Research
DIW Berlin is one of the leading research institutes in Germany. It covers a wide range of research areas which are organized into seven departments. These areas are characterized by topicality and scientific excellence. Some of these fields are briefly summarized to give an impression of what policy-oriented research is alike:
Empirical Industrial Economics
In the last decade, the empirical research on industrial organization has gained importance. Relevant research in this area combines a deep understanding and comprehensive knowledge of theoretical market analysis with empirical research techniques (microeconometrics) relying on panel data at the firm and sectoral levels. Industry structures, the working of markets under imperfect competition - specifically that of the new economy - and the private provision of infrastructure services are of high policy relevance. Moreover, the individual behavior of firms in the globalized market (international industrial economics) and the analysis of risk capital markets for small and medium-sized enterprises (SME) are high on the research and training agenda of DIW Berlin. The specific role of SMEs in sustaining an entrepreneurial culture that promotes innovations in the European Union is of high policy relevance and has been a longstanding focus of DIW Berlin research.
Social Policy Options in an Age of Demographic and Economic Change
Alongside their emphasis on economic matters, the OECD countries are concerned with a wide variety of social policy issues. These include the current debates about poverty and social exclusion within and between countries – in which social policy issues are closely related to economic matters. (Consider, for example, the apparent funding crisis in the public old-age pension schemes of several European countries, and the social impacts of the greater flow of labor between European states after enlargement. Assessments of impacts depend on different views of the generosity and nature of social safety nets, citizenship and eligibility criteria, and so on.) Assessment of these various issues is much enhanced by access to large-scale household surveys, especially those with a longitudinal dimension. DIW Berlin has this data and the capacity to analyze it. It hosts the internationally renowned German Socio-Economic Panel (GSOEP), containing longitudinal data on more than 12,000 private households. Its staff and associated researchers also have extensive experience with related international data sets across Europe and elsewhere (e.g. the British Household Panel Survey, US Panel Study of Income Dynamics and, of course, the European Household Panel Survey.) With the help of this data, many social policy issues can be studied, together with their relationship to economic and demographic issues - for example, the estimation of households’ responses to tax reforms or labor market measures.
Microeconomic Analysis of Public Policy
Microeconomic analysis of public policy takes into account heterogeneous behavior of individual agents (persons, households and firms) and heterogeneous effects of government policies at the individual level. Behavioral micro-simulation combines the microeconometric analysis of individual behavior and policy analysis and thus also provides a basis for both the positive and the normative analysis of government policies. Micro-simulation models are used by government agencies, international organizations, and numerous research institutes in Europe for fiscal and social policy study - for example, in analyzing income tax reforms, income transfer programs and pension reforms. applies behavioral microsimulation modelling to the empirical analysis of the incentive, distribution and welfare effects of fiscal and social policies.
Environmental Policy for a Sustainable Development
The EU strategy for sustainable development, adopted at the Gothenburg European Council, states that environmental protection is to be integrated into the definition and implementation of all Community activities and policies. It calls for a careful assessment of the long-term environmental, economic and societal effects, both inside and outside the EU, of any larger-scale EU policy proposal (Sustainable Impact Assessment, SIA). Economic modelling tools such as general equilibrium and simulation models can incorporate these inherently complex and intertwined policy dimensions into a single consistent framework that enables the assessment of quantitative effects and the analysis of trade-offs. Quantitative SIA studies are primarily based on applied computerized modelling tools. While previous energy-economic modelling efforts at DIW Berlin focused primarily on the representation of scarce resources (like oil and its impact on world economies), more recent efforts at our institute consider natural resources in a wider sense, including the absorption function of soil or climate change, and address the social and distributional effects of economic and environmental policies. The complexity of these models has increased considerably, notably by including global effects such as acid rain, ozone depletion and climate change, environment and trade, or by dealing with international technology transfer. Applied modelling concepts are therefore based on diverse economic theories and concepts such as computational general equilibrium models (CGE), Integrated Assessment Models (IAM), overlapping generation modelling approaches (OLG), game theoretic or econometric modelling concepts.
Infrastructure Policy and Benchmarking Models for Efficient Service Supply
The Lisbon strategy requires the adaptation of regional and national infrastructure networks (such as railways, highways, electricity, gas, water and telecommunication) to establish a single European market. Infrastructure provision is increasingly considered a key to structural change and economic growth in the European Union, and the European Commission has assumed a pro-active role as a think tank and door-opener for the introduction of new ideas into European infrastructure provision. Until recently, however, the efficiency of these measures has not been subjected to detailed scrutiny. More widespread use of benchmarking and productivity analysis is required to identify the most efficient infrastructure providers and to give latecomers incentives to update their equipment. Regulation can also be enhanced by modern benchmarking results. Current modelling in this area utilizes both parametric methods, such as stochastic frontier analysis, and non-parametric methods, such as Data Envelopment Analysis, and can be used to assess efficiency both in such diverse areas as airports, railways, electricity distribution grids and telecommunication, as well as in ‘social infrastructure’, such as universities and hospitals. DIW Berlin possesses broad experience in this field.
