Latest Press Releases

Many countries have seen a rapid surge in public debt levels due to the coronavirus pandemic. It comes therefore as little surprise that corporate taxation has become a focus of interest among policymakers as an alternative source of income to bridge these massive financing gaps in public budgets. While previous discussions have mainly focused on how to prevent a global decrease in corporate tax rates as economies try to increase their attractiveness as a business location, the recent shift in tax policy in the US and the UK have steered the discussion into a new direction. With both the UK and the US taking steps to raise company taxes, the question of whether businesses should be required to share the responsibility of covering COVID-19-related deficits through higher taxes could also become more relevant in Germany.    

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Regional economic development pays off: it secures employment in structurally weak areas and reduces regional inequality – at a lower cost than other policy measures such as increasing unemployment benefits. If, on the other hand, the subsidy is reduced, employment falls. This is the result of a recent study by ZEW Mannheim in cooperation with the University of Mannheim, which examines subsidies under the German policy measure to improve regional economic structures, “Verbesserung der regionalen Wirtschaftsstruktur” (GRW), from 1997 to 2017. The ZEW study is based on data from the Institute for Employment Research (IAB) and the Federal Statistical Office.

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The coronavirus crisis is hitting companies hard. This also affects M&A deals. The number of mergers and acquisitions (M&A) involving German firms has fallen sharply due to the COVID-19 pandemic. A similar trend can be observed in M&A transactions at the international level. The number of mergers and acquisitions by and with companies based in North America, China or Western Europe decreased significantly as well. This is the result of a recent analysis by ZEW Mannheim based on the Zephyr database of Bureau van Dijk, a Moody’s Analytics Company.

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Despite the upswing in the US labour market, the US Federal Reserve has decided to keep its benchmark rate unchanged in a range of 0.0 and 0.25 per cent and not to slow down its asset purchases. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter:

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The right way to deal with the high sovereign debt levels of many eurozone countries in the post-Covid era is the focus of a discussion today at an English-language seminar organized by ZEW Mannheim and EconPol Europe in cooperation with the Brigitte Strube Foundation. The panelists are Dr. Cinzia Alcidi, Director of Research, Head of the Economic Policy Unit at the Centre for European Policy Studies (CEPS) in Brussels; Prof. Volker Wieland, Ph.D., Professor of Monetary Economics at Goethe University Frankfurt and member of the German Council of Economic Experts; and Prof. Dr. Friedrich Heinemann, Head of Research and expert on Public Finance at ZEW. Commenting on the possible handling of government debt in the eurozone, Heinemann says:

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German consumers are more strongly affected by rising markups in trade, real estate and housing, healthcare and social services, and other services than the economy as a whole. And this trend is steadily increasing. In particular, households with low incomes, such as retired households, are negatively affected by such markups, according to a study by ZEW Mannheim commissioned by the Federal Ministry of Justice and Consumer Protection. Reasons for this include the increasing market power of companies and corporate concentration.

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Around 420,000 German households over the age of 65 worry about their income, even though they have no outstanding debt on their homes. In contrast to other retirement planning schemes, the market for reverse mortgages is not well developed. According to ZEW researchers, the reasons for this lie with both consumers and providers. As their study suggests, the market potential of reverse mortgages could grow significantly in the future.

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The Federal Constitutional Court has cleared the way for the EU’s 750 billion euro recovery fund in Germany. The actual constitutional suit has, however, not yet been decided. Professor Friedrich Heinemann, research department head and public finance expert at ZEW Mannheim, comments on this matter:

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In the April 2021 survey (6–14 April 2021), the CEP indicator climbed 3.5 points to a new value of 46.3 points. The CEP indicator, based on the China Economic Panel (CEP) and conducted by ZEW Mannheim in cooperation with Fudan University, Shanghai, reflects the economic expectations of international financial market experts for China on a 12-month basis.

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Individuals who have experienced severe financial losses due to the coronavirus pandemic are significantly less willing to take risks. This particularly appears to be the case for households with a low income. On the contrary, other personality traits, such as patience and locus of control, remain unchanged following financial losses. These are the findings of a recent study by RWI – Leibniz Institute for Economic Research and ZEW Mannheim.

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