HERE Seminar

Environmentally friendly technologies might substantially contribute to achieve environmental sustainability. While the social benefits of those green technologies are often expected to be positive, it remains rather unclear if they can generate private economic returns and thus private incentives for provision. In this paper, we adopt a regional perspective and identify the private returns to green technologies in German regions. The recent literature on spatial- and factor models has emphasized the importance of accounting for possible cross-sectional dependence in the data. Hence, we explicitly estimate the degree of cross-sectional dependence and choose an empirical framework robust to unobserved common shocks and knowledge spillovers of unknown form. Our results indicate that in terms of total factor productivity there are rather limited private returns to green technologies or technologies in general, when unobserved factors are controlled for. Potential implications for regional innovation policies are discussed.

Katrin Rehdanz (1), Swantje Sundt (1), Christine Merkb (2), Florian Weinbergerc (4)

(1) Kiel University, Department of Economics, Kiel, Germany

(2) Kiel Institute for the World Economy, Kiel, Germany

(3) GEOMAR Helmholtz Centre for Ocean Research Kiel, Kiel, Germany

Beach managers in Germany and worldwide are increasingly concerned about nuisance of seaweeds, which litter beaches in growing amounts since the onset of coastal eutrophication. Using extracted odorants of various seaweed species we test the hypothesis that it is rather the change in species composition that creates the nuisance and not the sheer amount. In our field experiment at the coast of Schleswig-Holstein survey respondents rated the odor of opportunistic species more intense and less pleasant than the odor of non-opportunistic species; preferring to visit these beaches less often. We conclude that the eutrophication of German Baltic Sea coasts has caused a shift in beach wrack composition toward species with a higher potential for olfactorial deterrence, which could explain increasing concerns despite limited increase of biomass in the study area.

Do economic sanctions succeed in weakening the support of incumbent governments? To answer this question, we focus on the sanctions imposed on Russia after 2014 and identify their effect on voting behavior in both presidential and parliamentary elections. On the economic side, the sanctions significantly hurt Russia’s foreign trade, but with regional-level variation. For identification, we derive counterfactual regional-level trade flows from a full-general-equilibrium gravity model. Observed deviations from the counterfactual result from pre-determined variation in the regions‘ industry structure as well as their propensity to substituting trade with sanctioning countries by trade with other countries. DiD-Estimations reveal that regime support significantly increased in response to the sanctions, at the expense of voting support of communist and nationalist parties. Indeed, 39 percent of the increase in the vote shares of president Putin and his party can be explained by the sanctions‘ trade effects. Placebo estimations confirm the validity of our identification assumptions.

Constitutional democracy is in decline and many would-be autocrats try to elude constitutional constraints or even to exploit constitutions in their favour. We make a number of proposals for designing constitutions that are more resilient against such attempts. A first look at the empirical evidence, however, is sobering. There is little evidence that many appealing constitutional rules are able to increase constitutional resilience.

Keywords: constitutional compliance, militant democracy, militant constitutionalism, de jure de facto gap, democratic backsliding.

JEL Codes: H11; K38; P51.

This paper provides a new perspective on the exchange rate disconnect puzzle by analyzing the role of expected fundamentals for expected exchange rate changes. We assess data for 31 economies from 2002 until 2017 and consider expectations regarding GDP growth, inflation, interest rates and current accounts. Our empirical findings identify an impact of expected fundamentals, which is not fully consistent with traditional fundamentals models. Our results also show that the expectation making process differs remarkably between industrial and emerging economies and that exchange rate expectations are stronger linked to expected fundamentals after the global financial crisis. Finally, we find that expectations related to fundamentals affect both realized forecast errors and dispersion across forecasters.

We show how major shareholders can exploit their power over international organizations to hide their foreign-policy interventions from domestic audiences. We argue that major powers exert influence bilaterally when domestic audiences view the intervention favorably. When domestic audiences are more skeptical of a target country, favors are granted via international organizations. We test this theory empirically by examining how the United States uses bilateral aid and IMF loans to buy other countries‘ votes in the United Nations Security Council (UNSC). Introducing new data on voting behavior in the UNSC over the 1960-2015 period, our results show that states allied with the US receive more bilateral aid when voting in line with the United States in the UNSC, while concurring votes of states less allied with the US are rewarded with loans from the IMF. Temporary UNSC members that vote against the United States do not receive such perks.

Populism is on the rise. What can history teach us about populism and the fate of countries with populists in power? This paper studies macroeconomic and political outcomes under populist governments since 1900, using a new data archive on left-wing and right-wing populist leaders in a sample of 60 nations. For coding, we follow the consensus approach and define populism as a political style that centers on an alleged struggle between „the people“ and „the elites“. We find that populism at the level of governments is at an all-time high, with 25% of countries ruled by populists in 2018. Second, populism is serial and recurring: most countries that had a populist leader in history also have a populist leader today. Third, we find that populists tend to ascend to office in crisis times and stay in power longer than other elected leaders. In terms of macroeconomics, populists often „catch the upswing“ in the short and medium run, with growth rates that are comparable to those under non-populist governments. However, about seven years after taking office, GDP growth starts to decline, on average, compared to the non-populist counterfactual. One explanation for the long-term GDP decline is the systematic erosion of checks and balances under populist rule. Across the board, indices of democratic quality, executive constraints, press freedom, and judicial independence drop strongly after populists come to power. Thus, in terms of political outcomes, we find that populists often turn authoritarian. In terms of economics, we find that populist rule is associated with long-run stagnation and crises.

Climate research suggests that global warming will lead to more frequent and more extreme natural disasters. Most disasters are local events with effects on local economic growth. Hence, assessing their economic impacts with the help of econometric country-level analysis may lead to biased results. Moreover, correct identification is further complicated by the possibility that local shocks shift production and consumption to neighboring locations. In this paper, annual night-time light emission data covering about 24,000 grid cells for the years 1992-2013 are matched to geocoded information on meteorological and geological events. Spatial econometric panel methods are applied to account for interdependencies between locations. Interpreting variation in light emissions as reflecting changes in economic activity, findings convey evidence for pronounced local average treatment effects and strong spatial spillovers, particularly for weather shocks. In particular, results suggest that spatial shifts of economic activity after a natural disaster are a rather local phenomenon, stressing the importance of local adaptation policies. Moreover, substantial heterogeneity across income groups and regions is identified.

Commuters spend their money in a different place from where they earn it, thereby constituting an important channel for cross-regional dependencies and shock propagation. We analyze their role for convergence at the county level by proposing a spatial weights matrix based on commuter flows. In contrast to the classical geography-based spatial weights matrices, this matrix captures asymmetric regional dependencies derived from agents‘ actual behavior. With this spatial weights matrix, we estimate a panel data model that is dynamic both in the time and space dimension. This allows us to capture to what extent a county’s growth depends both on its own past trajectory and on that of other counties to which it is connected by commuter flows. Applying our approach to German counties from 2002 to 2014, we find that (i) regional convergence has taken place with heterogeneous spatial effects, and (ii) commuter flows from poorer to richer counties are a notable feature of the convergence process.

Most previous evidence on employment and Intimate Partner Violence (IPV) is based on correlational studies. While such correlations are illustrative they do not tell us whether employment affects IPV, whether IPV affects employment, or whether there is some other factor that affects both employment and IPV. We identify the effects of jobs on IPV by collaborating with large companies in Ethiopia to randomly assign jobs to female applicants. In the presentation I will present results from the first six month follow up.

As the most important driver of long-term project evaluation, from climate change policy to infrastructure investments, the social discount rate (SDR) has been subject to heated debate among economists. To uncover the extent and sources of disagreement, we report the results of a survey of over 200 experts that disentangles the long-term SDR into its component parts: the pure rate of time preference, the wealth effect, and the real risk-free interest rate. The mean recommended SDR is 2.27 percent, with a range from 0 to 10 percent. Despite disagreement on point values, more than three-quarters of experts are comfortable with the median SDR of 2 percent, and over 90 percent find an SDR in the range of 1 to 3 percent acceptable. Our disentangled data reveal that only a minority of responses are consistent with the Ramsey Rule, the theoretical framework dominating discounting policy. Instead, experts recommend that governmental discounting guidance should be updated to deal with uncertainty, relative prices, and alternative ethical approaches.