News and Press Releases of DIW Berlin News and Press Releases en DIW Berlin Short-term benefits for Germany and the euro area from a U.S. interest rate hike German Institute for Economic Research: No reason for exaggerated concern about an economic slowdown

Euro area states can benefit from an interest rate increase in the U.S. in the short term, according to the findings of a current study by the German Institute for Economic Research (DIW Berlin). Thanks to the devaluation of the euro, their exports would rise to the extent that they are able to overcompensate for the negative demand effect from the U.S. This holds true for Germany in particular. In the medium term, interest rates in the euro area would follow those of the U.S., leading to a decline in growth rates there as well. “The positive effect would only be temporary. But our findings should reduce concerns that a hike in the U.S. benchmark interest rate would result in spillover effects and weaken the euro area economically,” said DIW economist Max Hanisch.

Wed, 21 Mar 2018 04:03:00 +0200
German and euro area economies will benefit from a U.S. interest rate hike in the short term To accompany the economic upturn in the U.S., the Federal Reserve Bank has been raising its benchmark interest rate incrementally. In an increasingly globalized world in which the American economy plays a key role, an action like this has spillover effects on the international level. Based on a dynamic factor model, the present study shows that the member states of the euro area—Germany in particular—can temporarily benefit from a restrictive U.S. monetary policy. The devaluation of the euro against the U.S. dollar will improve the euro area’s balance of trade and trigger an economic upturn, primarily in the member states in which the U.S. has captured a substantial portion of exports.

The full report in DIW Weekly Report 12/2018

Wed, 21 Mar 2018 04:00:00 +0200
New government prolongs German economic upswing: Editorial According to DIW Berlin estimates, the German economy should grow by 2.4 percent this year and 1.9 percent the following year. The GDP growth forecast has thus increased by 0.2 percentage points for this year compared to December and by 0.3 percentage points for the coming year. This primarily reflects the new fiscal policy framework resulting from the coalition agreement between the three parties forming the new German government (CDU, CSU, and SPD). The measures featured in the coalition agreement alone should lift growth by a good 0.3 percentage points next year, if—as it is assumed here—said measures will come into effect in 2019.

Significant relief for private households is expected for the legislative period up to 2021, and, to a substantial degree, already in 2019. For example, the plan to finance statutory health insurance by splitting the costs equally between employers and employees should result in relief for employees in the amount of 5.8 billion euros in 2019 alone. Conversely, higher costs for companies will translate into slightly lower profits; however, on balance, the move will result in a significant increase in the net disposable income of private households. In addition, a reduction in the unemployment insurance contribution rate, assumed to be implemented in the beginning of 2019, will also entail 3.6 billion euros in relief for private households next year. Finally, the announced increase in children benefits and tax allowances, as well as the increase in the insurance periods recognized for bringing up children (Mütterrente) and the introduction of a basic pension, are providing billions of euros in stimuli, boosting both disposable income and household consumption.

Furthermore, the coalition agreement includes additional federal government investment expenditures for things such as broadband expansion, research and development, and public housing. These expenditures amount to a total of 1.5 billion euros during the forecast period and are likely to somewhat stimulate the economy.

The German economy would not need any of these stimuli, however. It is experiencing an economic boom: the global economy is growing strongly and ensuring German exports are expanding dynamically. This benefits German industry in particular, which heavily invests in machinery and equipment. Service providers are also faring well, seeing as private households are spending more and more due to the prolonged favorable labor market situation and overall strong wage agreements. Growth is slowing only in the building and construction industry, as the branch is reaching its full capacity and prices are now rising significantly, leading to a gradual reduction in demand. Prices will rise somewhat more strongly in other branches in the coming quarters as well, which should dampen demand.

Furthermore, given that global economic growth is likely to lose some momentum in the context of a less expansive monetary policy, the German economy would gradually slip into a moderate slowdown in 2019 without the additional financial stimulus. However, that would cause no harm due to the current favorable labor market situation. No fiscal countermeasures would be required.  

Instead, policies should focus more on positively influencing the German economy’s long-term growth. In light of the foreseeable unfavorable demographic development, policies especially need to focus on making investment conditions more appealing. If there are increasingly fewer people of working age, then they must be able to be even more productive. The Grand Coalition has rightly agreed on additional education and infrastructure expenditures. To have a real impact on growth, spending in these areas needs to be targeted and not distributed indiscriminately regardless of the recipients’ needs.

The financial flexibility for these and further measures is there. The total public (federal government, regional states, municipalities, and social security bodies) budget surplus is expected to increase to 48 billion euros this year (1.4 percent in relation to GDP) and will only decrease slightly next year (1.2 percent), despite the billions of extra spending agreed on by the new government. However, the flexibility should not be overestimated: a large part of the surpluses is due to the sound economic situation, is thus not permanent, and should therefore not be prematurely earmarked for future spending. Moreover, the government is currently profiting from unusually low interest rates; as monetary policy normalizes, the associated savings will decline in the long term. This argues against the demand for a broad-based reduction in income tax that has repeatedly been brought up in public debate.

From an economic point of view, the less expansive monetary policy is likely to somewhat dampen the pace of expansion in the euro area. The U.S. Federal Reserve is also likely to tighten its monetary stance, resulting in the U.S. economy losing some momentum, despite the fact that the fiscal policy there will be much more expansive in terms of tax relief. All in all, it is to be expected that the currently strong global economic momentum will slightly fade.

As a result, the pace of German exports will decline in the later forecast period and investment activity will also pivot to a slightly lower rate. Throughout the course of the forecast, employment growth will be somewhat less buoyant. However, the slower pace of employment growth will not be detrimental to the strong labor market; at the end of the forecast period, the unemployment rate is likely to be 4.8 percent.

Nevertheless, risks loom over the generally very favorable economic prospects. For example, the recent fierce conflict over the introduction of tariffs on U.S. imports and other protectionist tendencies, such as Brexit and the outcome of the Italian general election, is worrying from a German perspective. If such measures significantly impact international trade, it would affect the German export economy. Additional risks arise from the monetary policy environment, especially in the euro area. An increase in interest rates faster than assumed here could exacerbate banks’ difficult financial situations in some countries and lead to a resurgence of the financial crisis in the euro area—which could impact the German economy.

The full report in DIW Weekly Report 10/2018

Mon, 19 Mar 2018 04:05:00 +0200
New government’s policies give the thriving German economy an additional boost The German economy will grow by 2.4 percent this year, especially due to strong foreign demand. Brisk investment activity continues in this economic climate; stimulus from foreign trade, however, is weakening somewhat. Despite strong consumer demand in the coming quarters, employment and economic output growth are losing momentum. However, stimulus measures from the new federal government will increase income and thus private households’ consumption. With 1.9 percent growth in 2019, overall economic capacity will remain well utilized.

The full report in DIW Weekly Report 10/2018

Mon, 19 Mar 2018 04:02:00 +0200
The global economy and the Euro area: expansion continues but is losing momentum The global economy is likely to grow by over four percent this year and somewhat less next year. DIW Berlin has slightly raised its forecast for both years. Developed economies as well as emerging markets are experiencing an upturn; however, growth rates are likely to be slightly lower in the future. One reason for the sound global economy is the fact that the labor market situation is steadily improving, leading to an increase in private consumption. Along with fiscal stimuli in the form of tax cuts and government spending programs, more private consumption is also likely to trigger corporate investment activities. Monetary policy remains expansionary, but gradual increases in interest rates in major economies as well as the European Central Bank's (ECB) phasing-out of government bond purchases may somewhat curb growth in the U.S. and the euro area. This would also weaken the expansion in emerging economies. Risks to global growth stem from protectionist activities in the United States as well as political uncertainty in Europe.

The full report in DIW Weekly Report 10/2018

Mon, 19 Mar 2018 04:01:00 +0200
Jan Marcus wins Best Junior Researcher Prize of the Joachim Herz Stiftung The Joachim Herz Foundation awards Prof. Dr. Jan Marcus with 25.000 Euro as this year's best junior researcher. Jan Marcus is a GC alumnus, a research fellow at the DIW Education and Family Department and a Junior Professor at the University of Hamburg. As such, the Graduate Center congratulates him and wishes him further success in his future work!

We also congratulate Prof. Dr. Joachim Winter and Peter Schwardmann PhD, both from the Ludwig-Maximilians-Universität München. Joachim Winter won the prize of 150.000 Euro for his research in health economics and Peter Schwardmann won the second junior researcher prize with 15.000 Euro.

Tue, 13 Mar 2018 02:12:00 +0200
Call for Papers – Workshop on Gender Economics DIW Berlin, Humboldt University and WZB are jointly organizing a workshop on Gender Economics. The aim of this workshop is to bring together an international group of labor and experimental economists. Topics of interest include, but are not limited to:

  • Dynamics of gender gaps in education and labor market outcomes
  • Interactions between gender norms, institutions and economic outcomes
  • The role of the firm and technology
  • The nature of discrimination

Keynote lectures will be delivered by Professor Claudia Olivetti (Boston College) and Professor Anna Dreber (Stockholm School of Economics).

The workshop will take place on Oct 18-19, 2018 at DIW Berlin. Authors at all stages of their career are invited to submit research papers via e-mail ( by May 1st. Notifications will be sent by June 1st.

In particular, we strongly encourage junior researchers to submit papers to the workshop. We have limited funds available for travel and accommodation costs. Please indicate in your e-mail submitting your paper whether you will be able to cover your own travel costs or whether you will require funding.

Bernd Fitzenberger, Humboldt University Berlin
Peter Haan, DIW Berlin and Free University Berlin
Dorothea Kübler, WZB and Technical University Berlin
Johanna Mollerstrom, DIW Berlin and Humboldt University Berlin
Alexandra Spitz-Oener, Humboldt University Berlin
Katharina Wrohlich, DIW Berlin

Funding from the DFG (SPP 1764 The German Labor Market in a Globalized World and CRC TRR 190 Rationality and Competition) and from the Friends of DIW is gratefully acknowledged.

Call for Papers PDF

Tue, 13 Mar 2018 12:19:00 +0200
Patricia Gallego-Granados has successfully defended her dissertation Patricia Gallego-Granados, who works at the Public Economics department, has successfully defended her dissertation at the Freie Universität Berlin.

The dissertation with the title "Essays on the Gender- and the Part-Time Wage Gap: A Distributional Approach" was supervised by Prof. Dr. Peter Haan (DIW Berlin, Freie Universität Berlin) and Prof. Dr. Christoph Breunig (Humboldt-Universität zu Berlin).

We congratulate Patricia on her success and wish her all the best for her future career.

Fri, 09 Mar 2018 10:28:00 +0200
Successful high-level conference of DIW Berlin, EU Commission and H4SF on Green Finance More than two years after the “Paris Climate Deal” and the entry into force of the “Sustainable Development Goals”, is Europe ready to take sustainable finance to the next level, making finance work for sustainable development and for protecting our climate? This question was addressed at a high-level event in Berlin on February 22, 2018. The conference was organized by the European Commission, DIW Berlin and the Hub for Sustainable Finance Germany (H4SF).

It gathered policy-makers, researchers, actors of the energy and banking sectors and regulators to discuss where we stand and where we are headed with sustainable finance in Europe. Key-note speaker and EU Commissioner Valdis Dombrovskis outlined the EU Commission’s vision on the topic ahead of the presentation of a European action plan and stressed the need to better channel funds, both public and private, towards green investments.

Christian Thimann, chair of High Level Expert Group on Sustainable Finance, Karsten Neuhoff, Head of the Climate Policy department at DIW Berlin, DIW Berlin president Marcel Fratzscher and Joachim Wuermeling, member of the Bundesbank board, were among the distinguished panellists. Participants unanimously agreed on the need to take things further in the interest of a more resilient banking system as well as of our planet, but the debates also highlighted the need for the right incentives, for a well-designed framework and adequate regulation.

A summary of the conference is available here

Thu, 08 Mar 2018 08:30:00 +0200
Martin Kroh has been appointed professor at the University of Bielefeld Martin Kroh, former Division Head of Survey Methodology and Management at the SOEP, has been appointed Professor of Methods of Empirical Social Research with a focus on quantitative methods at the University of Bielefeld starting January 1, 2018.

He will continue to support the SOEP in the area of survey methodology during a transitional period and also work on joint ongoing research projects.

Wed, 28 Feb 2018 02:51:00 +0200
Inequality in Germany: decrease in gap for gross hourly wages since 2014, but monthly and annual wages remain on plateau Despite the booming German labor market, wage inequality is still a relevant issue. In the present study, the authors report on the changes in wages and their distribution between 1992 and 2016. In addition to real contractual gross hourly wages, we closely examined gross monthly and annual wages. Based on Socio-Economic Panel (SOEP) data, the results show that wage inequality rose significantly between 1992 and 2005, in particular with respect to monthly and annual wages. Since then inequality in monthly and annual wages has plateaued at its 2005 level. Inequality in hourly wages has decreased only since 2014, and between 2013 and 2016, average real gross hourly wages rose by five percent after a longer phase of stagnation. For the lowest ten percent of the population, they rose by 13 percent—a rate related to the implementation of sector-specific wages and the statutory minimum wage. However, these minimum wages obviously did not affect monthly and annual wages as anticipated.

The full article by Markus M. Grabka and Carsten Schröder in: DIW Weekly Report 9/2018

Wed, 28 Feb 2018 02:00:00 +0200
Mathias Hübener has successfully defended his dissertation Mathias Hübener, who works at the department of Education and Family Research, has successfully defended his dissertation at the Freie Universität Berlin.

The dissertation with the title "Essays on the Impact of Education and Family Policies on the Formation of Human Capital" was supervised by Prof. Dr. C. Katharina Spieß (DIW Berlin, Freie Universität Berlin) and Prof. Regina T. Riphahn, PhD (Universität Erlangen-Nürnberg).

We congratulate Mathias on his success and wish him all the best for his future career.

Mon, 26 Feb 2018 01:13:00 +0200
AfD received more votes in the parliamentary election in rural areas with aging populations DIW Berlin study analyzes the correlation between the AfD's vote performance and different economic and sociodemographic variables at an electoral district level – The AfD performed well in western German electoral districts where there are many employees in the manufacturing industry and where incomes are low – In the eastern districts they performed better where there is a large share of elderly residents and a high density of craft businesses

DIW Berlin president Marcel Fratzscher and co-authors Christian Franz and Alexander Kritikos analyzed the correlation between the Alternative for Germany’s (Alternative für Deutschland, AfD) performance in the last parliamentary election and seven economic and sociodemografic structural variables. Certain characteristics, such as the unemployment rate or share of non-German citizens in each electoral district, appear to barely play a role. There are positive correlations for other factors, meaning that these characteristics are especially pronounced in electoral districts where the AfD performed well. The patterns are different in the eastern and western parts of Germany.

Wed, 21 Feb 2018 10:00:00 +0200
The macroeconomic effects of exchange rate movements The macroeconomic effects of exchange rate movements have been subject to an extensive debate in international economics. Traditionally, much of the discussion was focused on the relation between the effective exchange rate and the trade balance. However, the process of financial globalization has led to a sharp increase in foreign asset and liability positions across countries and also to a greater dispersion in foreign currency positions, with many countries being either large net creditors or net debtors in foreign currency. This has shifted the focus of the discussion from the trade balance to the external balance sheets of countries. This Roundup provides a brief overview of the literature on the macroeconomic impact of exchange rate movements.

Tue, 20 Feb 2018 02:04:00 +0200
What determines the Costs of Fiscal Consolidations? Recent studies have proposed several factors that determine how fiscal consolidations affect the economy. This Roundup focuses on several of these determinants. Namely, it discusses how the composition of the consolidation measure, the state of the business cycle, the level of private indebtedness and the amount of fiscal stress during which the measure is implemented influences the consequences of austerity. It seems reasonable to consider these factors more carefully when deciding about the type and timing of fiscal consolidation plans.

Mon, 19 Feb 2018 12:57:00 +0200
The GC Welcomes Jürgen Schupp as the New Vice Dean The DIW Graduate Center is happy to welcome its new vice dean, Prof. Dr. Jürgen Schupp. He currently holds a position as Professor at the Free University of Berlin Institute of Sociology. His research interests include survey methodology, social structures analysis and social inequalities.

Prof. Schupp has a long history of working at the Socio-Economic Panel Study (SOEP) of the DIW. He played an important role in further developing the study and served as its director of research from 2013 until now.

We wish him a good start and look forward to having him as vice dean!

Thu, 15 Feb 2018 11:29:00 +0200
The Graduate Center Has New Student Representatives We are happy to announce that GC students across all cohorts have voted for Daniel Graeber (GC class 2015) and Felicitas Schikora (GC class 2016) as their new representatives in 2018!

We thank Marica and Daniel for their excellent work last year and look forward to a continued great collaboration with the new representatives.

The two Student’s Representatives serve as spokespersons for the doctoral students. Every doctoral student is entitled to nominate and vote for two candidates, with elections held once a year.

Thu, 15 Feb 2018 10:57:00 +0200
Jan Berkes Receives a Grant from the German Academic Scholarship Foundation Jan Berkes, from the Education and Family department, has been granted a scholarship from the German Academic Scholarship Foundation (Studienstiftung des deutschen Volkes) from February 2018 on.

The Dean of the Graduate Center, Prof. Weizsäcker congratulates him on his success!

Mon, 12 Feb 2018 02:49:00 +0200
Household electricity prices: major savings possible by switching tariffs Retail electricity prices develop very differently depending on the provider and the tariff – Basic tariffs from default providers increased significantly between 2007 and 2014 while the most affordable tariffs offered in the market remained mostly constant – Providers passed the cost savings from falling wholesale prices on to households to varying degrees

The average electricity prices for German households have been rising almost constantly since 2007, but the rise in retail prices has affected customers to different degrees. While the basic tariffs offered by default providers—the most expensive tariffs available—increased by 50 percent by 2014, the most affordable tariffs on the market generally remained unchanged. The default providers are legally required to sell energy in the form of a default tariff to all households in their respective service areas. If consumers would switch from a default tariff to a cheaper tariff from a different provider, they would save a lot of money. In 2014, assuming average power consumption (2,800 kilowatt hours per year), it would have been possible to save an average of almost 400 euros. Nevertheless, only a relatively small number of households switch providers.

Wed, 07 Feb 2018 09:48:00 +0200
EU Roaming Regulation: theoretical model suggests a positive assessment Since June 15, 2017, mobile network operators in the European Economic Area may not impose surcharges for making telephone calls, sending text messages, or using data services in other EEA countries. The regulation was designed to create a digital domestic market without adversely affecting consumers. The regulation raises the expectation of changes in mobile network operators’ tariff structures. Theoretical examination shows that as long as mobile network operators do not exclude a roaming option for users who travel only occasionally, everyone will benefit from the regulations—even occasional travelers. In this case, positive effects are also anticipated for overall social welfare. However, negative effects are likely if some tariffs exclude a roaming option. The market result is highly dependent on how strongly consumers differ in their user behavior. The fact that all three mobile network operators in Germany exclusively offer tariffs with roaming options is evidence in favor of a positive assessment of the EU regulatory measures.

The full report by Pio Baake and Lilo Wagner in DIW Weekly Report 6/2018

Wed, 07 Feb 2018 09:01:00 +0200