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- Fachgruppe Volkswirtschaftslehre (189) (remove)
Drinking is Different!
(2020)
Unhealthy behavior can be extremely costly from a micro- and macroeconomic perspective and exploring the determinants of such behavior is highly important from an economist’s point of view. We examine whether locus of control (LOC) can explain alcohol consumption as an important domain of health behavior. LOC measures how much an individual believes that she is in control of the consequences of her own actions for her life’s future outcomes. While earlier literature showed that an increasing internal LOC is associated with increased health-conscious behavior in domains such as smoking, exercise or diets, we find that drinking seems to be different. Using German panel data from the Socio-Economic Panel (SOEP) we find a significant positive effect of having an internal LOC on the probability of moderate and regular drinking. We suggest and discuss two likely mechanisms for this relationship and find interesting gender differences. While social investments play an important role for both men and women, risk perceptions are especially relevant for men.
Reinhard Hujer
(2020)
Fünf Jahre Mindestlohn
(2020)
Die Einführung des gesetzlichen Mindestlohns zum 1. Januar 2015 war nach der Agenda 2010 die bedeutendste Arbeitsmarktreform der letzten 20 Jahre. Durch das relativ hohe Eingriffsniveau – etwa 4 Millionen oder 11% aller Erwerbstätigen verdienten vor der Einführung weniger als die neue Bruttolohnuntergrenze von 8,50 Euro pro Stunde – und die nahezu umfassende Gültigkeit, waren Hoffnungen und Befürchtungen gleichermaßen groß und viele Fragen zu den Wirkungen offen. Heute, fünf Jahre nach der Einführung und basierend auf zahlreichen, breit angelegten Evaluationsstudien, ist es Zeit für eine Zwischenbilanz. Die Löhne im unteren Bereich sind gestiegen, ohne dass es zu einem größeren Abbau an Beschäftigung gekommen ist. Gleichzeitig hat der Mindestlohn aber nicht die Zahl der Transferbezieher verringert. Auch das Armutsrisiko hat nicht abgenommen. Der Mindestlohn ist in vielerlei Hinsicht nicht existenzsichernd und wird auch nicht vollumfänglich durchgesetzt. Insofern wurde fünf Jahre nach der Einführung zwar einiges erreicht, wichtige Ziele aber auch verfehlt. Die Politik ist gefordert.
We analyze workers’ risk preferences and training investments. Our conceptual framework differentiates between the investment risk and insurance mechanisms underpinning training decisions. Investment risk leads risk-averse workers to train less; they undertake more training if it insures them against future losses. We use the German Socio-Economic Panel (SOEP) to demonstrate that risk affinity is associated with more training, implying that, on average, investment risks dominate the insurance benefits of training. Crucially, this relationship is evident only for general training; there is no relationship between risk attitudes and specific training. Thus, as expected, risk preferences matter more when skills are transferable – and workers have a vested interest in training outcomes – than when they are not. Finally, we provide evidence that the insurance benefits of training are concentrated among workers with uncertain employment relationships or limited access to public insurance schemes.
Stochastic uncertainty can cause difficult coordination problems that may hinder mutually beneficial cooperation. We propose a mechanism of ex-post voluntary transfers designed to circumvent these coordination problems and ask whether it can do so. To test this, we implement a controlled laboratory experiment based on a repeatedly played Ultimatum Game with a stochastic endowment. Contrary to our hypothesis, we find that allowing voluntary transfers does not entail an efficiency increase. We suggest and analyze two main reasons for this finding: First, the stochastic uncertainty forces proposers to accept high strategic uncertainty if they intend to cooperate by claiming a low amount (which many proposers do not). Second, many responders behave only incompletely conditionally cooperative by transferring too little (which hinders cooperation in future periods).
Getting a yes
(2020)
This paper studies how the request for a favor has to be devised in order to maximize its chance of success. We present results from a mini-dictator game, in which the recipient can send a free-form text message to the dictator before the latter decides. We find that putting effort into the message, writing in a humorous way and mentioning reasons why the money is needed pays off. Additionally, we find differences in the behavior of male and female dictators. Only men react positively to efficiency arguments, while only women react to messages that emphasize the dictators power and responsibility.
Labor market policy tools such as training and sanctions are commonly used to help bring workers back to work. By analogy to medical treatments, the individual exposure to these tools may have side effects. We study effects on health using individual-level population registers on labor market events outcomes, drug prescriptions and sickness absence, comparing outcomes before and after exposure to training and sanctions. We find that training improves cardiovascular and mental health and lowers sickness absence. The results suggest that this is not due to improved employment prospects but rather to instantaneous features of participation such as, perhaps, the adoption of a more rigorous daily routine. Unemployment benefits sanctions cause a short-run deterioration of mental health, possibly due higher stress levels, but this tapers out quickly.
From an active labor market policy perspective, start-up subsidies for unemployed individuals are very effective in improving long-term labor market outcomes for participants. From a business perspective, however, the assessment of these public programs is less clear since they might attract individuals with low entrepreneurial abilities and produce businesses with low survival rates and little contribution to job creation, economic growth, and innovation. In this paper, we use a rich data set to compare participants of a German start-up subsidy program for unemployed individuals to a group of regular founders who started from non-unemployment and did not receive the subsidy. The data allows us to analyze their business performance up until 40 months after business formation. We find that formerly subsidized founders lag behind not only in survival and job creation, but especially also in innovation activities. The gaps in these business outcomes are relatively constant or even widening over time. Hence, we do not see any indication of catching up in the longer run. While the gap in survival can be entirely explained by initial differences in observable start-up characteristics, the gap in business development remains and seems to be the result of restricted access to capital as well as differential business strategies and dynamics. Considering these conflicting results for the assessment of the subsidy program from an ALMP and business perspective, policy makers need to carefully weigh the costs and benefits of such a strategy to find the right policy mix.
Das Klimaschutzgesetz hat einen Paradigmenwechsel eingeleitet: den Einstieg in eine CO2-Bepreisung als künftiges Leitinstrument der Klimapolitik. Auf den ersten Blick ist der CO2-Preis unter einer Fülle von Fördermaßnahmen und ordnungsrechtlichen Regelungen verschüttet, deren Wirksamkeit und Kosten höchst unsicher sind. Der CO2-Preis ist aber so angelegt, dass er langfristig das dominante Instrument einer europäisch harmonisierten Klimapolitik werden kann. Der angedeutete Paradigmenwechsel der deutschen Klimapolitik öffnet damit die Tür, die europäische und internationale Kooperation zu stärken. Dazu ist es aber notwendig, neben der europäischen auch die globale Klimapolitik neu auszurichten. Auch dort sollten sich die Verhandlungen statt auf nationale Mengenziele auf CO2-Preise konzentrieren. Die erforderliche Kooperation wird möglich, wenn die Regierungen Transferzahlungen strategisch und reziprok nutzen. So könnte die Effektivität der Klimapolitik erhöht werden und es ließen sich die entstehenden Verteilungskonflikte entschärfen.
We present a novel data set of subnational economic output, Gross Regional Product (GRP), for more than 1500 regions in 77 countries that allows us to empirically estimate historic climate impacts at different time scales. Employing annual panel models, long-difference regressions and cross-sectional regressions, we identify effects on productivity levels and productivity growth. We do not find evidence for permanent growth rate impacts but we find robust evidence that temperature affects productivity levels considerably. An increase in global mean surface temperature by about 3.5°C until the end of the century would reduce global output by 7–14% in 2100, with even higher damages in tropical and poor regions. Updating the DICE damage function with our estimates suggests that the social cost of carbon from temperature-induced productivity losses is on the order of 73–142$/tCO2 in 2020, rising to 92–181$/tCO2 in 2030. These numbers exclude non-market damages and damages from extreme weather events or sea-level rise.
How assets get stranded
(2020)
Internalizing external costs of carbon is a fundamental goal of climate policy. Since the seminal work of Arthur Pigou in 1920, economic theory has analyzed the efficiency gains arising from various instruments that internalize externalities and lead to Pareto-improvements. It is widely recognized in environmental economics that a carbon price would effectively reflect the scarcity of the atmospheric disposal space for carbon depending on the temperature target that is to be achieved. The question of how to organize the transition process, i.e. moving from inefficient to efficient allocations, and implementing the necessary policies, has gained increasing attention in recent years. Arguably, the transition process is tightly interwoven with political processes that include complex interactions between societal stakeholders, such as households and firms, on the one hand, and political decision makers, on the other. Accordingly, understanding political-economy aspects of the transition process, including distributional outcomes, is becoming increasingly relevant. While a growing literature discusses the distributional implications of climate policy on households, it is less well understood how asset owners might be affected by climate policy and how these potential impacts would interact with the transition process. This Special Section focuses on public policy challenges related to this transition problem, with special emphasis on asset owners. A core theme is the special role of stranded assets, i.e. a devaluation of capital stocks or financial assets either by introducing a stringent carbon price or by omitting a pre-announced policy of this kind.
Climate-related costs and benefits may not be evenly distributed across the population. We study distributional implications of seasonal weather and climate on within-country inequality in rural India. Utilizing a first difference approach, we find that the poor are more sensitive to weather variations than the non-poor. The poor respond more strongly to (seasonal) temperature changes: negatively in the (warm) spring season, more positively in the (cold) rabi season. Less precipitation is harmful to the poor in the monsoon kharif season and beneficial in the winter and spring seasons. We show that adverse weather aggravates inequality by reducing consumption of the poor farming households. Future global warming predicted under RCP8.5 is likely to exacerbate these effects, reducing consumption of poor farming households by one third until the year 2100. We also find inequality in consumption across seasons with higher consumption during the harvest and lower consumption during the sowing seasons.
Interest in evaluating the effects of continuous treatments has been on the rise recently. To facilitate the estimation of causal effects in this setting, the present paper introduces entropy balancing for continuous treatments (EBCT) by extending the original entropy balancing methodology of Hainmüller (2012). In order to estimate balancing weights, the proposed approach solves a globally convex constrained optimization problem, allowing for much more computationally efficient implementation compared to other available methods. EBCT weights reliably eradicate Pearson correlations between covariates and the continuous treatment variable. This is the case even when other methods based on the generalized propensity score tend to yield insufficient balance due to strong selection into different treatment intensities. Moreover, the optimization procedure is more successful in avoiding extreme weights attached to a single unit. Extensive Monte-Carlo simulations show that treatment effect estimates using EBCT display similar or lower bias and uniformly lower root mean squared error. These properties make EBCT an attractive method for the evaluation of continuous treatments. Software implementation is available for Stata and R.
Background:
The literature on start-up subsidies (SUS) for the unemployed finds positive effects on objective outcome measures such as employment or income. However, little is known about effects on subjective well-being of participants. Knowledge about this is especially important because subsidizing the transition into self-employment may have unintended adverse effects on participants’ well-being due to its risky nature and lower social security protection, especially in the long run.
Objective:
We study the long-term effects of SUS on subjective outcome indicators of well-being, as measured by the participants’ satisfaction in different domains. This extends previous analyses of the current German SUS program (“Gründungszuschuss”) that focused on objective outcomes—such as employment and income—and allows us to make a more complete judgment about the overall effects of SUS at the individual level.
Research design:
Having access to linked administrative-survey data providing us with rich information on pretreatment characteristics, we base our analysis on the conditional independence assumption and use propensity score matching to estimate causal effects within the potential outcomes framework. We perform several sensitivity analyses to inspect the robustness of our findings.
Results:
We find long-term positive effects on job satisfaction but negative effects on individuals’ satisfaction with their social security situation. Supplementary findings suggest that the negative effect on satisfaction with social security may be driven by negative effects on unemployment and retirement insurance coverage. Our heterogeneity analysis reveals substantial variation in effects across gender, age groups, and skill levels. Estimates are highly robust.
In the context of microfirms, this paper analyzes whether the link between the three aspects involving innovative activities—R&D, innovative output, and productivity—hold for knowledge-intensive services. With especially high start-up rates and the majority of employees in microfirms, knowledge-intensive services (KIS) have a starkly different profile from manufacturing. Results from our structural models indicate that KIS firms benefit from innovation activities through increased labor productivity with highly skilled employees being similarly important compared to R&D for creating innovation output in microfirms. Moreover, the firm size advantage of large firms found for manufacturing almost disappears in KIS, with start-ups and young firms having a higher probability of initiating innovation activities and of successfully turning knowledge into innovation output than mature firms.
Challenges, Triggers and Initiatorsof Climate Policies and Implications for Policy Formulation
(2020)
With the onset of the global food crisis, the discussion about the use and misuse of agricultural market interventions regained academic attention. As a result of economies of scale, centralized policy implementation at the regional level has the potential to reduce the budgetary costs of policies. Borrowing from the literature on international unions and international policy coordination, we develop a conceptual framework to analyze when regional policy implementation makes sense. This is the case whenever spill-overs from centralization are large and policy preferences, driven by country-specific characteristics, are homogeneous. Subsequently, we examine the advantageousness of centralized policy implementation for the West African region regarding the most common food security policies. We show that centralization of trade policies and emergency food reserves is beneficial, while buffer stocks, safety net policies, and producer support policies should be implemented at the national level.
Entrepreneurial persistence is demonstrated by an entrepreneur’s continued positive maintenance of entrepreneurial motivation and constantly renewed active engagement in a new business venture despite counterforces or enticing alternatives. It thus is a crucial factor for entrepreneurs when pursuing and exploiting their business opportunities and in realizing potential economic gains and benefits. Using rich data on a representative sample of German business founders, we investigated the determinants of entrepreneurial persistence. Next to observed survival, we also constructed a hybrid persistence measure capturing the motivational dimension of persistence. We analyzed the influence of individual-level (human capital and personality) and business-related characteristics on both measures as well as their relative importance. We found that the two indicators emphasize different aspects of persistence. For the survival indicator, the predictive power was concentrated in business characteristics and human capital, while for hybrid persistence the dominant factors were business characteristics and personality. Finally, we showed that results were heterogeneous across subgroups. In particular, formerly unemployed founders did not differ in survival chances, but they were more likely to lack a high psychological commitment to their business ventures.
We test the price-setting behavior of firms using the Rotemberg (1982) model in order to explain puzzles in the New Keynesian Phillips curve (NKPC). For our tests, we conducted experiments that adapt the model into an individual decision-making problem. We find systematic deviations in price-setting according to the subjects’ degree of information acquisition. Subjects rarely make use of past information. On the other hand, subjects that decide to acquire relatively little information about future desired prices tend to overweight their own past set price when they set prices. We study the impact of this heterogeneous price-setting behavior for theoretically derived forward-looking Phillips curves. Our estimated NKPCs are in line with the empirical literature. The deviations from theoretical predictions in our NKPCs are driven by the less-informed subjects.
Entrepreneurial persistence is demonstrated by an entrepreneur’s continued positive maintenance of entrepreneurial motivation and constantly renewed active engagement in a new business venture despite counterforces or enticing alternatives. It thus is a crucial factor for entrepreneurs when pursuing and exploiting their business opportunities and in realizing potential economic gains and benefits. Using rich data on a representative sample of German business founders, we investigated the determinants of entrepreneurial persistence. Next to observed survival, we also constructed a hybrid persistence measure capturing the motivational dimension of persistence. We analyzed the influence of individual-level (human capital and personality) and business-related characteristics on both measures as well as their relative importance. We found that the two indicators emphasize different aspects of persistence. For the survival indicator, the predictive power was concentrated in business characteristics and human capital, while for hybrid persistence the dominant factors were business characteristics and personality. Finally, we showed that results were heterogeneous across subgroups. In particular, formerly unemployed founders did not differ in survival chances, but they were more likely to lack a high psychological commitment to their business ventures.
Modern health care systems are characterized by pronounced prevention and cost-optimized treatments. This dissertation offers novel empirical evidence on how useful such measures can be. The first chapter analyzes how radiation, a main pollutant in health care, can negatively affect cognitive health. The second chapter focuses on the effect of Low Emission Zones on public heath, as air quality is the major external source of health problems. Both chapters point out potentials for preventive measures. Finally, chapter three studies how changes in treatment prices affect the reallocation of hospital resources. In the following, I briefly summarize each chapter and discuss implications for health care systems as well as other policy areas. Based on the National Educational Panel Study that is linked to data on radiation, chapter one shows that radiation can have negative long-term effects on cognitive skills, even at subclinical doses. Exploiting arguably exogenous variation in soil contamination in Germany due to the Chernobyl disaster in 1986, the findings show that people exposed to higher radiation perform significantly worse in cognitive tests 25 years later. Identification is ensured by abnormal rainfall within a critical period of ten days. The results show that the effect is stronger among older cohorts than younger cohorts, which is consistent with radiation accelerating cognitive decline as people get older. On average, a one-standarddeviation increase in the initial level of CS137 (around 30 chest x-rays) is associated with a decrease in the cognitive skills by 4.1 percent of a standard deviation (around 0.05 school years). Chapter one shows that sub-clinical levels of radiation can have negative consequences even after early childhood. This is of particular importance because most of the literature focuses on exposure very early in life, often during pregnancy. However, population exposed after birth is over 100 times larger. These results point to substantial external human capital costs of radiation which can be reduced by choices of medical procedures. There is a large potential for reductions because about one-third of all CT scans are assumed to be not medically justified (Brenner and Hall, 2007). If people receive unnecessary CT scans because of economic incentives, this chapter points to additional external costs of health care policies. Furthermore, the results can inform the cost-benefit trade-off for medically indicated procedures. Chapter two provides evidence about the effectiveness of Low Emission Zones. Low Emission Zones are typically justified by improvements in population health. However, there is little evidence about the potential health benefits from policy interventions aiming at improving air quality in inner-cities. The chapter ask how the coverage of Low Emission Zones air pollution and hospitalization, by exploiting variation in the roll out of Low Emission Zones in Germany. It combines information on the geographic coverage of Low Emission Zones with rich panel data on the universe of German hospitals over the period from 2006 to 2016 with precise information on hospital locations and the annual frequency of detailed diagnoses. In order to establish that our estimates of Low Emission Zones’ health impacts can indeed be attributed to improvements in local air quality, we use data from Germany’s official air pollution monitoring system and assign monitor locations to Low Emission Zones and test whether measures of air pollution are affected by the coverage of a Low Emission Zone. Results in chapter two confirm former results showing that the introduction of Low Emission Zones improved air quality significantly by reducing NO2 and PM10 concentrations. Furthermore, the chapter shows that hospitals which catchment areas are covered by a Low Emission Zone, diagnose significantly less air pollution related diseases, in particular by reducing the incidents of chronic diseases of the circulatory and the respiratory system. The effect is stronger before 2012, which is consistent with a general improvement in the vehicle fleet’s emission standards. Depending on the disease, a one-standard-deviation increase in the coverage of a hospitals catchment area covered by a Low Emission Zone reduces the yearly number of diagnoses up to 5 percent. These findings have strong implications for policy makers. In 2015, overall costs for health care in Germany were around 340 billion euros, of which 46 billion euros for diseases of the circulatory system, making it the most expensive type of disease caused by 2.9 million cases (Statistisches Bundesamt, 2017b). Hence, reductions in the incidence of diseases of the circulatory system may directly reduce society’s health care costs. Whereas chapter one and two study the demand-side in health care markets and thus preventive potential, chapter three analyzes the supply-side. By exploiting the same hospital panel data set as in chapter two, chapter three studies the effect of treatment price shocks on the reallocation of hospital resources in Germany. Starting in 2005, the implementation of the German-DRG-System led to general idiosyncratic treatment price shocks for individual hospitals. Thus far there is little evidence of the impact of general price shocks on the reallocation of hospital resources. Additionally, I add to the exiting literature by showing that price shocks can have persistent effects on hospital resources even when these shocks vanish. However, simple OLS regressions would underestimate the true effect, due to endogenous treatment price shocks. I implement a novel instrument variable strategy that exploits the exogenous variation in the number of days of snow in hospital catchment areas. A peculiarity of the reform allowed variation in days of snow to have a persistent impact on treatment prices. I find that treatment price increases lead to increases in input factors such as nursing staff, physicians and the range of treatments offered but to decreases in the treatment volume. This indicates supplier-induced demand. Furthermore, the probability of hospital mergers and privatization decreases. Structural differences in pre-treatment characteristics between hospitals enhance these effects. For instance, private and larger hospitals are more affected. IV estimates reveal that OLS results are biased towards zero in almost all dimensions because structural hospital differences are correlated with the reallocation of hospital resources. These results are important for several reasons. The G-DRG-Reform led to a persistent polarization of hospital resources, as some hospitals were exposed to treatment price increases, while others experienced reductions. If hospitals increase the treatment volume as a response to price reductions by offering unnecessary therapies, it has a negative impact on population wellbeing and public spending. However, results show a decrease in the range of treatments if prices decrease. Hospitals might specialize more, thus attracting more patients. From a policy perspective it is important to evaluate if such changes in the range of treatments jeopardize an adequate nationwide provision of treatments. Furthermore, the results show a decrease in the number of nurses and physicians if prices decrease. This could partly explain the nursing crisis in German hospitals. However, since hospitals specialize more they might be able to realize efficiency gains which justify reductions in input factors without loses in quality. Further research is necessary to provide evidence for the impact of the G-DRG-Reform on health care quality. Another important aspect are changes in the organizational structure. Many public hospitals have been privatized or merged. The findings show that this is at least partly driven by the G-DRG-Reform. This can again lead to a lack in services offered in some regions if merged hospitals specialize more or if hospitals are taken over by ecclesiastical organizations which do not provide all treatments due to moral conviction. Overall, this dissertation reveals large potential for preventive health care measures and helps to explain reallocation processes in the hospital sector if treatment prices change. Furthermore, its findings have potentially relevant implications for other areas of public policy. Chapter one identifies an effect of low dose radiation on cognitive health. As mankind is searching for new energy sources, nuclear power is becoming popular again. However, results of chapter one point to substantial costs of nuclear energy which have not been accounted yet. Chapter two finds strong evidence that air quality improvements by Low Emission Zones translate into health improvements, even at relatively low levels of air pollution. These findings may, for instance, be of relevance to design further policies targeted at air pollution such as diesel bans. As pointed out in chapter three, the implementation of DRG-Systems may have unintended side-effects on the reallocation of hospital resources. This may also apply to other providers in the health care sector such as resident doctors.
This paper studies the effect of public transport policies on urban pollution. It uses a quantitative equilibrium model with residential choice and mode choice. Pollution comes from commuting and residential energy use. The model parameters are calibrated to replicate key variables for American metropolitan areas. In the counterfactual, I study how free public transport coupled with increasing transit speed affects the equilibrium. In the baseline simulation, total pollution falls by 0.4%, as decreasing emissions from transport are partly offset by rising residential emissions. A second counterfactual compares a city with and without public transit. This large investment decreases pollution by 1.7%. When jobs are decentralized, emissions fall by 0.5% in the first and by 3% in the second counterfactual.
Despite increasing empirical evidence of strong links between climate and economic growth, there is no established model to describe the dynamics of how different types of climate shocks affect growth patterns. Here we present the first comprehensive, comparative analysis of the long-term dynamics of one-time, temporary climate shocks on production factors, and factor productivity, respectively, in a Ramsey-type growth model. Damages acting directly on production factors allow us to study dynamic effects on factor allocation, savings and economic growth. We find that the persistence of impacts on economic activity is smallest for climate shocks directly impacting output, and successively increases for direct damages on capital, loss of labor and productivity shocks, related to different responses in savings rates and factor-specific growth. Recurring shocks lead to large welfare effects and long-term growth effects, directly linked to the persistence of individual shocks. Endogenous savings and shock anticipation both have adaptive effects but do not eliminate differences between impact channels or significantly lower the dissipation time. Accounting for endogenous growth mechanisms increases the effects. We also find strong effects on income shares, important for distributional implications. This work fosters conceptual understanding of impact dynamics in growth models, opening options for links to empirics.
The German start-up subsidy (SUS) program for the unemployed has recently undergone a major makeover, altering its institutional setup, adding an additional layer of selection and leading to ambiguous predictions of the program's effectiveness. Using propensity score matching (PSM) as our main empirical approach, we provide estimates of long-term effects of the post-reform subsidy on individual employment prospects and labor market earnings up to 40 months after entering the program. Our results suggest large and persistent long-term effects of the subsidy on employment probabilities and net earned income. These effects are larger than what was estimated for the pre-reform program. Extensive sensitivity analyses within the standard PSM framework reveal that the results are robust to different choices regarding the implementation of the weighting procedure and also with respect to deviations from the conditional independence assumption. As a further assessment of the results' sensitivity, we go beyond the standard selection-on-observables approach and employ an instrumental variable setup using regional variation in the likelihood of receiving treatment. Here, we exploit the fact that the reform increased the discretionary power of local employment agencies in allocating active labor market policy funds, allowing us to obtain a measure of local preferences for SUS as the program of choice. The results based on this approach give rise to similar estimates. Thus, our results indicating that SUS are still an effective active labor market program after the reform do not appear to be driven by "hidden bias."
Is trade a promoter of peace? Adam Smith, one of the earliest defenders of trade, worries that commerce may instigate some perverse incentives, encouraging wars. The wealth that commerce generates decreases the relative cost of wars, increases the ability to finance wars through debts, which decreases their perceived cost, and increases the willingness of commercial interests to use wars to extend their markets, increasing the number and prolonging the length of wars. Smith, therefore, cannot assume that trade would yield a peaceful world. While defending and promoting trade, Smith warns us not to take peace for granted.
This paper studies the effects of two different frames on decisions in a dictator game. Before making their allocation decision, dictators read a short text. Depending on the treatment, the text either emphasizes their decision power and freedom of choice or it stresses their responsibility for the receiver’s payoff. Including a control treatment without such a text, three treatments are conducted with a total of 207 dictators. Our results show a different reaction to these texts depending on the dictator’s gender. We find that only men react positively to a text that stresses their responsibility for the receiver, while only women seem to react positively to a text that emphasizes their decision power and freedom of choice.
This paper presents an experiment on the effect of retroactive price-reduction schemes on buyers’ repeated purchase decisions. Such schemes promise buyers a reduced price for all units that are bought in a certain time frame if the total quantity that is purchased passes a given threshold. This study finds a loyalty-enhancing effect of retroactive price-reduction schemes only if the buyers ex-ante expected that entering into the scheme would maximize their monetary gain, but later learn that they should leave the scheme. Furthermore, the effect crucially hinges on the framing of the price reduction.
Spatial and social mobility
(2018)
This paper analyzes the relationship between spatial mobility and social mobility. It develops a two-skill-type spatial equilibrium model of two regions with location preferences where each region consists of an urban area that is home to workplaces and residences and an exclusively residential suburban area. The paper demonstrates that relative regional social mobility is negatively correlated with segregation and inequality. In the model, segregation, income inequality, and social mobility are driven by differences between urban and residential areas in commuting cost differences between high-skilled and low-skilled workers, and also by the magnitude of taste heterogeneity.
This paper tests the robustness of voluntary cooperation in a sequential best shot game, a public good game in which the maximal contribution determines the level of public good provision. Thus, efficiency enhancing voluntary cooperation requires asymmetric behavior whose coordination is more difficult. Nevertheless, we find robust cooperation irrespective of treatment-specific institutional obstacles. To explain this finding, we distinguish three behavioral patterns aiming at both, voluntary cooperation and (immediate) payoff equality.
This paper presents results from an experiment on the effects of recommended retail prices on consumer and retailer behaviour. We present evidence that recommended retail prices, despite their non-binding nature, influence consumers’ willingness to pay by setting a reference point. At a given price, consumers buy more the higher the recommended retail price is, and their demand drops at prices above the recommended retail price, even when it is entirely uninformative about the value of the product. Retailers in this study are subject to similar anchoring effects, but they do not anticipate consumers’ behaviour well and are thus not able to exploit their behavioural biases.
The Rise of Populism
(2017)
Drawing on the recent political developments in Europe and the USA, and the public discourse since 2016, an analysis of the rise of populism on the left and the right is articulated with the aim to provide an understanding of the contemporary populist political landscape. The Trump phenomenon and his form of populism is analysed within the context of foreign policy and development aid. This is contrasted with the neoliberal view couched in Fukuyama’s ‘End of History’ theorem, and the current popular sentiment towards anti-establishment and anti-globalisation in Western democracies.
Growing out of the crisis
(2013)
Greece’s currently planned institutional reforms will help to get the country going with limited economic growth. With an economy based primarily on tourism, trade, and agriculture, Greece lacks an established competitive industry and an innovation-friendly environment, resulting in a low export ratio given the small size of the country and its long-time EU-membership. Instead, Greece exports only its nation's talent, with low returns. To become prosperous, the country must better capitalize on its Eurozone membership and add innovative sectors to its economic structure. Given Greece's hidden assets, such as the attractiveness of the country, a small number of strong research centers and an impressive diaspora in research, finance and business, we envision a Greek “Silicon Valley” and propose a ten point policy plan to achieve that goal.