants ex ante in a federal states with informational asymmetries as well as inter-temporal commitment problems. Local governments’ incentives to provide public goods are distorted if they rely on federal grants-in-aid offered ex post. Furthermore it becomes obvious that local governments are apt to substitute tax revenue for higher grants-in-aid if relevant local data are unobservable for the central government. To which extend ex post transfers mitigate local governments’ incentives crucially depends on the information structure predominant in the federation.
Read article
Inventory and analysis of national public policies that stimulate research in biotechnology, its exploitation and commercialisation by industry in Europe in the period 2002–2005.
C. Enzing, A. van der Guissen, Sander van der Molen
Luxembourg: Office for Official Publications of the European Communities,
2007
Abstract
Read article
Inventory and analysis of national public policies that stimulate biotechnology research, its exploitation and commercialisation by industry in Europe in the period 2002–2005: Final Report
Inventory and analysis of national public policies that stimulate research in biotechnology, its exploitation and commercialisation by industry in Europe in the period 2002–2005,
2007
Abstract
Read article
The German Upswing Takes a Break
Wirtschaft im Wandel,
2. Sonderausgabe
2007
Abstract
The world economy continues to expand healthily, but risks have increased during summer. The crisis of the housing sector in the US has deepened: A revaluation of mortgage backed assets has triggered turbulences on global financial markets. The institutes expect that financial markets will calm down during the coming months, but that the downswing in the US will slow the pace of the world economy. The economy in the euro area will, in addition, be dampened by the appreciation of the euro. The German economy is, in spite of a restrictive fiscal policy, in a robust upswing. Because wage setting and inflation continues to be moderate, there will be no need for a restrictive monetary policy. Thus the German economy will, due to slower demand from the US and higher costs of financing, lose momentum, but chances are good that the upswing will only take a break. In the coming year private consumption is expected to be the main contributor to growth, because wage incomes will expand strongly. Unemployment will continue to shrink, albeit at a smaller rate than during 2007. Fiscal policy will no longer be restrictive. Economic policy has improved the conditions for growth in Germany; there is, however, still much to do. Public finances have to be consolidated further, but at the same time, public investment has to be strengthened. This can be achieved if public consumptive expenditure growth is limited. The institutes suggest to increase public expenditure by 2% per annum over the cycle in nominal terms; this is, by less than by the trend growth rate of nominal GDP.
The institutes advise against a reversal of the recent labour market reforms. Instead, incentives for taking up jobs should be increased further.
Read article