News Archive

A new EconPol Policy Brief shows that in Germany, higher corporate taxes lead to a decline in private investment: a one percentage point increase in corporate taxes is associated with a cut in firm investment of around three percent.  This means that each additional Euro of tax revenues comes at the cost of a decrease in firm investment of more than two Euro. If taxes are increased during a recession, the magnitude of the investment response is twice as large. The authors conclude that fiscal policy should therefore avoid higher corporate taxation in times of economic crisis.

On July 12, 2022 the EconPol Pillars Conferce on European Labor Markets will take place in Brussels. Starting at 9:30 CEST a.m., the conferece discusses the impact of increasing competition with China and Latin America and digital transformation on labor markets in Europe. Livestream of the event will be available unter www.ifo.de/en/live.

The Ukraine war and geopolitical tensions pose major challenges for supply chains. Whereas shortages of microchips became a symbol of supply chain disruptions during Covid-19, a survey from June 2022 from the ifo Institute shows that over 74% of German manufacturing firms report production disruptions due to shortages of different types of inputs and raw materials. The production of key technologies that are necessary, for instance for the energy transition, often depends on imported raw materials.

How to deal with the already high levels of national debt in view of rising inflation in the eurozone? In his new Policy Brief Clemens Fuest argues that giving governments more debt leeway is the wrong way to go. Fiscal policy coordination should instead focus more on reallocating public expenditure and thus on increasing its quality rather than its quantity.

How do national governments use funds from the European Recovery and Resilience? A new EconPol Policy Report conducts an in-depth analysis of the national recovery and resilience plans of Austria, Belgium, and Germany. The results suggest that the EU funds are extensively used to replace national spending that governments would have made anyway. The share of new investment projects is smallest in Germany (52%) and highest in Belgium (77%). Austria ranks in the middle with 54%.