TY - JOUR A1 - Eydam, Ulrich A1 - Qualo, Hannes T1 - Income inequality and taxes BT - an empirical assessment JF - Applied economics letters N2 - Economic literature offers several distinct explanations for the raising income inequality observed in several countries. In the debate about the causes of inequality a growing strand of research focuses on the effects of taxation on income inequality. We contribute to this literature by providing a systematic empirical account of the relationship between income inequality and personal income taxation (PIT) for a set of countries over the period 1981–2005. In order to take alternative explanations into account and to isolate the effects of tax progressivity, we include a wide range of control variables. We address potential reverse causality between inequality and PIT by using the variation in tax schedules of neighbouring countries. Our results confirm a statistically significant negative association between the progressivity of PIT and income inequality. Overall, we find that especially the average and the marginal tax rate have the potential to reduce income inequality. This finding is qualitatively robust across various different empirical specifications. KW - income inequality KW - tax progressivity KW - personal income taxation KW - instrumental variables Y1 - 2023 U6 - https://doi.org/10.1080/13504851.2023.2208328 SN - 1350-4851 SN - 1466-4291 SP - 1 EP - 8 PB - Routledge CY - Abingdon ER - TY - RPRT A1 - Eydam, Ulrich A1 - Leupold, Florian T1 - What is it good for? BT - On the Inflationary Effects of Military Conflicts T2 - CEPA Discussion Papers N2 - Military conflicts and wars affect a country’s development in various dimensions. Rising inflation rates are a potentially important economic effect associated with conflict. High inflation can undermine investment, weigh on private consumption, and threaten macroeconomic stability. Furthermore, these effects are not necessarily restricted to the locality of the conflict, but can also spill over to other countries. Therefore, to understand how conflict affects the economy and to make a more comprehensive assessment of the costs of armed conflict, it is important to take inflationary effects into account. To disentangle the conflict-inflation-nexus and to quantify this relationship, we conduct a panel analysis for 175 countries over the period 1950–2019. To capture indirect inflationary effects, we construct a distance based spillover index. In general, the results of our analysis confirm a statistically significant positive direct association between conflicts and inflation rates. This finding is robust across various model specifications. Moreover, our results indicate that conflict induced inflation is not solely driven by increasing money supply. Furthermore, we document a statistically significant positive indirect association between conflicts and inflation rates in uninvolved countries. T3 - CEPA Discussion Papers - 65 KW - inflation KW - wars KW - military conflicts KW - spillover effects KW - dynamic panel estimation Y1 - 2023 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-597966 SN - 2628-653X IS - 65 ER - TY - CHAP A1 - Eydam, Ulrich A1 - Gabriadze, Irakli ED - Moldogaziev, Tima T. ED - Brewer, Gene A. ED - Kellough, J. E. ED - Durning, Danny W. T1 - Legal institutions, financial liberalization and financial development in transition economies T2 - Public policy and politics in Georgia : lessons from post-Soviet transition Y1 - 2021 SN - 978-3-8382-1535-8 SN - 978-3-8382-7535-2 SP - 221 EP - 256 PB - ibidem CY - Stuttgart ER - TY - RPRT A1 - Eydam, Ulrich A1 - Diluiso, Francesca T1 - How to Redistribute the Revenues from Climate Policy? BT - A Dynamic Perspective with Financially Constrained Households T2 - CEPA Discussion Papers N2 - In light of climate change mitigation efforts, revenues from climate policies are growing, with no consensus yet on how they should be used. Potential efficiency gains from reducing distortionary taxes and the distributional implications of different revenue recycling schemes are currently debated. To account for households heterogeneity and dynamic trade-offs, we study the macroeconomic and welfare performance of different revenue recycling schemes using an Environmental Two-Agent New-Keynesian model, calibrated on the German economy. We find that, in the long run, welfare gains are higher when revenues are used to reduce distortionary taxes on capital, but this comes at the cost of higher inequality: while all households prefer labor income tax reductions to lump-sum transfers, only financially unconstrained households are better off when reducing taxes on capital income. Interestingly, we find that over the transition period relevant to meet short-medium run climate targets, labor income tax cuts are the most efficient and equitable instrument. T3 - CEPA Discussion Papers - 45 KW - double dividend KW - E-DSGE KW - environmental tax reform KW - non-Ricardian households KW - revenue recycling Y1 - 2022 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-548960 SN - 2628-653X IS - 45 ER - TY - THES A1 - Eydam, Ulrich T1 - Essays on Macroeconomics N2 - This dissertation consists of four self-contained papers. Each paper deals with a specific macroeconomic question. The first paper assesses the distributional implications of environmental policies from a general equilibrium macroeconomic perspective. I develop a New-Keynesian model with several types of uncertainties and frictions that incorporates liquidity constrained households. The model is calibrated to match the German economy and the numerical results show that climate policy instruments can be associated with regressive welfare effects. Furthermore, the analysis shows that these effects can be mitigated through an appropriate revenue recycling scheme. The second paper deals with short-run inequality dynamics within a real business cycle model. An empirical evaluation shows that the cyclical components of income inequality, the capital share and real GDP are correlated. We develop tractable representation of common inequality indicators in the general equilibrium model and show that the observed pattern is driven by innovations in the capital share. A Bayesian estimation of the model for the United States with data for the period 1948 to 2017 indicates that the model provides a reasonable fit for the data and successfully replicates the observed pattern of cyclical correlations. The third paper empirically examines the effects of banking regulation on the risk-relationship between sovereigns and banks. Based on a comprehensive data set of the European banking sector, we find that the implementation of the novel European banking regulation framework significantly contributed to a weakening of the risk-link between sovereigns and banks.The fourth paper empirically examines the role of institutional experience for institutional development in transition economies. To capture institutional experience, we develop a novel index, based on historical country records. The results of cross-sectional and panel estimations suggest that institutional experience helps to explain the divergent economic and institutional development in transition economies after the dissolution of the Soviet Union. KW - Macroeconomic Dynamics KW - Environmental Policy KW - Inequality KW - Policy Design KW - Business Cycle KW - Income and Wealth Inequality KW - Distributive Shocks KW - Financial Stability KW - Sovereign Bail-out KW - Bail-in Tool KW - Doom Loop KW - European Banking Union KW - Bank Recovery and Resolution Directive KW - Institutions KW - Comparative Development KW - Transition Economies KW - Post-Soviet Space KW - Collective Memory Y1 - 2021 ER - TY - RPRT A1 - Eydam, Ulrich T1 - The Distributional Implications of Climate Policies Under Uncertainty T2 - CEPA Discussion Papers N2 - Promoting the decarbonization of economic activity through climate policies raises many questions. From a macroeconomic perspective, it is important to understand how these policies perform under uncertainty, how they affect short-run dynamics and to what extent they have distributional effects. In addition, uncertainties directly associated with climate policies, such as uncertainty about the carbon budget or emission intensities, become relevant aspects. We study the implications of emission reduction schemes within a Two-Agent New-Keynesian (TANK) model. This quantitative exercise, based on data for the German economy, provides various insights. In the light of frictions and fluctuations, compared to other instruments, a carbon price (i.e. tax) is associated with lower volatility in output and consumption. In terms of aggregate welfare, price instruments are found to be preferable. Conditional on the distribution of revenues from climate policies, quantity instruments can exert regressive effects, posing a larger economic loss on wealth-poor households, whereas price instruments are moderately progressive. Finally, we find that unexpected changes in climate policies can induce substantial aggregate adjustments. With uncertainty about the carbon budget, the costs of adjustment are larger under quantity instruments. T3 - CEPA Discussion Papers - 33 KW - Macroeconomic Dynamics KW - Environmental Policy KW - Inequality KW - Policy Design Y1 - 2021 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-508950 SN - 2628-653X IS - 33 ER - TY - JOUR A1 - Covi, Giovanni A1 - Eydam, Ulrich T1 - End of the sovereign-bank doom loop in the European Union? BT - the Bank Recovery and Resolution Directive JF - Journal of evolutionary economics N2 - In this paper we examine the relationship between the default risk of banks and sovereigns, i.e. the 'doom-loop'. Specifically, we try to assess the effectiveness of the implementation of the new recovery and resolution framework in the European Union. We use a panel with daily data on European banks and sovereigns ranging from 2012 to 2016 in order to test the effects of the Bank Recovery and Resolution Directive on the two-way feedback process. We find that there was a pronounced feedback loop between banks and sovereigns from 2012 to 2014. However, after the implementation of the European Banking Union, in 2015/2016, the magnitude of the doom-loop decreased and the spillovers became not statistically significant. Furthermore, our results suggest that the implementation of the new resolution framework is a suitable candidate to explain this finding. Overall, the results are robust across several specifications. KW - financial stability KW - sovereign bail-out KW - bail-in tool KW - doom loop KW - European Banking Union KW - Bank Recovery and Resolution Directive Y1 - 2020 U6 - https://doi.org/10.1007/s00191-018-0576-2 SN - 0936-9937 SN - 1432-1386 VL - 30 IS - 1 SP - 5 EP - 30 PB - Springer CY - Berlin ; Heidelberg ; New York ER - TY - JOUR A1 - Covi, Giovanni A1 - Eydam, Ulrich T1 - Correction to: End of the sovereign-bank doom loop in the European Union? BT - the Bank Recovery and Resolution Directive JF - Journal of evolutionary economics Y1 - 2018 U6 - https://doi.org/10.1007/s00191-018-0577-1 SN - 0936-9937 SN - 1432-1386 N1 - Correction to: https://doi.org/10.1007/s00191-018-0576-2 VL - 30 IS - 1 SP - 31 EP - 38 PB - Springer CY - New York ER - TY - JOUR A1 - Clemens, Marius A1 - Eydam, Ulrich A1 - Heinemann, Maik T1 - Inequality over the business cycle: the role of distributive shocks JF - Macroeconomic dynamics N2 - This paper examines how wealth and income inequality dynamics are related to fluctuations in the functional income distribution over the business cycle. In a panel estimation for OECD countries between 1970 and 2016, although inequality is, on average countercyclical and significantly associated with the capital share, one-third of the countries display a pro- or noncyclical relationship. To analyze the observed pattern, we incorporate distributive shocks into an RBC model, where agents are ex ante heterogeneous with respect to wealth and ability. We find that whether wealth and income inequality behave countercyclically or not depends on the elasticity of intertemporal substitution and the persistence of shocks. We match the model to quarterly US data using Bayesian techniques. The parameter estimates point toward a non-monotonic relationship between productivity and inequality fluctuations. On impact, inequality increases in response to TFP shocks but subsequently declines. Furthermore, TFP shocks explain 17% of inequality fluctuations. KW - business cycle KW - income and wealth inequality KW - distributive shocks KW - D31 KW - E25 KW - E32 Y1 - 2021 U6 - https://doi.org/10.1017/S1365100521000523 SN - 1365-1005 SN - 1469-8056 VL - 27 IS - 3 SP - 571 EP - 600 PB - Cambridge University Press CY - Cambridge ER - TY - RPRT A1 - Blanz, Alkis A1 - Eydam, Ulrich A1 - Heinemann, Maik A1 - Kalkuhl, Matthias A1 - Moretti, Nikolaj T1 - Fiscal Policy and Energy Price Shocks T2 - CEPA Discussion Papers N2 - The effects of energy price increases are heterogeneous between households and firms. Financially constrained poorer households, who spend a larger relative share of their income on energy, are particularly affected. In this analysis, we examine the macroeconomic and welfare effects of energy price shocks in the presence of credit-constrained households that have subsistence-level energy demand. Within a Dynamic Stochastic General Equilibrium (DSGE) model calibrated for the German economy, we compare the performance of different policy measures (transfers and energy subsidies) and different financing schemes (income tax vs. debt). Our results show that credit-constrained households prefer debt over tax financing regardless of the compensation measure due to their difficulty to smooth consumption. On the contrary, rich households tend to prefer tax-financed measures as they increase the labor supply of poor households. From an aggregate perspective, tax-financed measures targeting firms effectively cushion aggregate output losses. T3 - CEPA Discussion Papers - 70 KW - energy prices KW - E-DSGE KW - fiscal policy KW - welfare Y1 - 2023 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-612763 SN - 2628-653X IS - 70 ER - TY - JOUR A1 - Blanz, Alkis A1 - Eydam, Ulrich A1 - Heinemann, Maik A1 - Kalkuhl, Matthias T1 - Energiepreiskrise und Klimapolitik: BT - sind antizyklische CO2-Preise sinnvoll? JF - Ifo-Schnelldienst N2 - Sollte Klimapolitik auf Energiepreisanstiege reagieren und kurzfristig CO2-Preise anpassen, um Haushalte zu entlasten? Alkis Blanz, Ulrich Eydam, Maik Heinemann und Matthias Kalkuhl, Mercator Research Institute on Global Commons and Climate Change (MCC) und Universität Potsdam, zeigen, dass die Verwendung der Einnahmen aus der CO2-Bepreisung von entscheidender Bedeutung ist. Werden diese weitestgehend durch Steuersenkungen oder Transfers an Haushalte rückverteilt, sollten CO2-Preise nicht an kurzfristige Energiepreisschwankungen angepasst werden. Haushalte profitieren stärker von einer direkten Stabilisierung ihres Einkommens als von der Stabilisierung der Energiepreise. Werden Einnahmen aus der CO2-Bepreisung nicht rückerstattet, sind dagegen antizyklische CO2-Preise wohlfahrtserhöhend. Y1 - 2022 UR - https://www.ifo.de/DocDL/sd-2022-05-kalkuhl-etal-antizyklische-co2-preise.pdf SN - 0018-974X SN - 2199-4455 VL - 75 IS - 5 SP - 34 EP - 38 PB - Ifo Institut für Wirtschaftsforschung CY - München ER - TY - RPRT A1 - Blanz, Alkis A1 - Eydam, Ulrich A1 - Heinemann, Maik A1 - Kalkuhl, Matthias T1 - Optimal carbon pricing with fluctuating energy prices — emission targeting vs. price targeting T2 - CEPA Discussion Papers N2 - Prices of primary energy commodities display marked fluctuations over time. Market-based climate policy instruments (e.g., emissions pricing) create incentives to reduce energy consumption by increasing the user cost of fossil energy. This raises the question of whether climate policy should respond to fluctuations in fossil energy prices? We study this question within an environmental dynamic stochastic general equilibrium (E-DSGE) model calibrated on the German economy. Our results indicate that the welfare implications of dynamic emissions pricing crucially depend on how the revenues are used. When revenues are fully absorbed, a reduction in emissions prices stabilizes the economy in response to energy price shocks. However, when revenues are at least partially recycled, a stable emissions price improves overall welfare. This result is robust to different modeling assumptions. T3 - CEPA Discussion Papers - 51 KW - energy prices KW - E-DSGE KW - climate policy KW - welfare Y1 - 2022 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-561049 SN - 2628-653X IS - 51 ER -