{"id":75326,"date":"2024-11-20T16:15:35","date_gmt":"2024-11-20T15:15:35","guid":{"rendered":"https:\/\/dezernatzukunft.org\/?p=75326"},"modified":"2024-12-10T10:46:57","modified_gmt":"2024-12-10T09:46:57","slug":"a-controversial-investment","status":"publish","type":"post","link":"https:\/\/dezernatzukunft.org\/en\/a-controversial-investment\/","title":{"rendered":"A controversial investment"},"content":{"rendered":"

Nils Gerresheim<\/a><\/strong>, Max Krah\u00e9<\/p>\r\n\r\n

Download PDF<\/a><\/p>\r\n\r\n\r\n\r\n

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The US semiconductor company Intel is planning to build two ultra-modern chip factories near Magdeburg. This project was promised the largest industrial policy subsidy that the German government has ever approved for an individual company: almost 10 billion euros. Is this money well-spent? To answer this question, we developed guidelines for the evaluation of government investments (BESTInvest). This paper sets out these guidelines and applies them to Intel-Magdeburg. Our conclusion is that the subsidy is controversial. Although learning curve-, cluster- and innovation effects can create path dependencies in semiconductor production, there are uncertainties surrounding the size of these effects, and the impact of a single subsidy is likely to be moderate. Accordingly, it remains unclear whether the support would suffice to make Intel-Magdeburg competitive in the long term. In addition, relatively few jobs would be created, in a local labour market where there is currently a shortage of skilled workers. This calls into question the effects of the project on the regional and wider economy. In addition to economic factors, there are also relevant climate and sovereignty factors, which are positive but moderate. The over-all assessment therefore depends on the respective weights given to individual factors, as well as, if necessary, on the willingness to promote cluster formation and the competitiveness of the semiconductor industry in Germany and Magdeburg with further measures.\u202f<\/p>\r\n<\/div>\r\n

 <\/p>\r\n

Work on the content of this report was completed before the postponement of the start of construction of Intel-Magdeburg on September 16 was announced.<\/em><\/p>\r\n

Why did we write this paper?<\/h4>\r\n

Industrial policy is becoming increasingly important in advanced economies. In Germany, too, more active measures are being pursued, building on the industrial policy strategy published in 2023. This includes the planned Intel fab in Magdeburg. With an intended subsidy of 10 billion euros, this is the largest industrial policy project in the history of the Federal Republic.\u00a0<\/span>\u00a0<\/span><\/p>\r\n

In this context, we wanted to understand how to distinguish good from bad industrial policy projects. To this end, we developed an evaluation guide for state investments, called BESTInvest (<\/span>BEwertungsleitfaden f\u00fcr STaatliche Investition<\/span><\/i>). We applied this guide to the subsidy for the Intel plant in Magdeburg to identify the strengths and weaknesses of the project and present them transparently. With this evidence-based discussion, we hope to strengthen the democratic process and future industrial policy decision-making.\u202f<\/span>\u00a0<\/span><\/p>\r\n

What did we learn?<\/h4>\r\n

We learned that <\/span>evaluating <\/span>industrial policy measures on the scale of the Intel project <\/span>is a<\/span> complex<\/span> endeavour<\/span>. With Intel-Magdeburg, the German government is pursuing goals in the areas of macroeconomic and regional prosperity, climate transition and sovereignty. Whether the learning curve, cluster and innovation effects are sufficient to achieve a lasting increase in prosperity <\/span>commensurate<\/span> with the investment sum is uncertain<\/span>, as it <\/span>depends on specific, sometimes improbable<\/span>,<\/span> developments. On the labor market<\/span>,<\/span> few jobs <\/span>will be<\/span> created <\/span>relative<\/span> to the scale<\/span> of<\/span> the <\/span>su<\/span>bsidy<\/span>. <\/span>Already existing <\/span>shortage<\/span>s<\/span> of skilled worker<\/span>s <\/span>would <\/span>likely <\/span>be<\/span> further <\/span>exacerbated<\/span>. The climate and sovereignty effects are positive, but moderate.<\/span> Scenarios in which the Intel <\/span>fab<\/span> makes a significant contribution to Europe’s independence are unlikely. <\/span>In other words: the subsidy <\/span>constitutes<\/span> a controversial investment. Nevertheless,<\/span> a<\/span> comprehensive assessment of the <\/span>Intel-Magdeburg <\/span>project depends on the weighting of the individual aspects. This should not be done by us, but by <\/span>policy <\/span>makers.<\/span><\/span>\u00a0<\/span><\/span>\u00a0<\/span><\/p>\r\n

Um \u00fcber unsere weiteren Ver\u00f6ffentlichungen auf dem Laufenden zu bleiben, abonniert gerne unseren<\/em> Newsletter<\/em><\/a>. <\/em><\/p>","protected":false},"excerpt":{"rendered":"

The US semiconductor company Intel is planning to build two ultra-modern chip factories near Magdeburg. This project was promised the largest industrial policy subsidy that the German government has ever approved for an individual company: almost 10 billion eu-ros. Is this money well-spent? To answer this question, we developed guidelines for the evaluation of government investments (BESTInvest). This paper sets out these guidelines and applies them to Intel-Magdeburg. Our conclusion is that the subsidy is controversial.<\/p>\n","protected":false},"author":88,"featured_media":74752,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[194],"tags":[220,55,280,323,258],"class_list":["post-75326","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-papers","tag-eng","tag-fiscal-policy","tag-mk-en","tag-ng","tag-show-only-english-content-en"],"acf":[],"yoast_head":"\nA controversial investment - Dezernat Zukunft<\/title>\n<meta name=\"description\" content=\"Institut f\u00fcr Makrofinanzen\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dezernatzukunft.org\/en\/a-controversial-investment\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A controversial investment - 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