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Against the background of the increasingly discussed “Linguistic Saving Hypothesis” (Chen, 2013), I studied whether the targeted use of a present tense (close tense) and a future tense (distant tense) within the same language have an impact on intertemporal decision-making. In a monetarily incentivized laboratory experiment in Germany, I implemented two different treatments on intertemporal choices. The treatments differed in the tense in which I referred to future rewards. My results show that individuals prefer to a greater extent rewards which are associated with a present tense (close tense). This result is in line with my prediction and the first empirical support for the Linguistic Saving Hypothesis within one language. However, this result holds exclusively for males. Females seem to be unaffected by the linguistic manipulation. I discuss my findings in the context of “gender-as-culture” as well as their potential policy-implications.
The self-employed faced strong income losses during the Covid-19 pandemic. Many governments introduced programs to financially support the self-employed during the pandemic, including Germany. The German Ministry for Economic Affairs announced a €50bn emergency-aid program in March 2020, offering one-off lump-sum payments of up to €15,000 to those facing substantial revenue declines. By reassuring the self- employed that the government ‘would not let them down’ during the crisis, the program had also the important aim of motivating the self-employed to get through the crisis. We investigate whether the program affected the confidence of the self-employed to survive the crisis using real-time online-survey data comprising more than 20,000 observations. We employ propensity score matching, making use of a rich set of variables that influence the subjective survival probability as main outcome measure. We observe that this program had significant effects, with the subjective survival probability of the self- employed being moderately increased. We reveal important effect heterogeneities with respect to education, industries, and speed of payment. Notably, positive effects only occur among those self-employed whose application was processed quickly. This suggests stress-induced waiting costs due to the uncertainty associated with the administrative processing and the overall pandemic situation. Our findings have policy implications for the design of support programs, while also contributing to the literature on the instruments and effects of entrepreneurship policy interventions in crisis situations.
Strategic uncertainty is the uncertainty that players face with respect to the purposeful behavior of other players in an interactive decision situation. Our paper develops a new method for measuring strategic-uncertainty attitudes and distinguishing them from risk and ambiguity attitudes. We vary the source of uncertainty (whether strategic or not) across conditions in a ceteris paribus manner. We elicit certainty equivalents of participating in two strategic 2x2 games (a stag-hunt and a market-entry game) as well as certainty equivalents of related lotteries that yield the same possible payoffs with exogenously given probabilities (risk) and lotteries with unknown probabilities (ambiguity). We provide a structural model of uncertainty attitudes that allows us to measure a preference for or an aversion against the source of uncertainty, as well as optimism or pessimism regarding the desired outcome. We document systematic attitudes towards strategic uncertainty that vary across contexts. Under strategic complementarity [substitutability], the majority of participants tend to be pessimistic [optimistic] regarding the desired outcome. However, preferences for the source of uncertainty are distributed around zero.
Property tax competition
(2022)
We develop a model of property taxation and characterize equilibria under three alternative taxa-tion regimes often used in the public finance literature: decentralized taxation, centralized taxation, and “rent seeking” regimes. We show that decentralized taxation results in inefficiently high tax rates, whereas centralized taxation yields a common optimal tax rate, and tax rates in the rent-seeking regime can be either inefficiently high or low. We quantify the effects of switching from the observed tax system to the three regimes for Japan and Germany. The decentralized or rent-seeking regime best describes the Japanese tax system, whereas the centralized regime does so for Germany. We also quantify the welfare effects of regime changes.
This paper sheds new light on the role of communication for cartel formation. Using machine learning to evaluate free-form chat communication among firms in a laboratory experiment, we identify typical communication patterns for both explicit cartel formation and indirect attempts to collude tacitly. We document that firms are less likely to communicate explicitly about price fixing and more likely to use indirect messages when sanctioning institutions are present. This effect of sanctions on communication reinforces the direct cartel-deterring effect of sanctions as collusion is more difficult to reach and sustain without an explicit agreement. Indirect messages have no, or even a negative, effect on prices.
Optimal carbon pricing with fluctuating energy prices — emission targeting vs. price targeting
(2022)
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.
We use the prolonged Greek crisis as a case study to understand how a lasting economic shock affects the innovation strategies of firms in economies with moderate innovation activities. Adopting the 3-stage CDM model, we explore the link between R&D, innovation, and productivity for different size groups of Greek manufacturing firms during the prolonged crisis. At the first stage, we find that the continuation of the crisis is harmful for the R&D engagement of smaller firms while it increased the willingness for R&D activities among the larger ones. At the second stage, among smaller firms the knowledge production remains unaffected by R&D investments, while among larger firms the R&D decision is positively correlated with the probability of producing innovation, albeit the relationship is weakened as the crisis continues. At the third stage, innovation output benefits only larger firms in terms of labor productivity, while the innovation-productivity nexus is insignificant for smaller firms during the lasting crisis.
Ticket to Paradise?
(2022)
This paper provides novel evidence on the impact of public transport subsidies on air pollution. We obtain causal estimates by leveraging a unique policy intervention in Germany that temporarily reduced nationwide prices for regional public transport to a monthly flat rate price of 9 Euros. Us-ing DiD estimation strategies on air pollutant data, we show that this intervention causally reduced a benchmark air pollution index by more than six percent. Our results illustrate that public transport subsidies – especially in the context of spatially constrained cities – offer a viable alterna-tive for policymakers and city planers to improve air quality, which has been shown to crucially affect health outcomes.
This paper analyzes the effect of new bicycle lanes on traffic volume, congestion, and accidents. Crucially, the new bike lanes replace existing car lanes thereby reducing available space for motorized traffic. In order to obtain causal estimates, I exploit the quasi-random timing and location of the newly built cycle lanes. Using an event study design, a two-way fixed effects model and the synthetic control group method on geo-coded data, I show that the construction of pop-up bike lanes significantly reduced average car speed by 8 to 12 percentage points (p.p.) and up to 16 p.p. in peak traffic hours. In contrast, the results for car volume are modest, while the data does not allow for a conclusive judgment of accidents.
Job satisfaction has been found to impact behavioral choices at the workplace. Since levels of satisfaction are not guaranteed to remain high, understanding the consequences of job dissatisfaction is essential. Hence, I analyze the relationship between a worker’s job satisfaction and her training investments. Based on my theoretical model, I expect a U-shaped relationship if dissatisfied workers attempt to improve the situation or plan to quit. In contrast, there is an overall positive relationship if dissatisfied workers neglect their duties. Using logit regressions with the Household, Income and Labour Dynamics in Australia (HILDA) survey I find tentative evidence that there is on average an overall positive relationship with a 1 standard deviation increase in job satisfaction being associated with a 1.5% increased likelihood of participating in training. A closer inspection of the reasons for training as well as quit intentions reveals some hints of a U-shaped relationship. My results highlight the importance of considering the source of dissatisfaction as there are heterogeneous effects along different job satisfaction facets.
We investigate the effect of the COVID-19 pandemic on self-employed people’s mental health. Using representative longitudinal survey data from Germany, we reveal differential effects by gender: whereas self-employed women experienced a substantial deterioration in their mental health, self-employed men displayed no significant changes up to early 2021. Financial losses are important in explaining these differences. In addition, we find larger mental health responses among self-employed women who were directly affected by government-imposed restrictions and bore an increased childcare burden due to school and daycare closures. We also find that self-employed individuals who are more resilient coped better with the crisis.
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.
We provide the first estimates of the impact of managers’ risk preferences on their training allocation decisions. Our conceptual framework links managers’ risk preferences to firms’ training decisions through the bonuses they expect to receive. Risk-averse managers are expected to select workers with low turnover risk and invest in specific rather than general training. Empirical evidence supporting these predictions is provided using a novel vignette study embedded in a nationally representative survey of firm managers. Risk-tolerant and risk-averse decision makers have significantly different training preferences. Risk aversion results in increased sensitivity to turnover risk. Managers who are risk-averse offer significantly less general training and, in some cases, are more reluctant to train workers with a history of job mobility. All managers, irrespective of their risk preferences, are sensitive to the investment risk associated with training, avoiding training that is more costly or targets those with less occupational expertise or nearing retirement. This suggests the risks of training are primarily due to the risk that trained workers will leave the firm (turnover risk) rather than the risk that the benefits of training do not outweigh the costs (investment risk).
Carbon dioxide removal (CDR) moves atmospheric carbon to geological or land-based sinks. In a first-best setting, the optimal use of CDR is achieved by a removal subsidy that equals the optimal carbon tax and marginal damages. We derive second-best subsidies for CDR when no global carbon price exists but a national government implements a unilateral climate policy. We find that the optimal carbon tax differs from an optimal CDR subsidy because of carbon leakage, terms-of-trade and fossil resource rent dynamics. First, the optimal removal subsidy tends to be larger than the carbon tax because of lower supply-side leakage on fossil resource markets. Second, terms-of-trade effects exacerbate this wedge for net resource exporters, implying even larger removal subsidies. Third, the optimal removal subsidy may fall below the carbon tax for resource-poor countries when marginal environmental damages are small.
Subsidizing the geographical mobility of unemployed workers may improve welfare by relaxing their financial constraints and allowing them to find jobs in more prosperous regions. We exploit regional variation in the promotion of mobility programs along administrative borders of German employment agency districts to investigate the causal effect of offering such financial incentives on the job search behavior and labor market integration of unemployed workers. We show that promoting mobility – as intended – causes job seekers to increase their search radius, apply for and accept distant jobs. At the same time, local job search is reduced with adverse consequences for reemployment and earnings. These unintended negative effects are provoked by spatial search frictions. Overall, the unconditional provision of mobility programs harms the welfare of unemployed job seekers.
The COVID-19 pandemic created the largest experiment in working from home. We study how persistent telework may change energy and transport consumption and costs in Germany to assess the distributional and environmental implications when working from home will stick. Based on data from the German Microcensus and available classifications of working-from-home feasibility for different occupations, we calculate the change in energy consumption and travel to work when 15% of employees work full time from home. Our findings suggest that telework translates into an annual increase in heating energy expenditure of 110 euros per worker and a decrease in transport expenditure of 840 euros per worker. All income groups would gain from telework but high-income workers gain twice as much as low-income workers. The value of time saving is between 1.3 and 6 times greater than the savings from reduced travel costs and almost 9 times higher for high-income workers than low-income workers. The direct effects on CO₂ emissions due to reduced car commuting amount to 4.5 millions tons of CO₂, representing around 3 percent of carbon emissions in the transport sector.
In many countries, women are over-represented among low-wage employees, which is why a wage floor could benefit them particularly. Following this notion, we analyse the impact of the German minimum wage introduction in 2015 on the gender wage gap. Germany poses an interesting case study in this context, since it has a rather high gender wage gap and set the minimum wage at a relatively high level, affecting more than four million employees. Based on individual data from the Structure of Earnings Survey, containing information for over one million employees working in 60,000 firms, we use a difference-in- difference framework that exploits regional differences in the bite of the minimum wage. We find a significant negative effect of the minimum wage on the regional gender wage gap. Between 2014 and 2018, the gap at the 10th percentile of the wage distribution was reduced by 4.6 percentage points (or 32%) in regions that were strongly affected by the minimum wage compared to less affected regions. For the gap at the 25th percentile, the effect still amounted to -18%, while for the mean it was smaller (-11%) and not particularly robust. We thus find that the minimum wage can indeed reduce gender wage disparities. While the effect is highest for the low-paid, it also reaches up into higher parts of the wage distribution.
We use a quantitative spatial equilibrium model to evaluate the distributional and welfare impacts of a recent temporary rent control policy in Berlin, Germany. We calibrate the model to key features of Berlin’s housing market, in particular the recent gentrification of inner city locations. As expected, gentrification benefits rich homeowners, while poor renter households lose. Our counterfactual analysis mimicks the rent control policy. We find that this policy reduces welfare for rich and poor households and in fact, the percentage change in welfare is largest for the poorest households. We also study alternative affordable housing policies such as subsidies and re-zoning policies, which are better suited to address the adverse consequences of gentrification.
Charities typically ask potential donors repeatedly for a donation. These repeated requests might trigger avoidance behavior. Considering that, this paper analyzes the impact of offering an ask avoidance option on charitable giving. In a proposed utility framework, the avoidance option decreases the social pressure to donate. At the same time, it induces feelings of gratitude toward the fundraiser, which may lead to a reciprocal increase in donations. The results of a lab experiment designed to disentangle the two channels show no negative impact of the option to avoid repeated asking on donations. Instead, the full model indicates a positive impact of the reciprocity channel. This finding suggests that it might be beneficial for charities to introduce an ask avoidance option during high-frequency fundraising campaigns.
This paper examines the attempts of implement-ing components of the concept called Civiliza-tional Hexagon as a pathway to civilizing conflict in the Sub-Saharan Africa in the post-Cold War period. Despite significant decline in the violent conflict and substantial progress socio-economic aspects in the period, most states in the region have been facing challenges in their way to civilize conflict related to absence of inclusive political system, weak state unable to monopolize the use of violence in its territory, and social injustice. On the other hand, states like Botswana and Mauritius managed to civilize conflict through significant improvement in democratic consolidation. Besides their relative success in implementing six elements, these states enabled to integrate traditional institutions with modern state apparatus that helped them to fill the gap created as result of exogenous state formation process and the resulting unfinished nation-building project. Additionally, traditional institutions contributed to managing diversity.