Germany on the Long Road to Smart Regulation

Germany’s lagging position in terms of regulatory attractiveness is evident from the 2023 Country Index for Family Businesses calculated by ZEW Mannheim. But how and where exactly do inefficiencies persist? A detailed study by the authors of the Country Index, commissioned by the Foundation for Family Businesses, reveals that Germany is partly on the right track towards evidence-based economic policy. However, introducing more market-oriented incentives could enhance the acceptance of governmental interventions and trim costs.

Governance and bureaucratic burdens weigh heavily against Germany’s appeal as a business location compared to the 21 countries surveyed. Despite a substantial financial input, public spending efficiency remains low. However, the research team led by Professor Friedrich Heinemann also acknowledges positive strides. Germany performs relatively well in an OECD comparison when it comes to the assessment and evaluation of laws.

A particular focus of the new study is on climate policy. Germany has opted for a highly regulatory approach, which significantly restricts the freedom of companies. In contrast, Scandinavian countries have adopted a market-based approach and use the CO₂ pricing mechanism to a larger extent. Consequently, companies in these countries exhibit more optimism and acceptance.