Press Releases

Current and older Press Releases of DIW Berlin
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14 May 2014

Distributional Effects of Increasing the Insurance Periods Recognized for Bringing Up Children

The planned increase of the insurance periods recognized for bringing up children (Mütterrente) will increase the pension contribution rate by an average of 0.3 percentage points and reduce the gross pension level by an average of 0.4 percentage points by 2018. However, since government subsidies to the pension system are to be gradually increased from 2019, the longer-term impact on contribution rates and pension levels will be dampened, possibly at the cost of an increase of general taxes. Relative to net household income, the Mütterrente will primarily benefit low- and middle-income pensioner households, providing they have children born before 1992. From this perspective, the reform appears progressive. However, pensioners on a low income will only benefit if they are not claiming the basic minimum pension or, as a result of the Mütterrente - less than 30 euros per month per child - no longer qualify for the basic minimum pension. Pensioners who continue to claim the minimum pension will not benefit. This affects approximately three percent of women over the age of 65. At the same time, pensioners with higher incomes will be able to take full advantage of the reform. The bottom line is that those currently paying pension contributions and pensioners who do not have children born before 1992 will have to bear the cost.

7 May 2014

Work-Retirement Transition Pathways: Reforms Have Major Impact

Germany's draft bill to improve the benefits provided under the statutory pension insurance scheme (Gesetz über Leistungsverbesserungen in der gesetzlichen Rentenversicherungen) will entitle, in particular, those who have contributed for many years (at least 45) to retire early on a full pension (without any reductions to their pension payments) at the age of 63. The proposed reform is in stark contrast to the pension policies of past decades, even though the German government maintains it has no intention of changing course and still plans to pursue its objective of raising the retirement age. It is not currently possible to predict the effects of a statutory retirement age of 63. What is certain, however, is that statutory work-pension transition options and labor market policy framework conditions will have a significant impact on when people make the transition from working life to retirement. The German Institute for Economic Research (DIW Berlin) analyzed the impact of pension reforms over the last 20 years on the work-retirement transition of those born between 1932 and 1947. The study analyzed the retirement dynamic between 1990 and 2012 based on representative data from the German Socio-Economic Panel (SOEP). While official German Pension Insurance statistics primarily provide information on retirement age and type of pension, SOEP allows detailed analyses of developments in the phase leading up to retirement. A cluster analysis was used to identify typical work-retirement transition pathways and to examine the impact of labor market and pension policy framework conditions on the relative significance of these pathways in a comparison of cohorts. A further analysis was conducted to determine how the phase leading up to retirement changes between the ages of 58 and 65 in the cohort comparison. There are typically five pathways that characterize the work-retirement transition: in employment until statutory retirement age, in employment until early retirement, inactivity prior to retirement, unemployment prior to retirement, and early retirement or reduced earnings capacity pension. The work-retirement transition behavior of eastern and western Germans differs significantly. Findings clearly show that when options for early retirement exist, they are also used.

30 April 2014

Quality of Day Care Center Affects Children's Health

Previous studies on the impact of day care center attendance on child development have focused on quantitative aspects (e. g., capacity of the center). Yet the quality of a day care center is also relevant and is increasingly being discussed in the context of day care expansion. The discussion is often limited, however, to improving children?s skills and rarely addresses their health, although this is a key factor in their age-appropriate development. A study by DIW Berlin using data from the Socio-Economic Panel Study (SOEP) and official child and youth services data (KJH-Statistik) shows that regional differences in the quality of day care centers affect the development of children?s health. Preschool children attending a day care center with a high child-staff-ratio are more likely to be sick at the age of five and six. The study also demonstrates that entering early childhood care at four years of age or later increases the probability of illness at the ages of five or six, compared to children attending at a younger age.

9 April 2014

100 Years of Housing Policy: From Rent Freeze to Rental Brake

Housing rents in Germany have been rising for several years. Especially in major cities such as Berlin, Hamburg, and Munich, the increases have recently been higher than the German average growth rate of rents that makes up roughly two percent. The German government would like to respond to this development by introducing caps on rents for new rentals. But are rent really necessary? The growth rates of nominal rents went down markedly since the 1990s, from more than four percent at that time to about one percent on average over the past 15 years. In real terms, i.e., taking general inflation into account, rents have been even falling over certain periods. The problem of high rent hikes seems to be more common in large and university cities. One reason for this is the general trend towards reurbanization leading to significant population growth of the cities. This is coupled with a lack of elasticity of the housing stock in the short run. In particular, there is a shortage of small and inexpensive apartments. Housing policy should concentrate especially on this segment. Reduction of the real estate transfer tax or increased zoning of underused land within built-up areas for development might be an option, for example. Improved price statistics at the local level could also contribute to better market transparency. Instruments such as the Mietpreisbremse (literally a brake on rental prices), on the other hand, would make investment in rental housing less attractive and would exacerbate the housing shortage.

2 April 2014

Who Cares? The Significance of Informal Care by the Working Population in Germany

The daughter and son who take care of their parents or look after their neighbor who is no longer mobile while working at the same time: informal care is a central pillar of the German care system—particularly with regard to the aging population and the resultant increase in the demand for care. Between five and six percent of all adults regularly provide informal care according to DIW Berlin’s calculations for the years 2001 to 2012 on the basis of data from the Socio Economic Panel Study (SOEP). Around 60 percent of these women and men are of working age. The proportion of people in employment among all informal carers below 65 years of age has risen from just under 53 to almost 66 percent. The increase was greater among full time than part time employees although those in fulltime work combine caregiving and career significantly less frequently on average. The question arises how work and caregiving could be better reconciled because the need for (informal) care will continue to increase due to demographic change.The present report shows that informal carers are less satisfied in general and also with social security than those who do not provide informal care. However, the data give no indication that working at the same time amplifies this effect.

26 March 2014

Nuclear Power: Towards Phase-Out with Unresolved Questions of Storage of Nuclear Waste

Three years after the nuclear catastrophe in Fukushima one observes a certain momentum with regard to lifetime extensions as well as some interest in new building of nuclear power plants. Advocates of nuclear power argue in term of low-cost electricity generation, a secure supply as well as a contribution against climate change. The Reference Scenario of the European Commission - which sets the agenda on the EU Climate and Energy Strategy to 2030 - implies massive new buildings of nuclear power plants, not less than seven are forecasted for Poland alone. In Germany, too, voices are re-appearing that criticize the upcoming nuclear phase-out. However, DIW Berlin clearly derives that there is no "Renaissance" of nuclear power under way: the plans to construct new plants are concentrated in a few countries, mainly China. But foremost, the discussion neglects that nuclear power has never in history been produced economically, taking into account the costs of risks for mankind and the environment, the scrapping of nuclear waste, let alone the infrastructure of R & D and the corresponding national innovation system. The question where to store the highly radioactive waste is of yet unresolved. Phasing out nuclear is the safest and cost efficient strategy. The European discussion should not focus on analytical models that neglect a large part of the economic cost. Germany can continue its nuclear phase-out until 2022, without risking the supply security; this also holds for the upcoming closure of the Grafenrheinfeld nuclear power plant in 2015. Questions of scrapping old nuclear power plants and of long-term storage of radioactive waste have been ignored for a long time, they need to be addressed urgently now.

19 March 2014

Weak Inflation and Threat of Deflation in the Euro Area: Limits for Conventional Monetary Policy

Inflation in the euro area has been below the European Central Bank's target for almost a year now and it is also expected to remain at a very low level in the near future. On the one hand, such a low level of inflation is not in line with the ECB's objective. On the other hand, there is the risk that this situation will lead to a slide into deflation. In view of the ECB's historically low policy rates, the question arises as to which monetary policy options are available. In order to counteract possible deflation, primarily unconventional measures remain open to the ECB, such as outright purchases of securities. But the onus is also on fiscal and economic policy to actively address low inflation and the risks of deflation.

12 March 2014

A Modest Expansion Course

In 2014, the German economy is expected to grow by 1.8 %. Next year, GDP will increase by 2.1 %. The output gap will decline significantly this year, but will only be fully closed in the coming year. Inflation will remain low in this environment.

The upward momentum of the global economy weakened slightly in the final quarter of 2013. However, developed countries were almost able to maintain their pace of expansion which was propped up mainly by private consumption. This time, the stimuli also came from corporate investment activity. In contrast, the recovery in emerging countries could not keep pace with the dynamic growth of the previous quarter. Among other things, deteriorating external financing conditions and increases in policy rates impacted growth. Globally, monetary policies will continue to be very expansive. Moreover, the contractive impact of fiscal stimulus policies will also diminish. After a weak start to the year, the rate of growth in the global economy ought to accelerate again. Over time, the continuing low rate of inflation and the gradually improving situation on the labor market will support consumption in industrialized countries. As a result, companies are likely to increase their investment activity. The economies of emerging countries will benefit from increased imports in industrialized countries. On the whole, the average annual growth rate of the global economy in 2014 and 2015 is predicted to reach 3.8 % and 4.0 %, respectively.

The German economy is experiencing an economic upturn. However, there will be no appreciable acceleration. On the one hand, the world economy will not reach the growth rates of the pre-crisis period, and the structural adjustments within the euro area have clouded the prospects of the German export economy long-term; on the other hand, the global economy is gradually gaining momentum, and uncertainties are fading. Companies in Germany are continuing to tentatively increase their investments, and are catching up on those shelved in recent years. The upward trend in the construction industry is continuing, but slowly losing momentum. The employment market will remain buoyant and wages will rise significantly. The introduction of the minimum wage will allow these trends to persist in the coming year. This will drive up private consumption which picked up momentum at the beginning of the year. Exports are gaining some ground in the context of the global economic recovery, while imports rose more significantly in the wake of increasing domestic demand. Foreign trade in net terms is not contributing to growth.

The public budget will end the year with a slight deficit, although next year will see a slight surplus in net borrowing. Without taking cyclical influences into account, the public budget in both years will end with a surplus, which will decrease, however, due to relaxed spending policies.

5 March 2014

European Energy and Climate Policy Requires Ambitious Goals for 2030

In January 2014, the European Commission proposed a framework for its climate and energy policy up to 2030. It includes targets for reducing greenhouse gases and using renewable energies, but no specific targets for increasing energy efficiency. By 2030, greenhouse gas emissions are to be reduced by 40 percent over 1990 figures. Another element of the proposal is the introduction of a market stability reserve for the European Emissions Trading Scheme. However, its impact would be too late and too weak. In regard to renewable energy use, the Commission has proposed a goal to achieve a share of 27 percent of gross final energy consumption throughout Europe. This appears unambitious against the background of developments to date. In addition, there is no mandatory division of these goals among the individual member states. The Commission's calculations are based on implausible technical and economic assumptions in the power sector. The estimated costs for nuclear power are too low, and it is assumed there will be a breakthrough in carbon capture technologies that seems unlikely from today's perspective. In contrast, cost assumptions in the field of renewable energies remain too high and outdated. In light of previous experience, specific goals for 2030 are required on three levels: greenhouse gas emissions reductions, renewable energies, and energy efficiency. According to the Commission's impact assessment, energy system costs would hardly increase even with more ambitious objectives. In addition, creating an appropriate framework would also enable positive developments in investment, exports, and employment. The German federal government should continue its commitment to an ambitious European policy to reduce greenhouse gas emissions, to increase the use of renewable energies, and to boost energy efficiency.

26 February 2014

Pitfalls of Compound Interest Effect: Private Investors Underestimate Loss Risks of Financial Products

People are investing their life savings in financial products, for instance, to provide for their retirement, and in doing so they are making their future financial situation almost entirely dependent on the success of these investments. The financial sector promotes numerous investment opportunities with widely varying levels of risk - from the classic private pension insurance to high-risk equity funds. To assist investors in selecting a product suitable for them and to safeguard against financial losses, policy-makers have prescribed standardized and comprehensible product leaflets and consulting protocols. But is that enough? In order to prevent investors from making poor investment decisions, they also need sufficient knowledge of the financial issues, which, for example, allow them to accurately assess the effects of compound interest on an investment and the risk of loss. This seems to be the problem area, as indicated by the results of a behavioral experiment conducted by DIW Berlin in cooperation with Humboldt-University Berlin: most of the participants chosen misunderstood the effect of compound interest - and therefore seriously underestimated the investment risk.

26 February 2014

Persistently High Wealth Inequality in Germany

According to current analyses based on the Socio-Economic Panel Study (SOEP), the total net assets of German households in 2012 amounted to 6.3 trillion euros. Almost 28 percent of the adult population had no or even negative net worth. On average, individual net worth in 2012 totaled more than 83,000 euros; that is slightly more than ten years previously. The degree of wealth inequality remained virtually unchanged. With a Gini coefficient of 0.78, Germany has a high degree of wealth inequality compared to other countries and there is still a wide gap between western and eastern Germany, almost 25 years after unification. In 2012, the average net worth of eastern Germans was less than half that of western Germans.

19 February 2014

Fewer and Fewer Germans Working from Home

In 2012, almost five million people, or roughly 10 percent of the labor force in Germany, worked from home most or some of the time. Of these home workers, 2.7 million were employees, i.e., eight percent of the labor force. It is primarily highly qualified employees such as managers, academics, lawyers, publicists, engineers, or teachers who work from home; the majority has a university degree. However, there are also a large number of occupations with very few people working from home as the job is largely unsuitable for this mode of work. The discrepancies between men and women or different age groups remain small. In households with children, the mother or father are somewhat more likely to work from home. However, the decisive factor is the occupation itself. At the turn of the millennium, the number of people working from home initially increased, but dropped significantly from 2008 on and has been declining at double-digit rates in almost all professions since then. Yet overall employment in Germany has increased, as has the percentage of employees working from home in the European Union as a whole. Compared with other EU countries, Germany is somewhat below average when it comes to home working; in Scandinavia, and the remaining western and central European states, working from home is far more widespread.

12 February 2014

Low Base Interest Rates: An Opportunity in the Euro Debt Crisis

Member states of the euro area have been struggling with the legacies of the severe financial and economic crisis for four years now. But debt ratios are still rising. Negative primary balances, low growth, and low inflation do not allow for a recovery similar to the one in the US after the Second World War. Between 1946 and 1953, the US was able to almost halve its debt with no haircuts. The crisis countries of the euro area were able to "buy time" with bailout packages and low interest rates. But as long as the other influencing factors are not developing more positively, it remains uncertain whether the current stabilization of the euro debt crisis is sustainable. The ECB's low interest rate policy undoubtedly offers some relief in this situation. First, the interest burden for most countries in the euro area has declined in recent years. This effect has tended to stifle increases in the debt ratio. Second, low interest rates strengthen the economy. In turn, this increases government tax revenue and improves the primary balance. Low interest rates have also played an important role in driving down the debt ratio in the US. At the moment they appear to be the only lever in the euro area with which to make euro area countries' debt more sustainable. What matters now is that they seize this opportunity.

5 February 2014

Energy and Climate Policy - Europe Is Not Alone

To date, the European Union has been at the forefront of international climate protection. But there are now a number of other countries also pursuing a proactive energy and climate policy. They are increasingly investing in renewable energies, exploiting potential energy efficiencies in industry, buildings and transportation, and contributing to the reduction of greenhouse gas emissions through carbon prices. If Europe remains at the forefront of these developments, this would enable it not only to retain its credibility on global climate protection but also to improve the security of its energy supply, increase investments and innovations in growth industries thereby creating new employment opportunities. An ambitious energy and climate policy does not come at the expense of the competitiveness of the European economy. The proportion of energy costs is low in many parts of industry: For 92 percent of value added in the industrial sector, the ratio of energy costs to turnover is an average of 1.6 percent. Only in very few sectors are energy costs a factor in location decisions. For these sectors, there are exemption regulations so that climate programs do not cause a distortion of competition. Instead, the Global Competitiveness Index of the World Economic Forum highlights the importance of an innovative environment. Germany and some other European countries are among the leaders with respect to green patents. The future implementation of the energy transition and the design of the 2030 targets will determine if Europe stays among the leaders.

29 January 2014

Minimum Wage: Number of Eligible Employees Well Below Five Million

In the fall of 2013, DIW Berlin presented a study on minimum wages which was based on data from the Socio-Economic Panel Study for 2011. The data for 2012 have since become available. As expected, in terms of structures for employees with gross hourly earnings of less than 8.50 euros, i.e., those expected to receive the planned minimum wage, little has changed. These include, to an above-average degree, employees with simple occupations, women, employees in eastern Germany, mini-jobbers, working pensioners, and students. In particular, the minimum wage affects workers in small businesses, consumer-oriented services, and agriculture. In 2012, 5.2 million workers received a gross hourly wage of less than 8.50 euros, equivalent to 15 percent of all employees. There is evidence that the number of low-wage workers has decreased over the previous year - to about half a million. However, a statistically significant decline is only evident among full-time workers and workers engaged in simple occupations. These account for more than half of all low-wage workers. It is significant that a large proportion of workers earning less than 8.50 euros per hour in 2011 were above the minimum wage threshold in 2012 - as a result of wage increases. Their number is now likely to have declined due to further wage increases and will have fallen again by up to 700,000 by the time the minimum wage is introduced. In addition, there has been a decline in simple occupations, i.e., jobs that often only pay low wages. It is politically controversial as to whether certain groups will be excluded from the future minimum wage regulation - if pensioners and students were excluded, the number of people entitled to a minimum wage would be reduced by yet another million.

22 January 2014

Improved Energy Efficiency: Vital for Energy Transition and Stimulus for Economic Growth

As part of the energy transition process, the German government has set far-reaching energy efficiency targets, including doubling the annual energy-efficient refurbishment rate for existing residential buildings from one to two percent. DIW Berlin has estimated the additional energy-related investment required to meet these targets and analyzed the impact this could have on the economy. In the long term, the savings on household energy bills far exceed the additional investment. This, combined with further measures to increase energy efficiency in other sectors, substantially reduces energy consumption and greenhouse gas emissions. Even allowing for some elements of uncertainty, these measures to improve energy efficiency have a positive impact on income and domestic demand. They could also result in significantly positive effects on employment, depending on the ratio of productivity gains and new jobs. Nevertheless the most recent savings are not nearly enough to achieve the German government's energy efficiency targets. Clear and reliable framework conditions are needed soon to increase the number of buildings being refurbished for energy efficiency. Given the present analyses, which indicate that forcing the pace of energy efficiency improvements has a positive impact on German economic growth and employment, the government's hesitation seems even less justified.

15 January 2014

Women Still the Exception on Executive Boards of Germany's Large Firms - Gradually Increasing Representation on Supervisory Boards

The trend toward more women on the boards of directors of German companies continued in 2013, albeit on a small scale. The share of women on the supervisory boards of the 200 largest companies increased by more than two percentage points, and thereby at a somewhat higher rate than in recent years, to just over 15 percent. The corresponding share of women on executive boards virtually stagnated at a low level of just over four percent. These findings are revealed in DIW Berlin's latest Female Executive Barometer. In the DAX 30 companies there was even a decrease in the share of women on executive boards. The shares of female executives in MDAX, SDAX, and TecDAX companies also remained low. The development in companies with government- owned shares was limited as well. Moreover, women chairing boards of directors are still very much the exception in all the groups of companies studied. This applies to both supervisory and executive boards. The findings clearly indicate that increasing the share of women on corporate boards is not a self-sustaining process, that progress is slow, and that substantial efforts are still required. In order to achieve equal representation of both genders in these posts in the foreseeable future, more drastic changes are needed. In Germany, public companies could play a pioneering role, which is not the case at present. Companies in Germany and their interest groups can look to the Nordic countries for examples of firms that achieve substantial increases in the number of women on corporate boards without mandatory state regulation. Comparing European countries, however, we see that the share of women on corporate boards increased the fastest in countries with a mandatory women's quota.

18 December 2013

Recovery is Gaining Some Momentum

In 2013 the German economy will grow at 0.4 percent which is below the growth rate of potential output. The output gap is 0.5 percent. In 2014 gross domestic product will expand at 1,6 percent and the output gap will nearly be closed. In 2015 the economy will grow above trend at a rate of 2 percent.

The pace of expansion of the world economy has accelerated in the third quarter. Advanced economies contributed more and more to the recovery. The cyclical upturn builds mostly on the revival of private consumption which profits from gradual improvements of labour market conditions and still low rates of inflation. In addition, growth in emerging markets accelerated notably; in particular China and India grew dynamically. Despite the expected start of tapering of unconventional measures in the US, the stance of global monetary policy will remain very expansionary. Moreover, fiscal policy will be less contractionary. Over the course of time, diminishing policy uncertainty will spur investment. Gradual improvements of labour market conditions will revive private consumption. All in all, the global economy will grow at rates of about 4 percent in 2014 and 2015. The German economy continued its recovery. However, production will expand only modestly in the final quarter of 2013. German exports will revive as part of the global recovery. As we go along, this in turn spurs investment which will peak at the turn of the year 2014/2015. Then, the overall economy will grow at potential and will decelerate somewhat thereafter.

In light of the recovery, the creation of new jobs will continue, although at a declining rate. Unemployment will increase as the work force grows - mainly due to migration. In 2014 the rate of unemployment will be at 7 percent and will be slightly above that in 2015. As a result of new jobs created, wages will rise.However, since labour supply will not be scarce, mainly due to migration, the rise of wage will be modest. At a rate of 1,3 percent, low inflation props up purchasing power of private households. As the output gap narrows and consumption rises, inflation will rise gently to 1,6 percent in 2014 and to 1,7 percent in 2015.

In 2013, the overall public budget is marginally in surplus of 0.2 percent relative to nominal gross domestic product. In 2014 the budget will be nearly balanced, in 2015 the surplus is 0.7 percent.

16 December 2013

Demand Development and Fuel Usage on the Road: Alternative Drive Systems Slow to Get Going

The 54 million vehicles in Germany drove almost 720 billion kilometers in 2012. To date, alternative drive systems and fuels have not achieved any notable success in terms of vehicle numbers or vehicle use. However, the diesel engine, which has higher emissions of air pollutants, is gaining ground: diesel vehicles now constitute 29 percent of all passenger vehicles and 43 percent of all kilometers driven. Diesel fuel has been the most important energy source in road transport for ten years now. The proportion of biogenic fuels has stagnated since 2008 at below six percent, natural gas and liquefied petroleum gas cover only 1.5 percent of demand. In terms of alternative drive systems, not only are there promising long-term options, such as electromobility, but short-term meaningful alternatives should not be neglected either. The use of natural gas represents an alternative system with fewer emissions of greenhouse gases and air pollutants than conventional fuels and is potentially open to renewable energies use. The use of natural gas in the transport sector should therefore continue to be supported.

12 December 2013

More Child Care Facilities – Reduced Burden on Parents Increases Satisfaction

As of 2005, and since 2008 in particular, child care provision for under-three-year-olds in Germany has been expanded across the board. We examine whether this expansion of services using evidence of a reduced burden on mothers and fathers with children in this age group has significantly increased these parents’ satisfaction with various areas of their lives. To shed more light on this issue, we analyze data from the Socio-Economic Panel Study (SOEP) and Families in Germany (FiD) and compare them with official data to provide information about the regional child care ratio. These analyses show that both parents tend to be more satisfied with child care and family life in a region with a wider range of child care facilities. Particularly for mothers in western Germany, there is also a positive correlation between child care services and satisfaction with income, health, and life in general, indicating that an increased provision of early years child care helps reduce the double burden of work and family against a background of dominant gender roles that still prevail.

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