ZEWnews November/December 2013

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1 Zentrum für Europäische Wirtschaftsforschung GmbH Centre for European Economic Research (ZEW) ZEWnews November/December 13 Research Resuts Conferences Pubications with M& A Report Who is Any Individua? Carte Suppiers Standing to Caim Damages in Antitrust Actions Private enforcement of competition aw has been gaining increasing importance wordwide. A key aim of European competition poicy is to enabe those harmed by cartes to pursue caims for damages. Indeed, appicabe ega provisions in the EU and US provide for any individua who has suffered carte damages the right to seek ega redress. Photo: istockphoto The scope for damage caims by carte suppiers is broader in the EU compared to the US, as a study by researchers of ZEW and MPI for Comparative and Internationa Private Law shows. osses based on three effects: First, carte members require fewer input goods from suppiers as a resut of agreements to raise prices or restrict production, eading to ower saes (direct quantity effect). Thus, in contrast to the customers who suffer osses from higher prices, suppiers are typicay harmed by ower demand for input goods. This changed demand situation generates two additiona effects that can harm a suppier: a cost effect and a price effect. Due to ower demand, suppiers adjust their prices, asking for a different price than that which coud be charged in a competitive market environment. In addition, the cost structure of the suppier changes, eading to different costs per unit of output. Depending on the suppier s cost and demand functions, these secondary effects can either mitigate or intensify the osses due to the direct quantity effect. The extent to which ega redress can be sought for these osses is naturay of centra importance to an affected suppier. Whie suppiers are generay denied the right to pursue damage caims in the US, under EU aw as we as in important EU Member States the view is being increasingy adopted that suppiers have a right to recover carte damages. As a resut of Courage v. Crehan, the scope of damages that the prohibition of cartes is to prevent has a much broader definition in the EU than in the US. Under EU aw, the right to caim damages does not require that the damages be suffered in the same market in which the carte has impropery impaired competition. According to the case aw by the European Court of Justice (ECJ), imits to the right to In This Issue However, past research and pubic debate have focused amost excusivey on caims by carte customers who have suffered harm from excessive prices. Whether and to what extent other affected parties particuary suppier companies can recover damages from a carte has been amost whoy negected, and remains unanswered in the EU competition aw regime. This issue is taken up by researchers at the Centre for European Economic Research and the Max Panck Institute for Comparative and Internationa Private Law in a recent comparative aw and economics study (ZEW Discussion Paper No ). From an economic perspective, carte suppiers may incur Who is Any Individua? Carte Suppiers Standing to Caim Damages in Antitrust Actions... 1 Europe s Stainess Stee Industry Needs Open Goba Markets for Key Raw Materias... 2 Integrating Immigrants Into the Labour Market Wage Subsidies Recommended... 3 Most Start-up Founders Look Mainy for Team Members with Simiar Backgrounds Q&A: Femae Start-ups in Germany... 5 Sinking CO2 Prices Weaken Emissions Trade, but Recovery Is in Sight for the Medium Term.. 6 Conference: The Rebound Effect of Energy Efficiency Improvements is no Threat... 8 Inside ZEW... 9 Facts and Figures Opinion... 12

2 2 ZEWnews November/December 13 RESEARCH FINDINGS caim damages are instead determined by the presence of a causa ink between the competition aw infringement and a particuar head of damage. In order to adhere to this requirement, Germany and the United Kingdom have abandoned important and ong-standing imitations on the right to recover carte damages. The wider scope for damage caims provided for under EU aw compared to the US can be traced to differences in the institutiona frameworks as we as in the goas that the right to caim damages caused by competition aw infringements is supposed to pursue in the EU. According to the resuts of the study, it woud appear that carte suppiers in the EU have a right to caim damages, as no genera restriction to the right to recovery appies. This position has aready been advanced in various quarters with a view to EU aw, athough remarks in this regard have typicay been quite brief. In Germany and the UK, cear comments on the issue have yet to be made. However, ega frameworks as we as case aw provide a soid foundation for suppier caims, or at east suggest that such a foundation exists. In a particuar case, however, it is often invariaby difficut to demonstrate a causa ink between a competition aw infringement and the damages ostensiby suffered by a suppier. Econometric estimation techniques are certain to pay an increasingy important roe in demonstrating such causa inks. As part of the interdiscipinary study detaied here, the authors deveoped an econometric estimation technique that reies on a modified residua demand mode. This method makes it possibe to empiricay quantify the three aforementioned effects responsibe for carte damages. Forian Smuda, smuda@zew.de Eckart Bueren, bueren@mpipriv.de Europe s Stainess Stee Industry Needs Open Goba Markets for Key Raw Materias In a recent ZEW report researchers assess goba export restrictions on the primary raw materias for stainess stee and discuss possibe courses of action for the EU. The report was commissioned by the stainess stee scrap trading company Oryx Stainess. Whie the EU is the word s second argest producer of stainess stee after China, it reies on foreign imports of nicke, chromium, and moybdenum. Stainess stee scrap is the ony component that exists in arge quantities domesticay. It makes up 50 per cent of the raw materias used for the production of stainess stee gobay and 60 per cent for production in Europe. ZEW examined the tendencies of different states to introduce export restrictions. Deveoped countries, whose production and trade currents are gobay inked, favour free trade in raw materias. Deveoping countries as we as nations on the road to industriaization rich in one Photo: Nooscapes/iStock The EU is the word s second argest producer of stainess stee. Stainess stee scrap is the ony component that exists in arge quantities domesticay. raw materia or more are more ikey to reguate exports. ZEW aso prepared a comprehensive dataset of export restrictions on the four primary raw materias for stainess stee production from 07 to 12 for more than 30 states. Proposas for More Sustainabe Use Furthermore ZEW proposed that the EU creates and reguary updates a database containing information about a export restrictions on reevant markets. According to ZEW, this wi hep increase transparency and sink transaction costs for raw materia importers. Another proposa was that the EU verifies whether its pubic investments in research and deveopment are sti suitabe and whether the recycing rates of raw materias can be increased. Both courses of action coud ead to a more sustainabe use of the principa components of stainess stee. For the short term, ZEW beieves that the EU shoud push for biatera trade agreements with important raw materia suppiers. For the ong term, mutiatera treaties such as the WTO is the best option for eiminating export restrictions and to secure free trade in raw materias. Professor Andreas Lösche, oesche@zew.de Frank Pothen, pothen@zew.de

3 ZEWnews November/December 13 3 RESEARCH FINDINGS Integrating Immigrants Into the Labour Market Wage Subsidies Recommended A recent ZEW meta-anaysis (ZEW Discussion Paper No ) examines which active abour market poicy measures are the best way of heping immigrants find empoyment. The researchers coect findings from studies performed in a huge variety of European countries. In many countries in Europe immigrants represent a disadvantaged group on the abour market. Typicay, they are overrepresented among the unempoyed and underrepresented among the empoyed. Immigrants in Sweden and Finand, in particuar, are disproportionatey affected by unempoyment. In Germany, too, there is a sizeabe gap between immigrants and the rest of the popuation: in 10 the unempoyment rate of native Germans was just under 7 per cent, whie the unempoyment rate for immigrants iving in Germany was over 12 per cent. Effect of Labour Market Poicy on Immigrants Uncear European countries use a variety of Active Labour Market Programmes (ALMPs) to foster immigrant integration on the abour market. In particuar, these incude training programmes, wage subsidies in the private sector, subsidized empoyment in the pubic sector, and job search assistance. Training programmes aim to improve the knowedge and skis that Photo: wdstock/istockpho The ZEW meta-anaysis shows that wage subsidies in the private sector have been quite effective at increasing the empoyment chances of immigrants in Europe. are important for assuming empoyment. Wage subsidies give companies incentives to provide jobs for ow-skied workers. Subsidized empoyment in the pubic sector offers temporary work designed to ease the transition to reguar empoyment. Job search assistance, usuay offered by a pubic empoyment agency, incudes counseing, monitoring of search effort and penaties for faiure to compy. Athough the effects of individua poicy measures on empoyment have been subject to increased empirica scrutiny, a cear picture has yet to emerge which measures hep abour market integration for immigrants and which do not. To sharpen this picture, the study provided a meta-anaysis of 33 studies examining the effect of ALMPs on immigrants in European countries where immigrants abour market integration is particuary important: Denmark, Germany, Finand, the Netherands, Norway, Sweden, and Switzerand. Positive Effects on Empoyment The meta-anaysis quantified the extent to which certain aspects of the studies reviewed infuence their resuts. The main objective was to gauge how different types of poicy measures affect immigrants empoyment chances. The ZEW meta-anaysis shows that ony wage subsidies can be confidenty recommended to poicymakers. Most of the studies reviewed found that wage subsidies in the private sector positivey impact immigrant empoyment. By contrast, studies of training programmes generay show no reiabe effects on empoyment. The same goes for job search assistance and subsidized empoyment in the pubic sector. The metaanaysis indicates that there is considerabe room for improvement when it comes to seecting abour market poicy measures for immigrants. A greater use of wage subsidies in the private sector coud increase the share of empoyed immigrants, though the costs for doing so wi be high. Sebastian Butschek, butschek@zew.de Dr. Thomas Water, water@zew.de ZEW Discussion Papers No Frauke Scheer: Finding Starting-Vaues for Maximum Likeihood Estimation of Vector STAR Modes. No Gunter Feste, Martin Würmseher, Christian Rammer, Eckhard Boes, Martin Beof: Modeing Production Cost Scenarios for Biofues and Fossi Fues in Europe. No Wofgang Franz: Die Arbeitsmarktanayse in der wirtschaftspoitischen Beratung des Sachverständigenrates. Ony avaiabe in German. No Caudia Ghisetti, Kaus Rennings: Environmenta Innovations and Profitabiity: How Does it Pay To Be Green?

4 4 ZEWnews November/December 13 RESEARCH FINDINGS Most Start-up Founders Look Mainy for Team Members with Simiar Backgrounds In a recent ZEW study (ZEW Discussion Paper No ) researchers investigate the composition of start-up teams using a comprehensive dataset of knowedge-based and non-knowedge-based firms. They anayse changes in team composition over the first three years of a company. According to a widey hed view in management research, diverse backgrounds in a start-up team support team dynamics and improve company as we as team performance. Management schoars predominanty advocate that start-up teams shoud consist of members with different rather than Photo: A. Pobitzer/digitastock the first three years. The deveopment of team composition has received ony itte attention in the iterature due to a ack of data. The ZEW anaysis is based on a dataset of a firms with more than one empoyee founded in Denmark in the year These on the whoe 1,614 firms are foowed from their estabishment unti Teams in young companies tend to show homogenous characteristics one reason coud be that they want to avoid confict. these characteristics have aready been given a ot of attention in the iterature. By using the prior wages of start-up members, an innovative parameter is appied that aso refects other characteristics of empoyees in young companies, such as work experience. Furthermore to assess staff composition, the authors simuate team heterogeneity in a situation where teams are assembed randomy. The teams observed in the study are randomy regrouped into new teams and the degree of heterogeneity in these random teams were then used as a reference vaue for the actua mix of characteristics. The findings show that teams in the first year are significanty more homogenous than randomy assembed reference teams. Moreover, teams become more heterogeneous over time, with start-ups hiring staff in the second and third years with characteristics that tend to differ from those of the staff in the start-up year. This increase of heterogeneity, however, is ower than if a company hired new empoyees at random. This hods both for knowedge-based and non-knowedgebased companies, though the teams in knowedge-based companies are somewhat more heterogeneous. The High Costs of Heterogeneity simiar backgrounds. Such heterogeneous team members are supposed to bring in a greater variety of perspectives and more creativity which in turn eads to better team performance. There are aso downsides connected with workforce heterogeneity ike confict or coordination costs which may make peope homophie, i. e. incined to bound with others with simiar characteristics. Observing the Composition of Start-ups In a recent ZEW study these oppositiona views are sought to be tested by examining the composition of start-up teams in the first year and their change in the year 01, thereby anaysing changes in staff composition. This is one aspect that has received ony itte attention in the iterature due to a ack of data. The reseachers differentiate between knowedge-based start-ups and nonknowedge-based start-ups. Knowedge based describes companies that are active in knowedge-intensive sectors ike pharmacy and teecommunications, or companies that have at east one founding member with a university degree. Specificay, the heterogeneity of the start-up personne with regard to education, age, and saary before starting the new company is investigated. Age and education are taken into account because Start-up teams, therefore, are reativey homogenous and remain reativey homogenous over time, even if their heterogeneity increases somewhat. Possibe expanations for this phenomenon are that the costs, for exampe higher confict potentia and higher coordination effort, exceed the benefits of heterogeneity, that peope tend to ook for team members who are ike themseves, or that they simpy do not know anyone with significanty different backgrounds than themseves. Whether this is good or bad for the companys performance requires further investigations. Dr. Bettina Müer, bettina.mueer@zew.de Professor Urich Kaiser, urich.kaiser@business.uzh.ch

5 ZEWnews November/December 13 5 Poitico-Economic Anaysis Q&A: Femae Start-ups in Germany Women Continue to Lag Behind as Entrepreneurs Start-ups are important for keeping economies innovative and competitive. Yet there is much potentia for more start-ups by women, who continue to be underrepresented among the sef-empoyed. ZEW researchers Dr. Sandra Gottschak and Dr. Michaea Niefert expain the features of femae start-up activity in Germany. Based on the data of Germany s microcensus, the number of femae sefempoyed individuas has increased constanty over the past years. The share of women among the sef-empoyed increased from 26 per cent in 1991 to 32 per cent in 11. Are women on course to catch up with mae company founders? Niefert: At first gance, this appears true. But a coser ook shows that the women who become sef-empoyed usuay don t have empoyees and their sefempoyment is often ony part time, sometimes suppemented by dependent empoyment. Ony into these specia forms of sef-empoyment have entered more women in the past ten years. By contrast, Dr. Michaea Niefert works at ZEW s Research Department of Industria Economics and Internationa Management. She studies start-ups and sma- to medium-sized businesses with a focus on the determinants of start-up activity and the performance of young companies. She speciaizes in start-ups by women, start-ups by the unempoyed, and spin-offs from existing companies. Michaea Niefert studied economics at the University of Mainz and Bieefed. She competed her doctora thesis in mobiity and housing choice in Juy 03. the number of femae-founded start-ups with empoyees and the number of women who became sef-empoyed fu time have hardy changed. Those who are sef-empoyed without empoyees or sef-empoyed part time are not ikey to have companies that make arge-scae investments and assume entrepreneuria risks. The majority of the entries into sef-empoyment recorded by the microcensus are not start-ups in the proper sense. This is different for the start-ups registered in the Mannheim Enterprise Pane (MUP) which is based on a narrower definition of company. According to these data from firms in Germany, the share of German companies started by women since 03 has even decined and amounted ony to 22 per cent in 10. Therefore, we can t speak of women catching up to men. How does in comparison the performance of companies that were founded by women measure up to those founded by men? Gottschak: By a performance metrics used in our anaysis, companies founded by women do worse on average. Empoyment growth, revenue, and profitabiity are Photo: ZEW ess, and the share of companies that shut down within the first ten years is higher. What s more, companies started by women undertake ess research and deveopment, and are hence ess innovative. In the past ten years, start-ups by men and start-ups by women have converged in certain respects. This mainy concerns the number of empoyees and empoyment growth at new companies. For the most part, this convergence can be attributed to the genera movement to more soo start-ups, and in which the number of companies founded by men without empoyees and without empoyee growth is arge. In other words, start-ups by men and start-ups by women have converged because the situation of companies founded by men has worsened on average. Why do you think are women performing worse than men? Gottschak: There are significant differences between the sexes with many of the observed characteristics of company founders and their companies. In comparison with mae founders, femae founders have a ower eve of education. This is astonishing because the number of empoyed women in Germany who have a university degree hardy differs from that of men. Moreover, femae founders have ess professiona experience, especiay as managers. Women mainy tend to start companies in sma teams and invest ess start capita. They are more ikey to start a company out of necessity, which is to say, due to a shortage of empoyment aternatives, whie men tend to pursue a specific business idea. Are women reay more ikey to start companies in specific sectors, and if so, which? Gottschak: The share of women startup founders is around per cent. It is above average in retai (26 30 per cent) and in consumer oriented service sectors (30 34 per cent), which is to say, in economic branches that are not technoogy intensive, ess innovative, and utimatey ess growth oriented. In the high-tech branches, by contrast, the share of start-ups by women is very ow. This is due of course to women s choice of profession. Women continue to be interested to a esser degree in technoogy educations and decide far ess than men for courses of study in engineering or computer science. Hence, the number of women who can gain a footing in new technoogy based industries which offer a arge growth potentia is sma.

6 6 ZEWnews November/December 13 Poitico-Economic Anaysis Dr. Sandra Gottschak works at ZEW s Research Department of Industria Economics and Internationa Management. She investigates how the human capita of company founders affects performance, the ikeihood of cosure and the deveopment of young companies. Her research aso focuses on anonymization methods for company data. She is head of the ZEW Research Data Centre (ZEW-FDZ) and is therefore responsibe for the administration of ZEW research data which are provided for externa scientists for research purposes. What does the deveopment you discuss mean for Germany s economy? Niefert: The number of start-ups in Germany has been decining since the end of the 1990s. In view of the arge importance that start-ups have for economic innovation and competitiveness, this is a probematic deveopment. The hope that women coud hep reverse the downward trend with more start-ups has yet to be fufied, as our studies have shown. In addition, the rate at which women start companies in technoogy oriented Photo: ZEW industries important for competitiveness continues to be ow. A hopefu sign comes from recent deveopments in the high-tech manufacturing sector. The number of companies started by women since 06 has increased markedy, with the share of women start-ups going from 11 to 15 per cent. This may be an indication that women are graduay penetrating the high-tech sector and are increasing their contribution to the economy s innovativeness. What kind of poicies shoud be introduced in your opinion in future to motivate women to start their own companies especiay in sectors that have been ess attractive so far? Niefert: One goa shoud be to increase the number of women who are quaified to start companies in technoogy oriented industries. Measures that encourage women to choose a technoogica profession or a MINT fied of study are on the right track. The extent to which poicy measures can activate the potentia of femae founders and persuade more women to found start-ups is uncear, however. There are a number of measures to promote and assist start-up founders (men and women both), starting aready at the university. But in many cases their effectivity is not concusive. Whether measures directed speciay to women have their intended effect is ikewise not certain. A comprehensive change in mentaity eading to a greater share of women in management positions and to the assumption of greater responsibiity by women woud surey aso have a major effect on start-up activity. Dr. Sandra Gottschak, gottschak@zew.de Dr. Michaea Niefert, niefert@zew.de Sinking CO2 Prices Weaken Emissions Trade, but Recovery Is in Sight for the Medium Term According to the KfW/ZEW CO2 Barometer 13 Carbon Edition, firms in Germany have made sharp downward corrections to their emission aowance price expectations. But they continue to regard the European Union Emissions Trading System as a viabe instrument in cimate poicy. The KfW/ZEW CO2 Barometer a cooperative project of KfW Bankengruppe and ZEW has been anaysing the European Union Emission Trading System (EU ETS) on an annua basis since 09. The study s objective is to monitor firm behaviour in carbon markets in order to reguary provide detaied information to poicymakers, businesses and the research community. For that purpose, a German firms reguated unter the EU ETS are invited to participate in the survey. On average, about 1 companies have responded. This artice expains the most important resuts of the 13 survey. In 12 a surpus of emission aowance exerted considerabe pressure on the price of European Emission Aowances (EUAs). In 11 the average price was per ton of CO2 (tco2); by 12 the price had faen to under 10 per tco2. The companies that responded to this year s survey indicate having made strong downward corrections to EUA price expectations on account of the current market. But they expect a weak recovery of emissions trading in the medium term and its continuation in the ong term (see Figure 1). By the end of the year, the surveyed companies expect an average EUA price of 6.62 per tco2 (adjusted for infation). This amounts to a decine of price expectations by around 50 per cent compared with the previous survey, which recorded an average expected price for the end of 12 of per tco2. What is more, the surveyed companies do not beieve that the EUA price wi recover much in the short term, with prices expected to stay under 10 per tco2. In the medium term, by contrast, companies see a weak recovery of EU ETS and a rise in emission aowance prices. They predict an average aowance price of per tco2 by the end of. Notaby, the

7 ZEWnews November/December 13 7 Poitico-Economic Anaysis 1 Price expectations for EUAs on the spot market (adjusted for infation) (Price in EUR per Ton CO2) Upper Confidence Interva (95 Per Cent) Lower Confidence Interva (95 Per Cent) Price Expectations infationadjusted December 13 December 14 December December 30 The 95% confidence interva defines the range that correcty predicts the mean vaue with 15% probabiity. Source: KfW/ZEW CO2 Barometer 13 Carbon Edition surveyed companies aso beieve that EU ETS stabiization and rising EUA prices wi continue in the ong term, with an average price of per tco2 forecast for the end of 30. Based on these resuts, it can be inferred that companies continue to see EU ETS as an important and effective instrument in European cimate protection poicy for the ong term. The resuts of the survey aso show, however, that EU ETS provides itte incentive for CO2 abatement, and there is sti much room for reducing CO2 emissions among the surveyed companies. The expected medium- to ong-range recovery 2 Reasons for measures to reduce CO2 energy costs (see Figure 2). Ony 3 per cent of surveyed companies said that they initiated CO2 abatement measures on account of costs through EU ETS. In agreement with the medium- and ong-term price expectations for emission aowances, 12 per cent of surveyed companies had aready invested in abatement measures to prepare themseves for future costs from the emissions trade. Looking back, it is possibe to see a posi tive trend in the number of abatement measures impemented. Ony 33 per cent of companies surveyed in 13 activey sought to prevent CO2 before the introduction of EU ETS in per cent of them said that they undertook CO2 prevention measures in the first trading period of EU ETS, between 05 and 07. In the second trading period, between 08 and 12, this appied to 64 per cent of a surveyed companies. The resuts of this year s survey show that there is sti significant potentia for Increased Trading Activity In comparison to the resuts of the KfW/ZEW CO2 Barometer 12, both the proportion of companies that participate in the carbon market and the treading frequency have increased. Two thirds of a surveyed companies stated they had been trading emission aowances or credits since February 12. This corresponds to an increase of amost 10 percentage points compared to the resuts of the 12 survey. Moreover, 33 per cent of the respondents traded emission aowances at east biannuay, which is an increase of approximatey 7 percentage points on the previous year. Concerning their trading strategy, the majority of a surveyed enterprises reported accumuating emission aowances for future use. Nevertheess, one third of a surveyed firms have not traded emission aowances since February 12. The resuts of the survey show, that there are two main reasons not to participate activey in the carbon market: a sufficient free aocation of emission aowances and in-house reguation to prevent specuation. 12 % 84% 78% Expectations of Rising Cost Burden of Future Emissions Trading Overa Efficiency in Production in CO2 prices coud increase CO2 prevention. Around 77 per cent of surveyed companies said that they had aready taken measures to abate CO2 emissions. But the resuts aso show that the reduction of CO2 emissions was rarey the primary aim of abatement measures. With 90 per cent of surveyed companies that had aready undertaken CO2 prevention measures, CO2 reduction was a secondary effect. The main reasons for CO2 prevention that the companies gave were more efficient production and reduced Reasons For CO 2 Reduction Reducing Energy and Raw Materia Costs Reduction of Costs that are Incurred Directy by the Purchase of Carbon Credits 3% Source: KfW/ZEW CO2 Barometer 13 Carbon Edition reducing CO2 emissions at the responding companies. Ony 38 per cent of companies said that they had informed themseves about the possibiities of CO2 reduction and the associated costs and advantages. 66 per cent indicated that they pan to impement CO2 abatement measures within the next five years. See the resuts of the KfW/ZEW CO2- Barometer 13 at: 2pane/aktue.pdf Caro Gaier, gaier@zew.de

8 8 ZEWnews November/December 13 Conferences Conference: The Rebound Effect of Energy Efficiency Improvements is no Threat Is the increase of energy efficiency an effective means to achieve energy and cimate poicy goas? Do energy efficiency improvements resut in increasing energy consumption and thus fai to bring about the expected energy savings? What are the causes of rebound effects, and how can we counteract such effects? These and severa more questions focusing on househods in Germany were answered in detai at the REBOUND conference at ZEW in October 13. REBOUND is a three-year project coordinated by ZEW which was funded by the German Federa Ministry of Education and Research (BMBF). The objective of the project is to expore the causes of rebound effects in househods and to contribute to a more efficient energy and cimate poicy in this area. Moreover, rebound effects are anaysed by taking into account socioogica and socio-psychoogica factors. During the conference at ZEW in Mannheim in autumn the resuts of a representative househod survey on rebound effects in residentia heating and ighting as we as in mobiity were presented. The resuts of the study show that the actua energy savings resuting from measures to increase energy efficiency Upcoming Events through changes in behaviour can be surprisingy ower than expected by engineers. One reason for this is that consumers have a tendency to use new, fue-efficient cars more often because they produce ower fue costs per kiometre than ess efficient cars. So when it comes to mobiity, the researchers in the REBOUND project assume rebound effects between and 70 per cent, which is at the top end of the spectrum of resuts found in the iterature. Another possibe source of rebound effects is a more intensive use of residentia heating foowing the improvement of the heating system s energy efficiency. According to the resuts of the REBOUND project, however, rebound effects concerning residentia heating are about five per cent, that is, at the ower end of the resuts presented in the iterature. For residentia ighting, the project study assumes rebound effects between Fourth SEEK Conference at ZEW in Mannheim on Pubic Finance and Income Distribution in Europe in Mid-May 14 ZEW is peased to announce the fourth conference of its internationa research programme Strengthening Efficiency and Competitiveness in the European Knowedge Economies (SEEK). The conference takes pace in Mannheim on May 15-16, 14. Entited Pubic Finance and Income Distribution in Europe, it wi bring together economists and poitica decision makers for debate on fisca poicy and pubic debt, income and weath inequaity in Europe, and the prospects for a European fisca union. Poicy keynote speakers at the conference wi be former German Federa Minister of Finance Hans Eiche and Vítor Gaspar, Portuguese Finance Minister unti 13. The deadine for submission is February 16, 14. For more information see: five and 8.5 per cent. In-depth research on the causes of rebound effects has not been conducted yet. Are rebound effects merey price and income effects, or are they attributabe to socioogica and socio-psychoogica factors ike norms or individua beiefs? In particuar socioogica and socio-psychoogica factors coud be good approaches to deveop measures to minimise rebound effects. Previous projects on sustainabe consumption have indicated that ifestye concepts are particuary proific approaches for anaysing socioogica and socio-psychoogica causes of specific sustainabe or unsustainabe consumption patterns. The research conducted within the REBOUND project, however, has unearthed no socio-psychoogica factors of significant expanatory power apart from famiiar socio-demographic variabes ike income and education. Market-Based Mechanisms Are Not Accepted by Society Another presentation informed about the resuts of a work package which used the Dephi method to acquire and evauate effective, efficient and sociay acceptabe measures to reduce rebound effects. Additionay, two one-day panes on the topics of mobiity and energy use in househods were hed, featuring about ten experts for each area. The experts were, for exampe, suppiers, producers and traders of energy, representatives of energy agencies, poiticians, and researchers. The panes discussed a combination of economic, socia and educationa instruments. The main resut of the conference, however, was rather pessimistic: Effective instruments ike market-based mechanisms are not accepted by society, whie the accepted ones, for exampe information measures, are not effective. Find more information at: Dr. Kaus Rennings, rennings@zew.de

9 ZEWnews November/December 13 9 Inside ZEW ZEW President Cemens Fuest Appointed to Advisory Board of Germany s Stabiity Counci ZEW President Prof. Dr. Cemens Fuest has been appointed to the advisory board of the German Stabiity Counci. The German Stabiity Counci monitors the budgetary management of German federa and state governments in order to identify impending budgetary emergencies and to initiate measures responding to emerging threats. The experts on the advisory board support the Stabiity Counci s work. For the next five years, Cemens Fuest wi be one of the six members of the advisory board. The board is responsibe for an expert assessment concerning compiance with the maxium structura deficit on the federa eve. His further tasks incude recommendations for measures to eiminate excessive budgetary deficits. Fudan University and ZEW Sign Cooperation Agreement ZEW and Fudan University in Shanghai have been ong-standing co-operation partners. Fudan University s President Prof. Yang Yuiang, PhD, and ZEW President Prof. Dr. Cemens Fuest signed an officia co-operation agreement at the visit of a Chinese deegation to ZEW. President Prof. Yang Yuiang, PhD, and ZEW President Prof. Dr. Cemens Fuest Have Common Pans. Photo: ZEW The objective of the agreement is to intensify the existing coaboration in common research areas, to co-operate in quaifying young researchers, and to strengthen knowedge transfer. At the signing ceremony, Prof. Dr, Cemens Fuest said: The co-operation agreement we have signed is a good foundation to buid bridges between ZEW and Fudan University. Co-operation in Many Research Fieds The goa is to intensify co-operation in particuar in the research fieds of internationa finance, environmenta and resource economics, industria economics, as we as competition and reguation. Prof. Yang Yuiang, PhD, emphasised the internationa tradition of his university, which has the highest number of foreign students of a Chinese universities. True to this tradition, I m convinced that the co-operation with ZEW wi resut in an exchange of ideas across discipines. Both partners wi benefit, Yang added. One of the outcomes of the aready existing coaboration is the China Economic Pane (CEP), a periodica survey of economic and financia data on China by ZEW and Fudan University, which was estabished in mid-13. New Research Group on Internationa Distribution and Redistribution Takes up Work The new Research Group Internationa Distribution and Redistribution took up work at the beginning of October 13 at ZEW. The Research Group offers fisca and socia poicy advice on the basis of empirica studies. The research focuses on three main areas. In the research area Tax and Transfer Poicy, the researchers examine the efficiency, distribution, and wefare effects of tax and benefits systems. Another focus is on the macroeconomic effects of reforms and reform proposas. Furthermore, the Research Group studies the incentive effects resuting from tax and benefits systems over the ife cyce. Researchers in the area Prospects for the European Monetary Union examine questions reated to European fisca integration. Researchers working in the area Distribution of Income and Weath focus on the empirica anaysis of socioeconomic inequaity as we as on the distribution of poverty and weath. The new Research Group is headed by Professor Andreas Peich. Aongside his new position at ZEW, Peich has been appointed professor for quantitative economics at the University of Mannheim. Andreas Peich came to ZEW from the Institute for the Study of Labor (IZA) in Bonn. His research focuses on empirica pubic finance as we as abour and wefare economics. His current research topics incude the effects of taxation on budgetary decisions and on the distribution of income, the incidence of different tax types, as we as the optima design of tax and benefits systems.

10 10 ZEWnews November/December 13 Facts and Figures Share of Experts in % Freight Voumes Continue to Rise in CEP Services Sector Germany Western Europe Eastern Europe J J J J J J J J J 01/13 02/13 03/13 01/13 02/13 03/13 01/13 02/13 03/13 Share of Firms in % Many ICT Service Providers Engaged in Research and Deveopment (R&D) '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 ' Rapidy Increasing Sighty Increasing Unchanged Sighty Faing J Sharpy Faing Sentiment Index No R&D Occasiona R&D Continuous R&D Source: ZEW Source: ZEW, Mannheim Innovation Pane The sector of courier, express and parce (CEP) services is continuousy growing for some time, according to the experts surveyed by ProgTrans and ZEW for the TransportmarktBarometer. The Sentiment Index has not faen beow the 50 percent threshod in the ast four years and currenty stands at the highest eve since mid-11. The majority of experts expect freight voumes to remain stabe ony for Eastern Europe traffic; for nationa and Western European traffic 57 per cent of experts expect growing or even significanty growing transport voumes. Dr. Martin Achtnicht, achtnicht@zew.de The majority of firms in the ICT services sector (software, data processing, hosting/web portas, teecommunication services) are engaged in research and deveopment (R&D). In 11, 42 per cent of firms conducted R&D on a continua basis, i.e. they had R&D staff or even an R&D department. In per cent of the surveyed firms, R&D activities took pace in response to specific situations. Deveoping new software soutions and integrating new technica equipment into service processes is an essentia R&D task in this sector. Dr. Christian Rammer, rammer@zew.de Media Service Providers Restore Positive Sentiment After a Long Dry Spe Very Different Price Deveopment in the Rea Estate Sector of OECD Countries 80 Business Expectations Sentiment Indicator Business Situation Quarter 3/12 Quarter 4/12 Quarter 1/13 The ZEW Economic Sentiment Indicator for the Information Economy has continued to improve in the third quarter of 13. It reaches a tota of 66.3 points. The companies assessment of their business situation in the third quarter as we as their business expecations for the fourth quarter are extremey positive. Reaching vaues of 65.7 points and 66.9 points, both sub-indicators gain stabiity on a high eve. The sentiment in the media industry aso brightened up. The Sentiment Indicator in the media industry reaches 53.8 points in the third quarter of 13. Danie Erdsiek, erdsiek@zew.de Quarter 2/13 Quarter 3/13 Source: ZEW Germany Great Britain USA Spain -24% -2% -6% 0% -9% 0% 8% 15% 55% 63% The boom-and-bust countries, incuding the United States and Spain, foowed a strong price increase unti 06, whie their rea estate suffered a considerabe oss in vaue between 08 and 12. Countries ike Great Britain aso reported a rise in housing prices in the period unti 08; however, rea estate prices did not coapse. Germany and Japan experienced no boom in the reviewed period. In these countries, annua price increases are comparaby ow, mosty in the singe-digit percentage range, over arge parts of the period. Lena Jaroszek, jaroszek@zew.de 23% 22% 35% Price deveopment in the rea estate sector in seected OECD countries in the period between 1996 and 12. Source: ZEW 26% 33% 82%

11 ZEWnews November/December Facts and Figures ZEW Financia Market Test November Nov 11 March 12 Ju 12 Nov 12 March 13 Ju 13 Nov 13 Baance of positive and negative assessments concerning economic deveopment in Germany. Source: ZEW Germany: Confidence Continues to Grow The ZEW Indicator of Economic Sentiment for Germany has increased by 1.8 points in November 13. The indicator now stands at a eve of 54.6 points (historica average: 24.1 points), its highest mark since October 09. Economic expectations for Germany have been hovering at a high eve for months. The sighty improved economic outook for the Eurozone might have contributed to this deveopment, says ZEW President Prof. Dr. Cemens Fuest. The assessment of the current economic situation for Germany has sighty worsened in November. The respective indicator has faen by 1.0 points and now stands at the 28.7 points-mark. Economic expectations for the Eurozone have sighty increased in November. The respective indicator has improved by 1.1 points to 60.2 points. Frieder Mokinski, mokinski@zew.de Nov 11 March 12 Ju 12 Nov 12 March 13 Ju 13 Nov 13 Baance of positive and negative assessments concerning economic deveopment in Switzerand. Source: ZEW, Credit Suisse Switzerand: Optimism Among Financia Experts In November 13 the index of economic expectations for Switzerand has increased by 6.7 points. The ZEW-CS-Indicator has reached the 31.6 points-mark, continuing its upwards trend observed in the past haf year. About 41.4 per cent of surveyed anaysts expect an improvement of Switzerand s economic deveopment over a six-month time horizon. The share of anaysts assessing the current economic situation in Switzerand to be good has decined by 12.0 percentage points in the current survey. Thus, the respective indicator has dropped to the 37.7 points-mark. The experts seem to beieve that the improved economic situation in the country has stabiised. The ZEW-CS Indicator is cacuated monthy by the Centre for European Economic Research (ZEW) in cooperation with Credit Suisse (CS). Lena Jaroszek, jaroszek@zew.de Nov 11 March 12 Ju 12 Nov 12 March 13 Ju 13 Nov 13 Baance of positive and negative assessments concerning economic deveopment in the CEE region. Source: ZEW CEE Region: Economic Expectations Improve In November 13 economic expectations for Centra and Eastern Europe incuding Turkey (CEE) have improved by 7.0 points. The ZEW-Erste Group Bank Economic Sentiment Indicator now stands at a eve of 41.6 points. Economic expectations for Poand and Sovakia have dispayed the highest increases by 14.1 points and 16.7 points respectivey. In contrast, economic sentiment for Croatia decreases by 14.7 points this is the strongest decine of the indicator among a CEE-countries. The ZEW-Erste Group Bank Economic Sentiment Indicator for Centra and Eastern Europe has been compied on a monthy basis together with further financia market data by the Centre for European Economic Research (ZEW) in Mannheim with the support of Erste Group Bank, Vienna, since 07. Zweteina Iiewa, iiewa@zew.de

12 12 ZEWnews November/December 13 Opinion Germany s Trade Surpus: A Cause for Concern? Germany has been repeatedy criticized for running arge trade surpuses. The European Commission is currenty examining whether these surpuses endanger the proper function of the European economic and monetary union. But how coud these trade surpuses represent a threat? Critics argue that Germany is impeding the economic recovery of the eurozone by repeatedy caing for reforms in other nations whie faiing to make its own contribution to resoving the crisis. Highy indebted EU nations have massivey reduced their imports, thus shrinking their trade deficits, it is said, yet Germany continues to run high trade surpuses. Accordingy, there have been numerous cas for Germany to stimuate its domestic demand through greater pubic-sector investment and higher wages. It is argued that woud ead Germany to import more and export ess, thus heping to stabiize the economies of Europe s crisis-racked nations. But is this criticism of Germany justified? Coser examination reveas that it is not very convincing. First, it is by no means correct that Germany has sat on the sideines during the crisis, idy etting others undertake efforts to adjust. Baance of trade data confirm this fact: Whie Germany s trade surpus has remained arge in recent years in 07 it measured 195 biion euros, and in 12 some 188 biion euros the German export economy has undergone considerabe restructuring since 07. Germany s trade surpus vis-à-vis other EU states decined sharpy between 07 and 12, from 173 biion euros to 114 biion euros. In 07, neary 65 per cent of German exports went to other EU countries this figure has faen to 57 per cent over the ast five years. At the same time, the percentage of goods imported by Germany from EU nations has hardy faen. Thus, Germany has ceary reduced its export surpuses in inner-european trade, thereby heping to stabiize demand in the EU countries particuary impacted by crisis. One coud argue that this adjustment has been insufficient. But who shoud determine the eve of domestic demand that is appropriate for Germany? Europe is not a centray panned economy. Second, German trade surpuses are not the resut of a deiberate economic-poicy strategy. Wage restraint in Germany over the past decade has often been criticized as a form of export subsidy. But this poicy was necessary to reduce the extremey high unempoyment rates that prevaied at the turn of the century. Wage growth is now faster. Furthermore, wages in Germany are predominanty determined by coective bargaining between unions and empoyer s associations, not by egisators. Third, a poicy of greater domestic investment to counter trade surpuses woud be fooish. Investments shoud be made when the expected returns advise it, and not on the basis of baance of trade data. Fourth, it is often negected that for a country strongy impacted by demographic aging, it is an extremey sensibe course of action to reduce pubic debt and invest capita abroad. German export surpuses are a refection of this foreign investment. This touches upon an important point. The investment of retirement savings abroad is ony a good idea if the investments are sound. In the decade foowing the introduction of the euro, however, a great dea of money exported by Germany was poory invested. The baooning of pubic and private debts in the eurozone s periphery financed in part by German investors was often used to finance consumption or buid houses that nobody needed. Now, the money can t be repaid, necessitating muti-biion euro baiouts to prevent the insovency of governments and banks. Utimatey, German taxpayers have been footing the bi for monies owed to German investors by crisis-racked countries. From an economic perspective, this export strategy is highy irrationa. But this does not mean that Germany s export orientation needs to be reduced. What is needed instead is reguatory reform to banks and financia markets in order to prevent excessive indebtedness and encourage sound capita investment. If the EU s examination of German export surpuses eads to this insight, then it wi have been worthwhie. ZEWnews Engish edition pubished quartery Pubisher: Centre for European Economic Research (ZEW) Mannheim, L 7, Mannheim P.O. Box Mannheim Germany Internet: President: Prof. Dr. Cemens Fuest Business and Administration Director: Thomas Koh Editors: Eisa Jendrusch, Phone +49/621/ , Teefax +49/621/ , E-mai jendrusch@zew.de Gunter Grittmann, Phone +49/621/ , Teefax +49/621/ , E-Mai grittmann@zew.de Reprint and further distribution: ony with mention of reference and sending of a voucher copy Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW), Mannheim, 13