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Publications

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DIW on 15.12.2017, 11:00 h
An Analysis of a Forward Capacity Market with Long-Term Contracts

Abstract: We analyze the effectiveness of a forward capacity market (FCM) with long-term contracts in an electricity market in the presence of a growing share of renewable energy. An agent-based model is used for this analysis. Capacity markets can compensate for the deteriorating incentive to invest in controllable power plants when the share of variable renewable energy sources grows, but may create volatile prices themselves. Capacity markets with long-term contracts have been developed, e.g. in the UK, to stabilize capacity prices. In our analysis, a FCM is effective in providing the required adequacy level and leads to lower cost to consumers and [...] ( more )

DIW on 15.12.2017, 01:00 h
The World Economy and the Euro Area: Global Upswing Remains Intact for the Time Being: DIW Economic Bulletin

Abstract: The global economy is expected to grow by four percent annually over the next two years. This is a slight increase in the German Institute for Economic Research forecast in comparison to that of the fall. The upswing will gain momentum in both developed and emerging economies. Private consumption will play a pivotal supporting role as investment continues to grow rapidly around the globe. Despite the high level of unemployment in some countries, the euro area is experiencing stable growth, though its investment could be more dynamic. In China, cutting back overcapacity in manufacturing should suitably curb expansion. And a somewhat less [...] ( more )

DIW on 15.12.2017, 01:00 h
German Economy: Upswing Has Gained Breadth but Will Not Hold Pace: DIW Economic Bulletin

Abstract: The upswing of the German economy continues and since the beginning of 2017, even at a somewhat faster pace. Sharp gains in employment are still driving consumption. And companies are investing significantly more in machines and facilities. Many global risks that previously limited the propensity to invest?in Germany and many other countries?have vanished. And the euro area is also finally feeling the upswing. The German export industry in particular is enjoying the benefits. The German Institute for Economic Research (DIW Berlin) is thus raising its forecast for German GDP and now anticipates a plus of 2.2 percent for this year. [...] ( more )

DIW on 15.12.2017, 01:00 h
German Economy Booming but Not to the Point of Overheating: Editorial


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DIW on 14.12.2017, 12:00 h
Rethinking Academic Publications: Developing an Open-Source-Framework for a Multi-Layer Narrative in Online Publishing

Abstract: The internet has fundamentally changed the way researchers work and collaborate, but has had less impact on the way they publish their results. In this pa-per, we ask how scientific reports should be designed with the internet as the primary distribution channel in mind. We propose a concept for a multi-layerdesign, which is capable of including both interactive elements and a comprehensive data-layer. For the implementation, we suggest working with an output-independent format and a modular compilerto generate various output formats, most of all, HTMLand PDF. The HTML-version utilizes modern web standards like HTML5, CSS3 and JavaScript. [...] ( more )

DIW on 14.12.2017, 11:00 h
Marginal Employment for Welfare Recipients: Stepping Stone or Obstacle?

Abstract: Marginal employment (ME) is one of the largest forms of atypical employment in Germany. We analyse whether ME has a ?stepping stone? function for unemployed individuals, i.e., whether ME increases the subsequent probability of regular employment. We find differing treatment effects by unemployment duration. According to our results, ME increases the likelihood of regular employment within a 3-year observation period only for those who take up ME several months after beginning to receive benefits. In contrast, for those starting ME within the first months of receiving benefits, there is no effect on the probability of regular employment. [...] ( more )

DIW on 14.12.2017, 10:00 h
Will You Still Trust Me Tomorrow?: The Causal Effect of Terrorism on Social Trust

Abstract: How do people respond to terrorist events? Exploiting the timing of the 2010 wave of the annual ?Society Opinion Media? survey in Sweden, we study the causal effect of the Stockholm bombings of 11 December 2010 on Swedish public opinion. Our main contribution is that we draw explicit attention to the link between terrorist events and individuals? social trust. While we identify a strong effect on individuals? concern over terrorism, any observed effects with respect to generalised and neighbourhood trust appear to be short-lived?suggesting that isolated terror events have only limited, transitory effects on established social [...] ( more )

DIW on 14.12.2017, 01:00 h
Third Country Effects of Fiscal Devaluations

Abstract: We analyze fiscal devaluation in a three-country model. The introduction of the third country, outside a monetary union, increases the expansionary effect of fiscal devaluation and the second country of the monetary union experiences a boom instead of a recession.
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DIW on 13.12.2017, 04:00 h
Long-Term Growth Perspectives in Japan and the Euro Area

Abstract: Euro area countries and Japan are confronted with similar challenges. Potential output is on a declining trend in the Euro area, and the decrease started well before the financial crisis. In Japan, low-output growth is a striking feature since many years, despite the unconventional monetary policy stance and numerous fiscal stimulus programs provided by the government. According to a growth accounting exercise based on a Cobb-Douglas production function, the development in both economies can be traced to a weak evolution of TFP. Weak capital deepening is detected especially in the Euro area. Driven by high uncertainty, the willingness of [...] ( more )

DIW on 13.12.2017, 03:00 h
Electrification of a City Bus Network: An Optimization Model for Cost-Effective Placing of Charging Infrastructure and Battery Sizing of Fast-Charging Electric Bus Systems

Abstract: The deployment of battery-powered electric bus systems within the public transportation sector plays an important role in increasing energy efficiency and abating emissions. Rising attention is given to bus systems using fast charging technology. This concept requires a comprehensive infrastructure to equip bus routes with charging stations. The combination of charging infrastructure and bus batteries needs a reliable energy supply to maintain a stable bus operation even under demanding conditions. An efficient layout of the charging infrastructure and an appropriate dimensioning of battery capacity are crucial to minimize the total cost of [...] ( more )

DIW on 13.12.2017, 02:00 h
Cross-Border Effects of Capacity Mechanisms in Interconnected Power Systems

Abstract: The cross-border effects of a capacity market and a strategic reserve in interconnected electricity markets are modeled using an agent-based modeling methodology. Both capacity mechanisms improve the security of supply and reduce consumer costs. Our results indicate that interconnections do not affect the effectiveness of a capacity market, while a strategic reserve is affected negatively. The neighboring zone may free ride on the security of supply provided by the zone implementing a capacity mechanism. However, a capacity market causes crowding out of generators in the energy-only zone. A strategic reserve implemented by this region could [...] ( more )

DIW on 13.12.2017, 02:00 h
Analyzing the Continuity of Attitudinal and Perceptual Indicators in Hybrid Choice Models

Abstract: The main objective of this paper is to compare the consequences of treating the attitudinal and perceptual indicators of hybrid discrete choice (HDC) models as continuous or ordinal outcomes. Based on tradition and computational reasons, such indicators are still predominantly treated as continuous outcomes in practice. This usually neglects their nature (as respondents are normally asked to state their preferences, or level of agreement with a set of statements, using a discrete scale) and may induce bias.We conducted an analysis based on simulated data and real information (two case studies) and were able to find that the distribution of [...] ( more )

DIW on 12.12.2017, 11:00 h
Patrilocal Residence and Female Labour Supply

Abstract: Many people around the world live in patrilocal societies. Patrilocality prescribes that women move in with their husbands? parents, relieve their in-laws from housework, and care for them in old age. This arrangement is likely to have labour market consequences, in particular for the women. We study the effect of co-residence on female labour supply in Kyrgyzstan, a strongly patrilocal setting. We account for the endogeneity of co-residence by exploiting the tradition that youngest sons usually live with their parents. In both OLS and IV estimations, the effect of co-residence on female labour supply is negative and insignificant. This is [...] ( more )

DIW on 12.12.2017, 04:00 h
Bayesian Inference for Structural Vector Autoregressions Identified by Markov-Switching Heteroskedasticity

Abstract: In order to identify structural shocks that affect economic variables, restrictions need to be imposed on the parameters of structural vector autoregressive (SVAR) models. Economic theory is the primary source of such restrictions. However, only over-identifying restrictions can be tested with statistical methods which limits the statistical validation of many just-identified SVAR models. In this study, Bayesian inference is developed for SVAR models in which the structural parameters are identified via Markov-switching heteroskedasticity. In such a model, restrictions that are just-identifying in the homoskedastic case, become [...] ( more )

DIW on 07.12.2017, 10:00 h
International Investments and Current Account Imbalances: The Importance of Valuation Changes

Abstract: Global capital flows have strongly increased from the 1980s until the outbreak of the financial crisis. As a result of this development, Germany's foreign investment has risen to around 250 percent of gross domestic product while foreign investments in Germany have increased to about 200 percent of Germany?s gross domestic product. This positive difference between Germany?s assets and liabilities is a result of the country?s continuous current account surpluses, which represent net financial flows ? the difference between outflows and inflows. Investments abroad offer investors the opportunity to diversify their savings and possibly [...] ( more )

DIW on 06.12.2017, 04:00 h
Minimum Wage Not yet for Everyone: On the Compensation of Eligible Workers before and after the Minimum Wage Reform from the Perspective of Employees

Abstract: Calculations based on data from the Socio-Economic Panel (SOEP) show that after the introduction of a statutory minimum wage in Germany in January 2015, the wage growth of eligible employees with low wages accelerated significantly. Before the reform, the nominal growth in contractual hourly wages in the lowest decile, the bottom tenth of the pay distribution, was less than two percent in the long-term two-year average, while from 2014 to 2016 it was around 15 percent. Nevertheless, in the first half of 2016, around 1.8 million employees who were eligible for the minimum wage of 8.50 euros gross per hour still earned contractual hourly wages [...] ( more )

DIW on 06.12.2017, 04:00 h
Using Public Procurement as a Decarbonisation Policy: A Look at Germany

Abstract: Public authorities spend large proportions of their GDP on goods and services and are therefore responsible for a significant share of embedded emissions. Given this large impact, governments have the responsibility of decarbonizing their purchases, as well as the potential to influence markets towards sustainability. So-called ?Green Public Procurement? (GPP) consists in the use of environmental criteria in the procurement process. In Germany, Europe?s biggest economy, public purchases account for 15 percent of annual GDP. However, despite a rising trend, the use of GPP in public procurement contracts remains marginal. The main [...] ( more )

DIW on 06.12.2017, 04:00 h
Early Exit from ECB Bond Purchase Program Could Reduce GDP Growth and Inflation

Abstract: The European Central Bank is planning a gradual reduction of government bond purchases under the asset purchase program it initiated in 2015. The present study by the German Institute for Economic Research analyzes the potential macroeconomic implications of different exit strategies. The authors examined the potential effects of a reduction in net purchase volume, an early exit, and a faster exit from the program on output and inflation in the euro area. Model simulations showed that economic growth and inflation rates would decrease in all three scenarios. However, the effects of the scenario with reduced asset purchases are less severe [...] ( more )

DIW on 06.12.2017, 03:00 h
The Working Class Left Behind? The Class Gap in Life Satisfaction in Germany and Switzerland over the Last Decades

Abstract: The 1990s and 2000s were a gloomy period for Germany?s working class, hit by mass unemployment, welfare retrenchment and wage stagnation. We examine whether the growing economic disparity between the top and the bottom of Germany?s class structure was accompanied by a widening class gap in life satisfaction. We analyse whether there is a social class gradient in life satisfaction and whether, over the last decades, this class gradient increased in Germany, relative to the comparison case of Switzerland. We use panel data for Germany (1984-2014) and Switzerland (2000-2015) and check the robustness of our results by replicating our [...] ( more )

DIW on 06.12.2017, 02:00 h
Decentralization and Public Procurement Performance: New Evidence from Italy

Abstract: We exploit a new dataset based on EU procurement award notices to investigate the relationship between the degree of centralization of public procurement and its performance. We focus on the case of Italy, where all levels of government, along with a number of other public institutions, are involved in procurement and are subject to the same EU regulation. We find that i) municipalities and utilities, which currently award the largest shares of contracts, perform worse than all other institutional categories; and ii) decentralization implies lower performance only when it comes with weak competences of procurement officials. The evidence [...] ( more )

DIW on 05.12.2017, 02:00 h
Persistence in the Cryptocurrency Market

Abstract: This paper examines persistence in the cryptocurrency market. Two different longmemory methods (R/S analysis and fractional integration) are used to analyse it in the case of the four main cryptocurrencies (BitCoin, LiteCoin, Ripple, Dash) over the sample period 2013-2017. The findings indicate that this market exhibits persistence (there is a positive correlation between its past and future values), and that its degree changes over time. Such predictability represents evidence of market inefficiency: trend trading strategies can be used to generate abnormal profits in the cryptocurrency market.
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DIW on 04.12.2017, 02:00 h
Effectiveness of the ECB Programme of Asset Purchases: Where Do We Stand?

Abstract: The ECB has engaged in several forms of unconventional monetary policy since 2007. This report documents empirically that the implemented measures were effective. In a counterfactual analysis, the report simulates the effects of an unconventional monetary policy shock of -10 basis points to euro area sovereign yields, consistent with the effect of the first announcement of the Expanded Asset Purchase Programme (EAPP). The simulation shows that the surprise expansion led to significant increases of output, prices, and inflation expectations, as well as to a drop in the unemployment rate. The shock is transmitted to the economy through lower [...] ( more )

DIW on 01.12.2017, 01:00 h
Coding of Free-Text Answers on the Most Important Political Problem in Germany - Methods of Coding and Documentation of Results


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DIW on 30.11.2017, 11:00 h
Essays on Risk Preferences and Peer Effects in Household Decision-Making: Experimental Evidence


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DIW on 30.11.2017, 09:00 h
Financial Literacy and Financial Behavior: Evidence from the Emerging Asian Middle Class

Abstract: This paper analyses financial literacy and financial behavior of middle class people living an urban Asian economy. Other than most papers on financial literacy that focus on people in developed countries, we surveyed people living Bangkok. Using standard financial literacy questions, we find that financial literacy levels are largely comparable to industrialized countries, but understanding of more advanced financial concepts is lower. Similarly, savings accounts are held by most people, but more sophisticated products are a lot less common. We further show, in line with the literature, that higher financial literacy leads to improved [...] ( more )

DIW on 30.11.2017, 02:00 h
Partial Retirement: Effects on Employment and Implications for Government Budgets

Abstract: The demographic change is posing many challenges for government budgets. In the face of a shrinking work force, keeping the number of workers and thus pension contributors at the highest possible level is a key economic policy goal. This could be achieved if people retire from the work force later in life. Partial retirement, the option to work part-time while drawing a pension before reaching the normal retirement age, could create the necessary conditions for reaching this goal. The impact of partial retirement on employment will be simulated below. The results show that unrestricted access to partial retirement can lead to an increase in [...] ( more )

DIW on 30.11.2017, 02:00 h
Nuclear Power Unnecessary for Climate Protection—There Are More Cost-Efficient Alternatives

Abstract: The world needs to continue working to protect the climate?this is generally undisputed. However, there is no agreement on which technologies should be used to decarbonize the energy sector. Many international scenarios still assume a relevant role for nuclear power in the future. However, a study by the German Institute for Economic Research shows that the Paris climate protection target? limiting global warming to below two degrees?can be achieved inexpensively without nuclear power. The results of a global energy system model indicate that no new nuclear power plants have to be built in order to meet the global climate target. It [...] ( more )

DIW on 29.11.2017, 03:00 h
Labour Market Responses to Social Security Contributions and Social Benefits: Empirical Evidence from Germany


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DIW on 28.11.2017, 01:00 h
US Monetary Policy and the Euro Area

Abstract: This study investigates the international spillover effects of contractionary US monetary policy and its transmission channels on members of the euro area (EA) before and after the implementation of the euro. I find the multilateral spillover effects on individual EA economies' real activity and inflation to be asymmetric, i.e. the responses are mainly expansionary but not exclusively so. While the effects are diverse and rather large before 1999, responses become more homogeneous and smaller in size after the implementation of the euro. However, country-specific asymmetries remain. Trade and interest rates but also credit, stock and housing [...] ( more )

DIW on 27.11.2017, 02:00 h
The Effectiveness of Capacity Markets in the Presence of a High Portfolio Share of Renewable Energy Sources

Abstract: The effectiveness of a capacity market is analyzed by simulating three conditions that may cause suboptimal investment in the electricity generation: imperfect information and uncertainty; declining demand shocks resulting in load loss; and a growing share of renewable energy sources in the generation portfolio. Implementation of a capacity market can improve supply adequacy and reduce consumer costs. It mainly leads to more investment in low-cost peak generation units. If the administratively determined reserve margin is high enough, the security of supply is not significantly affected by uncertainties or demand shocks. A capacity market is [...] ( more )

DIW on 24.11.2017, 11:00 h
Examining the “Veggie” Personality: Results from a Representative German Sample

Abstract: An increasing proportion of people choose to follow a vegetarian diet. To date, however, little is known about if and how individual differences in personality relate to following a vegetarian diet. In the two studies presented here, we aimed to (1) estimate the prevalence of self-defined vegetarians in two waves of a German representative sample (N = 4,496 and 5,125, respectively), (2) analyze the effect of socio-demographic variables on dietary behavior, and (3) examine individual differences between vegetarians and meat eaters in personality traits, political attitudes, and health-related variables. In Study 1, a strict definition of [...] ( more )

DIW on 24.11.2017, 11:00 h
The Relation between Religiosity and Muslims' Social Integration: A Two-Wave Study of Recent Immigrants in Three European Countries

Abstract: Does their degree of religiosity affect how successfully recent Muslim migrants integrate socially into the host society in terms of their social contacts with the majority population and their ethno-religious group? And/or do these co-ethnic and interethnic social contacts affect the religiosity of Muslim migrants over time? On the basis of a two-wave study among recent migrants in Germany, the Netherlands and the U.K., the relationship between religious practices and social contact is studied. Findings indicate that Muslims who were more religious before migration develop more co-ethnic contacts shortly after moving to Europe, which in [...] ( more )

DIW on 24.11.2017, 11:00 h
Less Alimony after Divorce – Spouses’ Behavioral Response to the 2008 Alimony Reform in Germany

Abstract: The 2008 alimony reform in Germany considerably reduced post-marital and caregiver alimony. We analyze how individuals adapted to these changed rulings in terms of labor supply, the intra-household allocation of leisure, and marital stability. We use the German Socio-Economic Panel (SOEP) and conduct a difference-in-difference analysis to investigate couples? behavioral responses to the reform. The results do not confirm theoretical expectations from labor supply and household bargaining models. In particular, we do not find evidence that women increase their labor supply as a result of the negative expected income effect. Neither do our [...] ( more )

DIW on 24.11.2017, 02:00 h
Parental Socio-Economic Status and Childcare Quality: Early Inequalities in Educational Opportunity?

Abstract: This study examines whether children from potentially disadvantaged families attend early childhood education and care (ECEC) centers of lower quality compared to more advantaged children in the universal and strongly state-subsidized ECEC system in Germany. We combine the representative German Socio-Economic Panel (SOEP) with the 2014 K2ID- SOEP extension study on ECEC quality. We run linear and logistic regression models of 32 quality indicators based on 818 children who attend 749 ECEC groups in 647 centers. The findings provide evidence that migrant children and in particular children of low-educated parents experience moderately lower [...] ( more )

DIW on 23.11.2017, 03:00 h
Companies with R&D Abroad Make Germany a Strong Research Location

Abstract: In recent years, German companies have invested more in research and development (R&D) abroad. After a prolonged plateau period, the proportion of investment abroad rose to around 35 percent; concurrently R&D expenditure in Germany has continued to rise sharply. Growth abroad did not occur at the expense of domestic research. Foreign companies in Germany have also invested more in R&D recently but have not yet topped the 2011 record high. Measured by stocks of foreign direct investment, they should still have some potential for higher expenditure in R&D. In international comparison, the growth in private R&D investment in Germany in recent [...] ( more )

DIW on 23.11.2017, 03:00 h
Incentives for the Long-Term Integration of Renewable Energies: A Plea for a Market Value Model

Abstract: Due to increasing shares of renewable energies in electricity production, the cost-effective system integration of these installations is becoming more and more important. Technologies and locations are viewed as system-friendly when they are more cost-efficient and easier to integrate because they, unlike other installations, produce at times when electricity is more valuable. This report shows that project developers of renewable energies in Germany have had limited incentivesto invest in system-friendly installations. A market value model is derived based on five criteria for the further development of support instruments. This model [...] ( more )