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IW Newsletter: Brussels Briefing

7. July 2022
Dear Reader,

the summer break is near, however, it doesn’t necessarily feel like it – with all the large files, big decisions and numerous meetings still filling up desks and agendas.

This is also reflected in the German Economic Institute’s publications. Take trade policy, for example: a new trade agreement between the EU and New Zealand has been agreed, after a rather long-ish period of stagnation in this area, which has inspired our Director, Prof Michael Hüther and researcher Matthias Diermeier to assess how current megatrends shape the pattern of international trade, but also of capital flows and technology diffusion. It’s an interesting read about how deglobalisation, digitalisation, decarbonisation, and demographic change leave their mark on the global economy. This analysis is complemented with a report by senior IW economist Jürgen Matthes. He produced an inventory of the mutual dependencies in trade between the EU and Germany on the one hand and China and Russia on the other.

The EU’s attempt of tackling this situation is to become more “strategically autonomous”, not least by attracting and subsidizing semiconductor production. How this is penning out, describe our economists Hubertus Bardt, Klaus-Heiner Röhl and Christian Rusche, when looking at the EU’s dependency on oversea producers for microchips. And their assessment is seconded by another study on the importance of the data economy for Europe’s digital strategic autonomy by IW researchers Jan Büchel and Barbara Engels.

Additionally, disrupted production has quite an impact on the German economy, as our researchers Manual Fritsch and Christoph Schröder demonstrate in their report on producer price hikes over the past two years. All of this means, that companies and their employees are under enormous pressure to change and adapt. IW colleagues Annette Dietz, Andreas Hammermann and Oliver Stettes provide a look behind the scenes of upheaval and change and businesses in the transformation process. If this topic interests you, take a closer look at the pharmaceutical sector; our researchers Jasmina Kirchhoff, Lydia Malin and Simon Schumacher have analysed its need for skilled labour in an era of digital transformation.  

The transformation calls for investments, by both, public and private sources. For several years however, Germany preferred austerity. What the fiscal and economic effects of local austerity were, is a fascinating read by our economist Melinda Fremerey. Other EU governments, e.g. Ireland or the Netherlands, took a somewhat different route; they wanted to strengthen business location, specifically through generous tax expenditures for businesses. Our researchers Martin Beznoska and Ruth Schüler looked at OECD numbers, trying to gauge the effectiveness of such tax concessions.

Nowadays, EU governments have committed to invest in the “Green Deal”, i.e. sustainability and digitalisation measures. It turns out, however, that defining what counts as green or sustainable is not as straightforward as one might think. Our researchers Sarah Fluchs, Adriana Neligan and Finn Arnd Wendland propose some documentation and definition principles for climate investments, to effectively document contributions to climate protection in all economic sectors, as opposed to the current plethora of different national and international terminologies, documentation principles and methods.  

The changes linked to the Green Deal and twin transition have of course an impact on society as a whole. Our economist Björn Kauder has tried to see if there is a correlation between voting behaviour and the geographical penetration of family businesses in Germany. It’s quite fascinating to put the maps of voting results and those of family business distribution in Germany next to each other. It’s also interesting to then read this analysis on anti-immigration sentiments, populist radical right parties and welfare state redistribution programmes, by our researchers Matthias Diermeier and Judith Niehues. But where do we really stand, regarding inequality and unemployment? Michael Hüther and Judith Niehues have analysed perception and reality in their publication on the current economic and social developments.

Wishing you happy reading,
Sandra Parthie

Studies

Should the State Pension Scheme Take Different Socio-demographic Backgrounds into Account?
IW-Trends No. 2 | 6. July 2022
Jochen Pimpertz
While German law stipulates a standard retirement age for all members of the public pension scheme, empirical studies have ...

How current megatrends shape the patters of international trade,  capital flows and technology diffusion
External Publication | 4. July 2022
Michael Hüther / Matthias Diermeier
Deglobalisation, digitalisation, decarbonisation, and demographic change have already left their mark on the global economy. ...

The impact of disrupted production on producer prices in Germany
IW-Trends No. 2 | 4. July 2022
Manuel Fritsch / Christoph Schröder
From 2020 to 2021 the producer prices of manufactured goods in Germany increased by 6 per cent. However, price hikes ...

The Importance of the Data  Economy for Europe’s Digital  Strategic Autonomy
External Publication | 4. July 2022
Jan Büchel / Barbara Engels
European companies need to have the ability to store, process, use, and share data securely and autonomously, for example by ...

Do Family Businesses Shape Political Voting Behaviour in Germany?
IW-Trends No. 3 | 1. July 2022
Björn Kauder
In recent years family businesses have become an object of research in their own right. Indeed, it has been shown that, far ...

The Need for Skilled Labour in an Era of Digital Transformation
IW-Trends No. 2 | 24. June 2022
Jasmina Kirchhoff / Lydia Malin / Simon Schumacher
The shortage of skilled workers is increasingly confronting companies in Germany with major challenges. In view of the ...

Subsidizing Semiconductor Production for a Strategically Autonomous European Union?
External Publication | 21. June 2022
Hubertus Bardt / Klaus-Heiner Röhl / Christian Rusche
The COVID-19 pandemic has highlighted the vulnerability of international supply chains and the dependency of the economy of ...

Fiscal and Economic Effects of Local Austerity
External Publication | 20. June 2022
Melinda Fremerey
We study the consequences of a large-scale austerity program targeting financially-constrained municipalities in Germany. For ...

a program specific analysis of welfare preferences
External Publication | 17. June 2022
Matthias Diermeier / Judith Niehues
The literature on immigration and the welfare state describes a trade-off between immigration and welfare support. We argue ...

Mutual dependence in trade between China, the EU and Germany
IW-Report No. 35 | 13. June 2022
Jürgen Matthes
An inventory of the mutual dependencies in foreign trade between the EU and Germany on the one hand and China and Russia on ...

Tax concessions in OECD countries
IW-Report No. 34 | 13. June 2022
Martin Beznoska / Ruth Maria Schüler
The Global Tax Expenditures Database (https://gted.net/) collects national reports on tax expenditures for 101 countries for ...

Businesses in the transformation process
IW-Report No. 33 | 10. June 2022
Annette Dietz / Andrea Hammermann / Oliver Stettes
The pressure on companies and their employees to change and adapt is enormous against the background of megatrends such as ...

Inequality and Unemployment in Germany
External Publication | 8. June 2022
Michael Hüther / Judith Niehues
Data for the time before the corona pandemic reveal a largely positive picture of the economic and social development in ...

Ukraine as a candidate for EU membership?
IW-Report No. 32 | 7. June 2022
Melinda Fremerey
The European Commission is currently evaluating Ukraine's application for an EU-membership. A fast-track procedure for ...

Definitions and Documentation Principles
IW-Trends No. 2 | 30. May 2022
Sarah Fluchs / Adriana Neligan / Finn Arnd Wendland
Achieving climate neutrality requires investment in technologies which protect the climate from global warming and ...

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