Press Releases

Current and older Press Releases of DIW Berlin
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19 March 2015

The German economy is growing strongly — no signs of overheating

DIW economic experts are forecasting a growth of 2.2 percent in 2015, which should stand at 1.9 percent in 2016 - capacity utilization at nearly normal levels - foreign markets less important than before the crisis - primary growth driver is private consumption based on a good labor market - surpluses in public budgets remain high - international risks remain significant

The German economy, which is currently exhibiting strong growth, will continue to progress in this direction with capacity utilization at nearly full levels. The economic experts at the German Institute for Economic Research (DIW Berlin) predict that it will grow by 2.2 percent this year and by 1.9 percent year. Experts see no signs of overheating, since the important markets - such as the euro area and China - are showing only slight developments. Additionally, investments are increasing only modestly. Instead, private consumption will continue to support growth through strong income gains and favorable developments in the labor market. Despite the overall favorable outlook, there remain economic risks: For example, the financial markets could tighten significantly in response not only to a resurgence of the crisis in the euro area, but also to an intensification of the conflict in Ukraine.

4 March 2015

Power Storage Can Secure Energy Transition in the Long Term

The power-generation capacities of wind and photovoltaic plants vary according to the weather, time of day, and season. The expansion of renewable energy sources means there is a growing need to offset these fluctuations and bring power supply into line with demand at all times. Power storage can contribute to this and thus safeguard the energy transition in the longer term. An analysis conducted by the German Institute for Economic Research (DIW Berlin) shows that storage requirements may increase sharply if the share of renewables becomes very high. “Particularly if other flexibility options, for instance, concerning the demand-side, develop less favorably than anticipated, additional power storage might be necessary,” says DIW energy expert Wolf-Peter Schill. “Consequently, broad-based funding for research and development of power storage continues to be a logical course of action in order to secure the energy transition.”

18 February 2015

Tax and Transfer System: Current Redistribution Mainly through Social Insurance

The German tax and transfer system ensures that the net incomes of its citizens are distributed much more evenly than market income. Much of this redistribution takes place through the social security system. However, the majority of government benefits do not go to financially needy households. Tax expert Stefan Bach summarizes the key findings of a recent study conducted by the German Institute for Economic Research (DIW Berlin): “While income is properly redistributed in Germany, apart from basic social security, many transfers also go to middle-class or even to wealthy citizens.”

18 February 2015

Private Spending on Children’s Education: Low-Income Families Pay Relatively More

DIW study takes broader approach to expenditure on education: in addition to spending on child daycare services and schools, expenditure on non-formal educational provisions such as leisure activities is also captured – researchers recommend linking contributions to income

Families who spend money on their children’s education face a heavier financial burden, the lower their income: while the corresponding share of monthly income in the lower fifth of the income distribution is around four percent, it drops to just over three percent for higher-income families. If families spending no money on education, either because they do not use the provisions or because they are exempt from paying contributions, are also included, the share of expenditure on education, however, increases with income. These are the findings of a new study by the German Institute for Economic Research (DIW Berlin), which is based on data from the Socio-Economic Panel (SOEP) study and the SOEP-related study Families in Germany (Familien in Deutschland, FiD). According to the researchers’ calculations, each family in Germany with children under the age of 16 – including the 23 percent of families who spend no money on education – spends an average of approximately 93 euros per month on various educational provisions such as child daycare, private tuition, or leisure activities such as sports clubs or music lessons. Those families with expenditures for such provisions spend around 120 euros per month. “Families pay a considerable share of spending on education out of their own pocket. This is all the more true if the concept of education is broadly defined. The broad definition includes spending on formal educational provisions such as child daycare services and fee-paying schools and on informal and non-formal provisions such as in-home daycare providers or sports clubs and music lessons,” say the authors of the study Carsten Schröder, C. Katharina Spieß, and Johanna Storck.

11 February 2015

Judgment on Inheritance Tax by German Federal Constitutional Court: New Study by DIW Berlin Assesses Impact of Considerably Limiting Company Privileges

A study by DIW Berlin presents a reform proposal – tax breaks could be restricted, tax burdens could be paid over longer periods – inheritance tax revenue would increase considerably

After the German Federal Constitutional Court determined in December 2014 that far-reaching exemptions to inheritance tax on corporate assets are partly unconstitutional, a new study by DIW Berlin suggests restricting tax exemptions for the heirs of corporate assets. “It is questionable whether such broad exemptions are required to prevent job losses at larger companies,” said the author of the study, DIW Berlin’s tax expert, Stefan Bach. Legislators ought to place ceilings on tax benefits and restrict them on operating assets. In return, tax payments on business transfers should be stretched out over longer periods, so the company successor can pay them off with current revenues. Tax authority claims could also be linked to the economic success of a business, and other liabilities could be given priority over the tax claim. According to calculations by DIW Berlin, inheritance tax reforms could increase tax revenues in the medium term from the current five billion euros to 13 billion euros per year if tax rates would remain the same. The calculations are based on estimates of annual corporate asset transfers of between 25 and 30 billion euros.

4 February 2015

New Approaches to Power Grid Planning

Future plans to expand the German electricity transmission grid will be based on scenarios which specifically include the federal government’s climate targets for the electricity sector. These are the findings of Christian von Hirschhausen and Claudia Kemfert, energy experts at the German Institute for Economic Research (DIW Berlin), one of the leading economic research institutions in Germany, presented in the latest issue of DIW Economic Bulletin. The plans also include a lower lignite capacity than previously, which the experts see as a positive step.

30 January 2015

Women Catching Up in German Labor Market - Participation Rate Rising Faster Than That of Men

The labor force participation rate for women has increased by ten percentage points since 1995, while the corresponding figure for men has only risen by one percentage point. Reasons for this include women’s improved qualifications, which are catching up with those of men, and their greater willingness to participate in working life and take advantage of changes in the economic structure.

Women are playing an increasingly important role in the German labor market. These are the findings of a new analysis conducted by the German Institute for Economic Research (DIW Berlin). Accordingly, the participation rate for women in Germany has risen by around ten percent since 1995—while for men it has only increased by about one percentage point. In 2013, 46 percent of all workers in the country were female. However, given that more women than men continue to work part-time, their share of work volume remained lower—at around 40 percent. In 2013, almost half of working women were in part-time employment, but only one in nine working men. While women’s willingness to participate in working life has increased in the past two decades across all age groups and qualification classes, men’s propensity to work rose substantially only among those aged 55 or older. DIW’s labor market expert, Karl Brenke, noted that the increased labor force participation may have helped considerably to alleviate demographic developments.

21 January 2015

Women Executive Barometer 2015: Highest Decision-Making Bodies in German Companies Still Male-Dominated

Persistently low shares of women on executive and supervisory boards – very few companies presently meet pending compulsory gender quotas – DIW Berlin presents proposals to remedy this

In 2014, women remained the exception at the top of the corporate ladder: at barely five percent, the share of female executive board members in the top 200 companies (ranked by turnover) was up just one percentage point over the previous year. This is equivalent to 47 of a total of 877 board seats. If the figures for the top 100 only are taken into account, the share of women in top management has in fact fallen from just under five to just over four percent. These are the findings of the latest women executive barometer analysis conducted by DIW Berlin, one of the leading economic research institutions in Germany. “There has been next to no progress on the executive boards. They remain male-dominated monocultures, despite the obligation toward increasing the representation of women in senior management undertaken by the leading associations of the German business community in 2001. This is anything but a positive development,” explains Dr. Elke Holst, Research Director Gender Studies at DIW Berlin. Dr. Holst and fellow researcher Dr. Anja Kirsch from the Freie Universität in Berlin conducted a study involving over 500 corporations, banks, and insurance companies. Women are better represented on supervisory boards: here, the share of women on the supervisory boards of both the top 200 and the top 100 companies increased by around three percentage points to 18 percent in each case. The corresponding figure in the DAX 30 was almost 25 percent, which can probably be accounted for by the public discussions surrounding the introduction of gender quotas. “Nonetheless, much is yet to be done to achieve anything resembling a gender balance on corporate boards,” adds Dr. Holst. “The planned compulsory gender quota alone can’t change the world.” Besides systematic improvements in internal career opportunities for women in order to facilitate their ascent to top management positions, employment procedures, promotions, and salary structures all need to be made more transparent. Companies also need a more flexible approach to career models, working hours, and attendance policies.

9 January 2015

Personality Traits Affect Young People’s Intention to Study

DIW Berlin studied the effect of personality traits on intention to study – those more open to new experiences are more likely to attend college – the effect of personality is particularly high among children from non-academic families

In addition to factors such as school performance and parents’ educational background, personality is crucial as to whether students subsequently want to study or not. These are the findings of a study conducted by the German Institute for Economic Research (DIW Berlin), based on data from the Socio-Economic Panel (SOEP) study. Consequently, young people’s intention to study is greater, the more open they are to new experiences. The findings also hold true if other factors affecting intention to study are included in the calculations – such as household income, number of siblings, or migration background. “Particularly among children from non-academic families who are underrepresented at German colleges, openness to new experiences is relevant to study intention,” said DIW Berlin’s educational economists, Frauke Peter and Johanna Storck. Education policies should therefore place a stronger focus on developing non-cognitive skills, i.e., personality traits, in early childhood education. Mentoring programs or more detailed information about access to higher education could possibly ensure more “non-academic” children to be open to further education.

17 December 2014

German Economy to Overcome Temporary Weakness

The German economy has veered back on an upward course, after weak growth in the summer semester 2014. In this projection, real GDP is estimated to grow by 1.5 percent in 2014, by 1.4 percent in 2015 and by 1.7 percent in 2016. Inflation is projected to remain low, with 0.9 percent in 2014, 0.7 percent in 2015 and 1.4 percent in 2016. The growth rate of the global economy rose slightly in the third quarter. The gradually improving situation on labor markets will lead to increasing incomes in the forecast period, particularly in advanced economies. Along with continuously low energy prices, this should stabilize purchasing power and thus private consumption and investments. The average annual growth rate of the world economy is expected to be 3.4 percent in 2014, 3.8 percent in 2015 and 3.9 percent in 2016. Inflation is predicted to linger between a moderate two and three percent in the projection period. Economic developments in Germany are supported by foreign demand, which also stimulates investment going forward. Private consumption is increasing noticeably; this is based on a persistently positive situation on the labor market, high wage growth, as well as strong increases in social benefits. In addition, declining energy prices are raising purchasing power significantly, as well as driving up company profits.

17 December 2014

Fiscal Policy: Realize The Need For Action - Take Measures!

The situation of public budgets is relaxed and will remain so in the years 2015 and 2016 - despite a slight weakening in the coming year. In 2014, the overall budget is estimated to show a surplus of 0.5 percent relative to nominal gross domestic product; next year the surplus will shrink to 0.1 percent - mainly due to the increased pension payments - and in 2016it will reach 0.4 percent. The debt ratio, which was over 80 percent in 2010, will have decreased to 66.3 percent in 2016. Furthermore policy met its prioritized objective of establishing abalanced budget at the federal level for the year 2015. In sum: Public finances have not appeared in such a favorable manner since before German unification. Compared to many other European countries, the situation in Germany looks bright. It does not follow, however, that everything about current German fiscal policy is right. On the contrary, government expenditure is not structured well and the overall fiscal situation is benefiting enormously from extra factors such as low interest rates on national debt and the effect of bracket creep which raises income tax revenue by more than the increase of real income. Recent fiscal policies have also placed an emphasis on non-durable expenditures rather than investment spending, financial scope has been foregiven, and there has been a failure to implement measures to increase potential economic growth. Instead, structural surpluses are being generated. The current policies do not appear to have supporting growth as their primary objective.

10 December 2014

Eight Years After Real Estate Transfer Tax Reform: Most German States Seize Opportunity for Tax Increases

The financial relationship between central government and the federal states is about to undergo major reforms. In addition to reorganizing financial equalization, policy-makers are now discussing providing financial aid for structurally weak regions once the Solidarity Pact expires, bolstering the general financial strength of states and establishing an effective debt ceiling. Against this backdrop, the present report examines reform of real estate transfer tax, which is considered to be one of the most important results of the fiscal federalism reform in 2006. Since then, states have been able to determine their own tax rates. The report also analyzes the pros and cons of the real estate transfer tax in detail. The states’ newly acquired fiscal autonomy has triggered considerable dynamism. With the exception of Bavaria and Saxony, all the federal states have seized the opportunity to raise the real estate transfer tax over the past eight years. Today, it is by far the most important independent tax revenue for each state and is the only tax that allows them to set their own rate. However, tax revenue measured against total income, i.e., including community taxes, federal grants, and financial equalization, is relatively low. An international comparison shows that Germany is at the upper end of the scale when it comes to tax rates on real estate transfer.

3 December 2014

Lifetime Earnings of Workers in Germany: Inequality Doubles Between 1935 and 1972 Birth Cohorts

Income inequality is usually considered in terms of its current development. A long-term perspective allows us to compare the income situation of today’s generation with that of their parents. For the first time ever, we have measured the inequality of wages and salaries earned over an entire working lifetime using a new kind of dataset. The findings show that the inequality of lifetime social security earnings of western German male workers doubled between the 1935 and 1972 birth cohorts. 20 to 40 percent of this increase can be attributed to a higher level of unemployment among those at the lower end of the wage scale. The remainder is caused by a wider distribution of earnings. The greater inequality of lifetime earnings could have far-reaching consequences. Thus, it is expected that the opportunities to save up significant assets through their own efforts are increasingly limited for the recipients of lower and medium lifetime earnings for the birth cohorts analyzed here.

26 November 2014

German Construction Industry: New Residential Construction at Economic Peak - Public Construction Gaining Ground

The construction industry remains a key pillar of the German economy. According to the latest construction volume calculations by DIW Berlin, the value of construction in the current and coming year is forecast to grow far more rapidly than the economy as a whole: by a price-adjusted 3.3 percent in 2014 and 2.1 percent in 2015. Currently, new residential construction is an important engine for growth with the construction volume in this sector anticipated to increase by almost 12 percent in 2014, in nominal terms. However, this year will also see significant growth in construction on existing buildings. In addition to gains in residential construction, more positive developments are also currently being observed in commercial and public construction, following declines in these sectors in recent years. However, although residential construction is stable, the high growth rates recorded in the current year are unlikely to continue into 2015. Fears that construction price increases would be (too) strong, precisely in this sector, are not supported by the national average. However, the dynamic growth of new construction is expected to tail off appreciably. Moreover, largely as a result of the gloomy economic outlook, the commercial construction sector is also likely to record only moderate growth in construction volume. The highest increases for 2015 are expected in the public construction sector--although the investment program announced by the government is in fact likely to have very little impact, even if further relevant measures are implemented in the next year.

26 November 2014

Renewable Energy: Bavaria, Baden-Württemberg, and Mecklenburg-Western Pomerania Front-Runners Among German Länder

Germany's energy transition envisages a shift toward energy being supplied primarily from renewable sources. The expansion of renewables is largely determined by central government policy but the German Länder also play a major role and could consequently make a significant contribution toward a successful energy transition. DIW Berlin recently conducted its fourth renewable energy ranking of the German Länder. The study is based on a total of 60 input and output indicators at the Länder level appraising , from a renewable energy use perspective, both the efforts and performance of energy and environmental policies as well as technology and economic policies. The overall evaluation puts Bavaria, Baden-Württemberg, and Mecklenburg-Western Pomerania in the lead. Bavaria is the most progressive when it comes to the use of renewables, although wind energy potential is underexploited in this federal state. Baden-Württemberg stands out with its exemplary energy policy framework for the expansion of renewable energy. Mecklenburg-Western Pomerania has made the most advances with regard to technological and economic structural change.

19 November 2014

Sharp Increase in German Real Estate Prices Nationwide But Still No Speculative Bubble

Speculative house price increases potentially mean major real and financial risks and have increasingly been the subject of current public debate in Germany. Recent events in countries such as the US or Spain have demonstrated the negative impact that the bursting of speculative price bubbles can have on national economies. However, the signs of speculative property price bubbles are difficult to detect at national level because the aggregate data conceal opposing developments on regional real estate markets. The present DIW study analyzes a dataset comprising housing rent and price time series in 127 German cities compiled by the independent consulting company bulwiengesa AG. These data allow a detailed analysis of property prices by region and consequently make it possible to identify speculative price increases at an early stage. Explosive growth in prices has been observed in many German cities, which could be an indication of a property price bubble. However, in the majority of cases, the price increases were triggered by rises in residential rents and therefore, for the most part, are not a result of speculative influences. On the whole, also compared to other developed economies, the real estate market in Germany is structurally sound. For example, the share of housing loans with a long-term interest rate fixation tends to be very large and there are no unusual developments in lending practices. Consequently, political intervention is unnecessary at this stage, although a close eye should be kept on regional developments.

19 November 2014

Reduction in Coal Power Generation Could Help Germany Meet Climate Targets

According to the climate target set by the German government for 2020, greenhouse gas emissions are to be reduced by 40 percent compared to 1990 levels. However, current projections indicate that this target will only be achieved if further measures are implemented. The power sector has an important role to play here, around 85 percent of its emissions are produced by lignite and hard-coal power plants. A large number of German power stations are already very old and particularly CO2-intensive. Therefore, in the context of the Climate Action Programme 2020 developed by the German government, early closure of lignite and hard coal-fired power plants is being discussed as an effective short-term measure. This appears to be a particularly favorable option due to the current overcapacities, resultant low wholesale prices, and high electricity exports. Scenario calculations for the German power system for 2015 indicate that closing the oldest and most CO2-intensive coal-fired plants could make a substantial contribution to achieving the German government's climate targets. If additional hard-coal power stations with a total capacity of three gigawatts and lignite power stations with a capacity of six gigawatts were to be closed, this would result in a 23-million-ton reduction in CO2 emissions. The shutdown of hard-coal-fired power plants with an overall capacity of around three gigawatts already announced would generate further reductions. At the same time, wholesale prices are on the increase, which makes power generation by flexible gasdriven plants in particular more cost effective. The wholesale price increase would also lead to a reduction in the EEG surcharge.

5 November 2014

Development of Corporate Earnings: Positive But Inconsistent

Statistics on corporate earnings in Germany are still not being recorded satisfactorily, despite them being an important economic indicator. To date, DaFNE remains a seldom-used data basis for describing company profits. It includes statutory financial statements (balance sheet, profit and loss statement) in a longitudinal (panel) data format that enables individual company profits to be tracked and evaluated over time. The analyses in this Wochenbericht show that, on the whole (or on average), the profits of non-financial corporations are developing positively again in the wake of the financial and economic crises. Further, there appears to be considerable variation behind the averages values, for instance in the development of individual sectors. Indeed, a closer inspection of the panel data on the development of earnings by individual corporations shows a significant proportion of companies made losses in more than half of the years between 2006 and 2011. However, the total value of these losses was far lower than the earnings achieved by those companies making profits in at least half of those years. Companies making a profit before the financial and economic crises (2006, 2007) but making a loss in one of the crisis years more frequently showed losses after the crises (2010, 2011) than was the case for companies making a profit in 2006 and 2007 that also went on to show a profit in 2008 and 2009. What the data do not indicate, however, is to what extent losses incurred in the financial crisis are responsible for subsequent losses.

9 October 2014

German Economy Stagnating - Now Is The Time To Strengthen Growth

The German economy will grow by 1.3 percent this year and by 1.2 percent in 2015, predict the economic research institutes involved in the Joint Economic Forecast in their autumn report. According to the report, Germany’s economy has cooled down markedly. With economic output falling in the second quarter and stagnating in the third quarter of 2014, the engine for economic growth is proving hard to rev up again. Both domestic and foreign demand is weak: the consumer climate deteriorated recently and companies remain cautious about investment. The moderate pace of growth in the world economy and the low level of economic impetus in the euro area over the forecasting period are also having a negative impact. In this environment the economic research institutes are in favour of strengthening growth and creating more favourable investment conditions. They see financial scope for a more investment-friendly tax system and higher spending on areas that promote growth like physical and human capital.

9 October 2014

2013 "Heat Monitor Germany": Heating Energy Consumption Falls While Costs Rise

The heating market plays a key role in achieving the Federal Government's energy and climate policy objectives. In particular, major savings need to be made in heating residential buildings if the majority of buildings are to be climate-neutral by 2050. In light of this, DIW Berlin and ista Deutschland GmbH have created an up-to-date data basis that is based on the heating energy bills of apartment blocks in Germany. Significant savings were achieved between 2003 and 2013. Demand for area-specific heating energy in Multifamily buildings throughout Germany fell by around 16 percent. Given developments in recent years and the continuing increases in floor space, however, the Federal Government's medium-term and, in particular, long-term objectives require significantly greater savings. Nevertheless, decreasing energy demand does not necessarily lead to lower heating costs. The reason for this is largely a rise in oil prices which, on average, has actually overcompensated for energy savings. Given these circumstances, energy-efficiency upgrades to buildings not only provide insurance against soaring energy prices but are also an important long-term tool for maintaining real estate marketability. There are also differences in regional developments: while heating energy demand in the East German states is lower on average, savings in the West German states are more dynamic. Individual regions, for example, in southern Germany, have made substantial progress. The pattern of heating costs varies from region to region. Households in some parts of the East German states and in rural areas, where fuel oil is used more frequently, have higher energy costs.

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