Skip to content
ResearchLounge

Lost economic output due to high bureaucracy - Study by ifo Institute

Ever wondered about the costs of bureaucracy? Germany loses €146 billion annually due to excessive bureaucracy! Learn how digitalisation and reforms could transform administrative processes and boost the economy. Dive into the study that outlines a brighter, streamlined future for businesses.

Frequently Asked Questions (FAQ)

  1. What is the problem with bureaucracy in Germany? While laws and regulations are essential for a functioning legal system, excessive bureaucracy is perceived as a burden, hindering economic growth. In Germany, concerns have been raised about the increasing bureaucratic burden on businesses, leading to additional costs and impacting competitiveness.

  2. How has the bureaucratic burden developed in Germany? The “Erfüllungsaufwand,” which measures the time and direct costs associated with complying with legal regulations, has increased significantly since 2021. This burden primarily affects businesses and highlights the direct costs of bureaucracy for companies.

  3. What are the economic consequences of a high bureaucratic burden? High bureaucratic burdens can lead to several negative economic outcomes:

    • Business closures and relocation of investments abroad: Businesses struggling with excessive bureaucracy may be forced to shut down or move their operations to countries with less stringent regulations.
    • Reduced start-up activity: High bureaucracy creates barriers to entry for new businesses, stifling innovation and entrepreneurial spirit.
    • Shift from profit maximization to “Rent Seeking”: Excessive bureaucracy may lead businesses to focus on navigating regulations rather than innovating and maximizing profits, a phenomenon known as “rent seeking,” which is economically inefficient.

  4. How does Germany’s bureaucratic burden compare internationally? Germany’s bureaucratic burden is slightly below the OECD average but significantly higher than in countries like Sweden, which boasts the lowest bureaucracy index. Unlike other OECD countries that have implemented significant bureaucratic reductions, Germany’s bureaucratic burden has remained stagnant over the past 15 years.

  5. What is the impact of comprehensive bureaucracy reduction on economic performance? A study by the ifo Institute revealed that a comprehensive reduction in bureaucracy could lead to a 4.6% increase in real GDP per capita. The positive effects are not immediate but build up over time, with the full impact becoming apparent around ten years after implementing the reforms.

  6. What are the estimated costs of bureaucracy for the German economy? Based on the ifo Institute study, if Germany had implemented comprehensive bureaucracy reduction in 2015, real GDP per capita would have been €2,449 higher in 2022. The study estimates that Germany loses approximately €146 billion per year due to the bureaucratic burden.

  7. Can digitization help reduce the bureaucratic burden in Germany? Digitization of public administration can play a crucial role in reducing bureaucratic burdens. This is evident from the declining trend in the Bureaucracy Cost Index published by the German Federal Statistical Office. However, to fully leverage digitization, bureaucratic processes must be simplified and adapted to digital possibilities.

  8. What are the policy recommendations to address the bureaucratic burden in Germany? A two-pronged approach is recommended:

    • Fundamental simplification and streamlining of bureaucracy: This includes reducing the number and scope of administrative procedures and improving user-friendliness.
    • Complete digitization of essential bureaucratic processes: Digitization should go beyond simply making existing processes available online. It requires a high level of digital maturity with user-friendly, end-to-end digitized, and even automated processes. Decisive political action is required to implement these recommendations, with a focus on long-term goals and a commitment to overcoming the political challenges associated with significant reforms.

Resources & Further Watching

💡 Please don’t forget to like, comment, share, and subscribe!

Youtube Hashtags

#digitaltransformation #economicgrowth #policychange #innovation #businessefficiency #bureaucracy #germany #ifo

Youtube Keywords

economic growth bureaucracy costs digital transformation policy reform economic efficiency innovation business efficiency bureaucratic reform entrepreneurship economic policy economic development digitization public administration policy change startup culture business innovation economic opportunities global competitiveness ifo institute ifo institut bürokratie bürokratieaufwand entgangene wirtschaftsleistung durch hohen bürokratieaufwand wirtschaftspolitik germany

Stay Curious. Stay Informed.

Join the ResearchLounge community to get regular updates on the latest breakthroughs in science and technology, delivered clearly and concisely. Subscribe to our channels and never miss an insight.

Help us grow by sharing our content with colleagues, students, and fellow knowledge-seekers!

Your engagement fuels discovery!

Donate Now