Research Interests

  • Innovation 
  • Competition Policy
  • Multinational Enterprises​

Current Research

VAT reduction as unconventional fiscal policy in Germany:
Fast but heterogeneous pass-through in the fuel market

with Felix Montag and Alina Sagimuldina
Download / CEPR Discussion Paper / VoxEu  
On 3 June 2020, the German government unveiled an unprecedented stimulus package to combat the economic consequences of the COVID-19 pandemic. A key element of this package is a temporary reduction of value-added tax rates between July and December 2020. The aim of this policy is to temporarily lower prices and stimulate consumption through the expectation of higher prices in the future.
 
This is the first study that estimates the pass-through rate of the VAT reduction for the market of retail fuel, a major sector of the economy. We show that pass-through was fast, substantial, but incomplete. Moreover, pass-through rates differ for different types of fuel. More specifically, pass-through is substantially larger for diesel than for gasoline (E5). As diesel engine drivers on average drive twice as many kilometers per year as gasoline engine drivers, a plausible explanation for the observed pass-through rates is that diesel drivers are more likely to search and shop for lower prices than drivers of gasoline engines. 

Standing on the shoulders of science

with Martin Watzinger, LMU
 Download / CEPR Discussion Paper / VoxEu  / Patent novelty data / R&R in Strategic Management Journal
The goal of science is to advance knowledge, yet little is known about its value for marketplace inventions. While important breakthrough technologies could not have been developed without scientific background, skeptics argue that this is the exception rather than the rule, questioning the usefulness of basic research for private sector innovations and the effectiveness of the knowledge transfer from university to industry. We analyze the universe of U.S. patents to establish three new facts about the relationship between science and the value of inventions. First, we show that a patent that directly builds on science is on average 2.9 million U.S. dollars more valuable than a patent in the same technology that is unrelated to science. Based on the analysis of the patent text, we show second that the novelty of patents predicts their value, and third that science-intensive patents are more novel. This documents that science introduces new concepts that are valuable for marketplace inventions. Our study informs the debate on the merits of science for corporate innovation and the origins of breakthrough inventions.

How antitrust can spur innovation: ​Bell Labs and the 1956 consent decree

with Martin Watzinger, Thomas Fackler and Markus Nagler
 Download / VoxEU/ Link to CEPR Discussion Paper
​AEJ: Policy, accepted

Is compulsory licensing an effective antitrust remedy to increase innovation? To answer this question, we analyze the 1956 consent decree which settled an antitrust lawsuit against Bell, a vertically integrated monopolist charged with foreclosing the telecommunications equipment market. Bell was forced to license all its existing patents royalty-free, including those not related to telecommunications. We show that this led to a long-lasting increase in innovation but only in markets outside the telecommunications industry. Within telecommunications, where Bell continued to exclude competitors, we find no effect. Compulsory licensing is an effective antitrust remedy only if incumbents cannot foreclose the product markets.

Media:
New York Times / Latest Thinking / Stanford Law Revice  / The Register / Fast Company / American Progress / The Conversation 

Measuring the Spillovers of Venture Capital

with Martin Watzinger
Download full paper /VoxEU / ​Link to CEPR Discussion Paper
Review of Economics and Statistics, accepted

We provide the first measurement of knowledge spillovers from venture capital-financed companies onto the patenting activities of other companies. On average, these spillovers are nine times larger than those generated by the R&D investment of established companies. Spillover effects are larger in complex product industries than in discrete product industries. Start-ups with experienced inventors holding a patent at the time of receiving the first round of investment produce the largest spillovers, indicating that venture capital fosters the commercialization of technologies. Methodologically, we contribute by developing a novel definition of the spillover pool, combining citation-based and technological proximity-based approaches.

Multinational firms and tax havens

with Anna Gumpert and James Hines
Review of Economics and Statistics 2016, Vol. 98 (4), 713-727
 Substantially revised version of "The use of tax havens in exemption regimes" 2011, NBER working paper 17644.

Multinational firms with operations in high-tax countries can benefit the most from reallocating taxable income to tax havens, though this is sufficiently difficult and costly that only 20.4 percent of German multinational firms have any tax haven affiliates. Among German manufacturing firms, a one percentage point higher foreign tax rate is associated with a 0.3 percentage point greater likelihood of owning a tax haven affiliate. This is consistent with tax avoidance incentives, and contrasts with earlier evidence for U.S. firms. The relationship is less strong for firms in service industries, possibly reflecting the difficulty of reallocating taxable service income.

Big Banks and Macroeconomic Outcomes: Theory and Cross-Country Evidence of Granularity

with Franziska Bremus, Claudia Buch and Katheryn Russ
Journal of Money, Credit and Banking, 2018, vol 50(8), 1785-1825
2013, NBER working paper 19093.
Does the mere presence of big banks affect macroeconomic outcomes? In this paper, we develop a theory of granularity (Gabaix, 2011) for the banking sector, introducing Bertrand competition and heterogeneous banks charging variable markups. Using this framework, we show conditions under which idiosyncratic shocks to bank lending can generate aggregate fluctuations in the credit supply when the banking sector is highly concentrated. We empirically assess the relevance of these granular effects in banking using a linked micro-macro dataset of more than 80 countries for the years 1995-2009. The banking sector for many countries is indeed granular, as the right tail of the bank size distribution follows a power law. We then demonstrate granular effects in the banking sector on macroeconomic outcomes. The presence of big banks measured by high market concentration is associated with a positive and significant relationship between bank-level credit growth and aggregate growth of credit or gross domestic product.

Publications

Books

  • "Contracts in Trade and Transition: The Resurgence of Barter" (with Dalia Marin), Cambridge and London: MIT Press, 2002

Statements & Reports

  • Analyse der Beweggründe, der Ursachen und der Auswirkungen des so genannten Offshoring auf Arbeitsplätze und Wirtschaftsstruktur in Deutschland (mit Claudia Buch, Christian Arndt, Iris Kesternich, Anselm Mattes, Christian Mugele, Harald Strotmann), Gutachten erstellt im Auftrag des Bundesministeriums für Wirtschaft und Technologie, Tübingen/München  2007
  • Non-Horizontal Mergers Guidelines: Ten Principles, A Note by the EAGCP Merger-Subgroup, (mit Marc Ivaldi, Bruce Lyons, John van Reenen, Frank Verboven, Nikos Vettas, Xavier Vives), erstellt für die Economic Advisory Group for Competition Policy des Chief Economist, DG Competition, Europäische Kommission, Brüssel 2007