Social and economic preferences towards the end of life
For various strategic, psychological, and cognitive reasons, social and economic behavior may change as people approach high age and the end of life. Using large-scale in-person and online surveys with embedded experiments, we study how individual and social decision-making varies with age and subjective life expectancy. I'll present preliminary results on trust and trustworthiness, altruistic giving, risk preferences, and in particular time preferences.
Anchoring of Inflation Expectations: Do Inflation Target Formulations Matter?
Inflation target formulations differ across countries and over time. Most widespread are point targets, target ranges, hybrid combinations of the two, or mere definitions of price stability. This paper proposes a novel empirical measure of expectations anchoring based on the cross-sectional distribution of private sector inflation point forecasts. Applying this to a panel of 29 countries, it finds three main results. First, a numerical target definition per se does not improve anchoring compared to a definition of price stability, while the formulation of a numerical reference point increases the degree of anchoring. Second, point targets and hybrid target formulations are associated with better anchoring than target ranges. Third, periods of persistent target deviations lead to an increase in tail risks to the inflation outlook. Conditional on such periods, point targets and hybrid targets attenuate tail risks to the inflation outlook, with a stronger quantitative effect for point targets. The results are consistent with models suggesting that targets ranges are interpreted as zones where monetary policy is less active.
Strategy-Proof and Envy-Free Random Assignments
We study the random assignment of indivisible objects among a set of agents with strict preferences. We show that there exists no mechanism which is unanimous, strategy-proof and envy-free. Weakening the first requirement to q-unanimity – i.e., when every agent ranks a different object at the top, then each agent shall receive his most-preferred object with probability of at least q – we show that a mechanism satisfying strategy-proofness, envy-freeness and ex-post weak non-wastefulness can be q-unanimous only for q ≤ 2/n (where n is the number of agents). To demonstrate that this bound is tight, we introduce a new mechanism, Random-Dictatorship-cum-Equal-Division (RDcED), and show that it achieves this maximal bound when all objects are acceptable. In addition, for three agents, RDcED is characterized by the first three properties and ex-post weak efficiency. If objects may be unacceptable, strategy-proofness and envy-freeness are jointly incompatible even with ex-post weak non-wastefulness.
Behavioral Market Design
Human behavior shapes almost all aspects of our lives. It influences the success of societies, markets, organizations, and individuals. Indeed, many economic and social challenges, such as pandemics, climate change, traffic congestion and energy scarcity, require behavioral change. In this talk, I use case studies to show how research in market design and behavioral economics can be used to develop mechanisms that align incentives and behavior with the underlying goals.
This is an extracurricular session taking place at HS104a Garystraße 21 from 5.30 - 7.00 pm.
Right-wing populism in the tropics: Economic crisis, the political gender gap, and the election of Bolsonaro
This paper investigates whether differential exposure to a labor market shock by gender contributed to the rise of far-right populism in Brazil. Using a shift-share approach, we find that gender heterogeneity in shock exposure predicts electoral outcomes. Male-specific labor demand shocks increase support for Bolsonaro in the 2018 Brazilian presidential election, but female-specific shocks have the reverse effect. Additional results suggest that these opposing effects are accompanied by an unprecedented shift in social values of men and women, with men becoming relatively more conservative. Our preferred interpretation is that Bolsonaro's conservative rhetoric---shared by several other right-wing politicians---is more appealing to men once they experience a relative loss in economic status, which is consistent both with the positive male effect as well as the negative female effect.
Pension Reform Preferences in Germany: Does Information Matter?
Demographic change has an impact on pay-as-you-go pension systems. To maintain their financial sustainability, reforms are necessary, but often lack public support. Based on representative survey data from Germany, we conduct a survey experiment which allows investigating whether salience of or information about demographic change enhances preferences towards reforms in general as well as towards specific reform measures. We find that salience and information provision significantly increase the perceived reform necessity. Furthermore, salience increases preferences for an increase of the retirement age over other reform measures, while information provision reduces preferences for tax subsidies. In addition, we highlight the impact of prior beliefs and find that overestimation of demographic change in the short term reduces the treatment effects, while overestimation in the long term increases it. As the salience and the information treatments barely differ, we conclude that it is not the information about the demographic change, but rather being made aware of the challenges of the pension system, which matters for reform preferences.
The transmission of financial shocks and the leverage of financial institutions: An endogenous regime switching framework
We conduct a novel empirical analysis of the role of leverage of financial institutions for the transmission of financial shocks to the macroeconomy. For that purpose we develop an endogenous regime-switching structural vector autoregressive model with time-varying transition probabilities that depend on the state of the economy. We propose new identification techniques for regime switching models. Recently developed theoretical models emphasize the role of bank balance sheets for the build-up of financial instabilities and the amplification of financial shocks. We build a market-based measure of leverage of financial institutions employing institution-level data and find empirical evidence that real effects of financial shocks are amplified by the leverage of financial institutions in the financial-constraint regime. We also find evidence of heterogeneity in how financial institutions, including depository financial institutions, global systemically important banks and selected nonbank financial institutions, affect the transmission of shocks to the macroeconomy. Our results confirm the leverage ratio as a useful indicator from a policy perspective.
Estimating Preferences from Strictly Concave Budget Restrictions
We propose an experimental method, Strictly Concave Budget Restrictions, to determine preference parameters precisely with the lowest possible number of observed choices. Our approach extends a method that is commonplace in economics for estimating preference parameters: the analysis of choices that were made subject to linear budget restrictions. Compared to other elicitation methods, budget-based approaches allow for relatively precise estimation of the preference parameters that govern individuals’ choices. This is the case, however, only as long as individuals choose interior allocations. It has turned out across numerous experimental studies that the majority of participants’ choices from linear budgets are corner allocations. The main idea of Strictly Concave Budget Restrictions is to encourage interior choices by making corner allocations extremely unattractive. In an online study investigating intertemporal choice, we demonstrate that our method indeed drastically reduces the frequency of corner allocations. Preliminary analyses indicate that our method also improves the ability to estimate parameters on the individual level and, as a consequence, to characterize interindividual heterogeneity.
Populist Leaders and the Economy
Populism at the country level is at an all-time high, with more than 25% of nations currently governed by populists. How do economies perform under populist leaders? We build a new cross-country database identifying 50 populist presidents and prime ministers 1900-2018. We find that the economic cost of populism is high. After 15 years, GDP per capita is more than 10% lower compared to a plausible non-populist counterfactual. Rising economic nationalism and protectionism, unsustainable macroeconomic policies, and institutional decay under populist rule do lasting damage to the economy.
Intergenerational Returns to Migration: Evidence from Italian Migrants Worldwide
The main rational motivation understood to be behind migration decisions is to improve opportunities and future life chances, both for the migrants themselves and for their offspring. Using unique administrative data on Italians living abroad, we estimate the effect of parental migration on the education, employment and income opportunities of descendants in the host country, by comparing Italian second-generation immigrants with Italians residing in Italy having similar characteristics, such as age, sex, Italian region of origin and parental background. To account for self-selection on unobservable characteristics, we apply a multinomial selection bias correction framework. We find heterogeneous returns to migration across destination countries, higher returns in terms of estimated income than education, and observe important gender differences. These heterogeneity is associated with certain characteristics of the host country’s education system and labour market. Finally, we test whether the expectation of better opportunities for both migrants and their children indeed plays an important role for the migration choice.
Headwind or Tailwind at the Ballot Box? The Local Effect of Wind Turbines on Green Party Support
Whether pro-climate parties win or lose at the ballot box in an area where wind turbines were built is a matter of debate. Some of the sparse literature on this relationship finds negative effects often interpreted as NIMBY behavior and concerns about noise and the visual intrusion of the landscape. Other studies highlight the economic benefits and habituation effects. We contribute by exploiting new fine-grained data on the position of wind turbines in Germany and more robust econometric methods. Crucially, we measure the visibility of wind turbines from settlements. We estimate the change in voting behavior within the last seven national election periods for the German Green Party in municipalities after the first visible wind turbine was constructed. During most periods, there is no statistically significant effect of visible wind turbines on Green party vote share, suggesting that voters do not punish the party. Yet, this seems to be changing in the 2021 election period because of various political and energy-related reasons.
Resource Dependence and Recycling
Recycling waste from used goods can substitute for scarce raw materials and reduce resource dependence. This paper presents a model of waste collection, recycling and final goods production using raw and recycled materials. Recycling acts like a multiplier of primary resources. When there are incomplete trash markets, recycling is inefficiently low. An optimal tax on trash combined with a demand subsidy can induce the Pareto optimal allocation. The tax subsidy scheme is self-financing and mimics a competitive market for trash. We study trade between a resource poor country exporting final goods and a resource rich country exporting raw materials. Expanding the recycling industry can reduce resource dependency of the industrialized country. We find rich welfare effects of trade policy with non-trivial interactions of terms of trade effects and distortions in recycling.