Institut für Volkswirtschaftslehre

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On the blurring boundaries between monetary and fiscal policy
(2025) Krautter, Victoria; Evers, Michael
In recent decades, several different crises have occurred in the European monetary union at ever shorter intervals. In a monetary union, the centralised monetary policy makes it difficult for member states to react to crises, as only national fiscal policy can be used to combat such crises. This is particularly problematic in the case of asymmetric shocks between member states, because in a monetary union, centralised monetary policy can only react efficiently to symmetric shocks. However, the national asymmetric effects of shocks must be balanced out by national fiscal policy. This makes the role of fiscal policy all the more crucial in the monetary union. Therefore, the interaction between monetary and fiscal policy in a monetary union is essential and must be further explored. As part of my dissertation, I am examining the interaction between monetary and fiscal policy in a monetary union and looking at the effects of different fiscal instruments. I use a dynamic stochastic general equilibrium model with a large fiscal sector for two regions to investigate the introduction of different fiscal instruments in a monetary union. National fiscal policy can cause negative adverse effects between member countries. A national strategically used tax policy of one country can have negative effects on another country, since a country will always try to maximise its own welfare exclusively. This is reflected in the "beggar-thy-neighbour" effect. In the first two projects of my thesis, the question is whether the strategic exploiting of a labour tax rate can be reduced by transfer regimes or public debt arrangements. To this end, a case of pure centralised monetary policy with a strategically used labour tax is compared with the respective introduced fiscal regimes. The additional fiscal transfer regimes include a tax revenue sharing mechanism between the countries and a central fiscal authority that covers indirect transfers between the member countries. A linear debt restriction and a central authority with a common union-wide debt represent the fiscal public debt mechanisms. In order to be able to identify the strategic component of the labour tax rate across all considered regimes, the differences between the Nash equilibrium and the social planner solution are determined. The strategic interaction requires welfare losses and determines an inefficient allocation of resources in the monetary union. Fiscal instruments can partially internalise these strategic incentives and achieve a more efficient allocation. These two projects were co-authored with Prof. Dr. Michael Evers and Julius Kraft. In my third project, I consider a currency union with a central monetary policy in combination with a government debt and a primary deficit limitation rule based on the model of the Maastricht Treaty. This situation is expanded and compared using different transfer regimes such as the tax revenue sharing mechanism and a central fiscal authority with indirect transfers. In addition, the functionality of the primary deficit and government debt rule is analysed with regard to different shocks in the form of an asymmetric productivity and an asymmetric government spending. These additional fiscal rules aim to prevent negative spillover between the two regions due to over-indebtedness and excessive primary deficits. For this purpose, the two restrictions on the primary deficit and the national government debt are described by an exponential function in order to be able to model a one-sided punishment for non-compliance with the respective target values. This guarantees that larger exceedances of the target values are punished more severely than small deviations. In addition, undershoots of the target value are only punished very slightly. This can guarantee greater discipline in compliance with the fiscal rules. The fiscal arrangements can reduce the strategic usage of the labour tax rate compared to a scenario with purely centralised monetary policy. This applies in particular to a central fiscal authority, which can decline the labour tax rate overall. Fiscal arrangements can help diminish strategic incentives and thereby create more efficient allocation. However, this effect is weaker if the model frictions such as distorting taxes, nominal rigidities and mark-ups are neglected. Nevertheless, the fiscal regimes lead to a reduction in the strategic component in the labour tax rate, whereby either the tax base effect or the national debt effect can be reduced. The primary deficit restriction in conjunction with the transfer regimes has a significantly limited effectiveness under the presence of an asymmetric government spending shock although transfers decrease the level of the primary deficit. In contrast, the government debt limitation is actually effective under all regimes and assumed shocks. The punishment of excessive government debt can prevent over-indebtedness. Its functionality is reinforced by the sovereign spread on government debt working as a market discipline mechanism. This is especially true for a central fiscal authority. The interregional risk-sharing in a monetary union enables the member states to protect each other against asymmetric shocks. The transfer regimes with an additional debt and primary deficit restriction diminish income risk-sharing significantly. However, pure transfer or debt regimes without an additional fiscal limitation lead to a substantial increase in the risk-sharing of consumption and income. This strengthens the international insurability of the monetary union as a whole. Although this characteristic is predominantly pronounced for a central fiscal authority with common union-wide debt and indirect transfers. The combination of a primary deficit and government debt restriction rule with the two transfer regimes results in an improvement in welfare compared to a pure centralised monetary policy with a debt and deficit limitation. The strategic exploiting of the labour tax rate reduces the welfare level for all scenarios. The exclusion of this strategic component, on the other hand, always increases the welfare level significantly. This applies regardless of whether a pure centralised monetary policy or a fiscal scenario like transfers or debt restriction is considered. The central fiscal authority has the greatest welfare gains of all considered arrangements. In conclusion, a government debt limitation rule with all regarded transfer scenarios and centralised monetary policy are effective for the observed shocks. The central fiscal authority is particularly characterised by the reduction of the strategic incentives in the labour tax rate, a significant improvement in the interregional risk-sharing and obviously welfare gains. Thus, the highest level of fiscal integration leads to the best results based on the assumed criteria. Both monetary policy and fiscal policy should be centralised in order to achieve the best possible solution for the monetary union as whole.
Macroeconomic aspects of fiscal federalism in monetary unions
(2025) Kraft, Julius; Evers, Michael
There is an ongoing policy debate about federal fiscal structures in the European monetary union, that has recently gained new momentum in context of the Recovery and Resilience Facility within the Next Generation European Union programme as well as the reform of the Stability and Growth Pact within the European fiscal framework. This long-standing debate, that originates from the European unification process, has thus far led to a monetary union without a complementary fiscal union. The recent reforms once again raise the question of the desirable degree of federal integration and the optimal design of fiscal institutions in the European monetary union. This thesis assesses the macroeconomic characteristics of different federal fiscal arrangements, common debt structures and risk-sharing mechanisms in a monetary union and derives policy implications for the ongoing debate about fiscal federalism in the European monetary union. The integration of strategically interacting regional fiscal authorities into a structural two-country model of a monetary union allows to quantitatively assess their strategic incentives and the resulting business cycle and welfare effects. Introducing different federal fiscal arrangements and common debt structures to the monetary union yields insights about the resulting incentive effects as well as their macroeconomic consequences. In particular, the analysis focusses on the macroeconomic characteristics of a fiscal equalisation mechanism, a central fiscal authority, a debt rule and common debt in a monetary union. From an empirical perspective, an agnostic orthogonalisation approach is suggested, that allows to decompose the business cycle shocks in the Euro area into their common and idiosyncratic shock components. Analysing their empirical characteristics yields insights about the scope for macroeconomic risk-sharing across the countries of the Euro area. The first chapter identifies the strategic incentives for the regional fiscal authorities in a monetary union to adjust their labour income tax responses and quantifies the resulting business cycle and welfare implications. There is a general trade-off between the adverse incentives for strategic behaviour and the allocative efficiency, so that strategic interac tion results in inefficient allocations and causes welfare losses. Building upon the fiscally decentralised benchmark economy with standard economic frictions, a fiscal equalisation mechanism and a central fiscal authority are introduced to the monetary union. Whereas the regional fiscal authorities have strategic incentives for stronger labour income tax responsiveness to changes in the tax base and the debt-to-GDP ratio than efficient in the benchmark economy, their responses are weaker than efficient with a central fiscal authority. In the presence of strategic interaction, introducing a central fiscal authority improves welfare, whereas a fiscal equalisation mechanism causes welfare losses relative to the benchmark scenario. The second chapter analyses the impact of different common debt regimes and potential adverse strategic incentives within a monetary union. The common debt structures encompass a debt-unrestricted benchmark, a debt rule set-up, and a common debt scenario. Labour income taxation, as the strategic fiscal policy instrument, responds to labour income as the tax base and the regional debt-to-GDP ratio through a feedback rule. The benchmark scenario reveals existing adverse effects from the strategic use of labour income taxation for the regional benefit. This scenario serves as a point of comparison for the optimal labour taxation in the other two common debt regimes. A Nash equilibrium is used to evaluate this strategic component of taxation. The strategic tax component leads to inefficiently high tax rates that require internalisation through different debt structures. In the absence of model frictions such as nominal rigidities and distortionary taxes, the debt rule scenario internalises the inefficiency of the debt effect. In contrast, the common debt case internalises the strategic tax base effect. Taking all frictions into account, both debt scenarios lead to lower and more efficient tax rates, which demonstrates the internalisation of the strategic component. The debt rule and the common debt structure lead to welfare gains compared to the benchmark scenario, both with and without strategic incentives. In addition, these arrangements can mitigate the trade-off between strategic incentives and the allocative efficiency. Especially in the common debt case, the strategic incentives are almost internalised through the additional risk-sharing mechanism. The third chapter decomposes the business cycle shocks in the Euro area into their common and idiosyncratic shock components to evaluate the scope for macroeconomic risk-sharing across countries. The approach is based on the Aoki (1981) transformation, that allows for an agnostic orthogonalisation of the shock components that is independent from structural assumptions. An application to the core and the periphery of the Euro area shows that the cyclical fluctuations are heterogeneous between these groups of countries. Since common shocks explain most of the region-specific shock variance, their shocks are nevertheless highly correlated. Extending the analysis to the initial Euro area countries, the results show that the common shock component explains most of the country-specific shock characteristics and that the idiosyncratic component is relatively less relevant. A risk-sharing mechanism for idiosyncratic shocks has the potential to reduce fluctuations in all Euro area countries, whereas an equalisation of the weighted cyclical differences can even be counter-productive and increase the business cycle fluctuations in some countries. The strategic interaction between the regional fiscal authorities in a monetary union has substantial incentive effects with considerable business cycle and welfare implications. There is a general fiscal policy trade-off between the adverse incentives for strategic behaviour and the allocative efficiency, so that strategic interaction results in inefficient allocations and causes welfare losses. It is demonstrated in how far different publicly discussed federal arrangements and common debt structures internalise the strategic externalities resulting from fiscal policy spillovers. In general, federal integration in a monetary union increases the strategic externalities, so that the adverse incentives are overall weaker. In principle, there is potential for welfare improvements through the coordination of strategic fiscal policies. Given that adverse incentives already exist within the current European fiscal framework, any attempt to internalise the strategic externalities through the federal structure has the potential to generate welfare improvements. However, the estimated scope for macroeconomic risk-sharing across the Euro area countries is limited since common shocks are predominant. Nevertheless, a risk-sharing mechanism for idiosyncratic shocks has the potential to reduce the cyclical fluctuations in all Euro area countries, thereby contributing to the convergence towards a common business cycle.
Predictor preselection for mixed‐frequency dynamic factor models: a simulation study with an empirical application to GDP nowcasting
(2025) Franjic, Domenic; Schweikert, Karsten; Franjic, Domenic; Core Facility Hohenheim and Institute of Economics, University of Hohenheim, Stuttgart, Germany; Schweikert, Karsten; Core Facility Hohenheim and Institute of Economics, University of Hohenheim, Stuttgart, Germany
We investigate the performance of dynamic factor model nowcasting with preselected predictors in a mixed‐frequency setting. The predictors are selected via the elastic net as it is common in the targeted predictor literature. A simulation study and an application to empirical data are used to evaluate different strategies for variable selection, the influence of tuning parameters, and to determine the optimal way to handle mixed‐frequency data. We propose a novel cross‐validation approach that connects the preselection and nowcasting step. In general, we find that preselecting provides more accurate nowcasts compared with the benchmark dynamic factor model using all variables. Our newly proposed cross‐validation method outperforms the other specifications in most cases.
Improving public policy
insights on tax compliance and inequality
(2024) Vietz, Jasmin; Dwenger, Nadja
This thesis offers valuable insights for improving the design of public policies. First, it enhances the government’s ability to allocate public funds in a manner that aligns with citizens’ preferences by deepening the understanding of fair income distribution. Second, it investigates how informing citizens about the use of these public funds can improve tax compliance. Third, it highlights heterogeneity in individual decisions, enabling the government to incorporate this heterogeneity into public policy design. The thesis is structured into five chapters. Chapter 1 situates the research questions within the field of public economics, providing a comprehensive overview of existing literature. This establishes a foundation for understanding the relevance of the thesis and its contributions. Chapter 2, which is based on joint work with Nadja Dwenger and Ingrid Hoem Sjursen, explores fairness preferences. Hereby, the focus is on meritocracy. Meritocracy implies paying people according to their performance and consists of two principles: (i) paying people with equal performance equally (fair equality) and (ii) paying people with higher performance more (fair inequality). However, fulfilling both principles simultaneously can be challenging. Through an online survey experiment conducted with a representative sample of the US population, we provide experimental evidence on which principle individuals consider more important. Participants in the experiment are faced with the choice to either create equality among equals (implementing fair equality) or create inequality among unequals (implementing fair inequality). While one might expect meritocrats to value both principles equally, our experimental variation reveals that individuals are willing to incur a substantial personal cost for implementing one of the two principles. We find that roughly half of meritocrats in our sample choose to implement fair equality, while the other half opts for fair inequality. Chapter 3, which is based on joint work with Ingrid Hoem Sjursen, investigates non-pecuniary motives, specifically reciprocity, as determinants of voluntary tax compliance. In environments with low enforcement capacity, fostering voluntary compliance through non-pecuniary motives can be crucial for increasing public revenues. The chapter investigates whether informing citizens about tax benefits (i.e., public goods and services funded by tax revenue) enhances voluntary tax compliance. Furthermore, it examines whether the information’s impact changes if it comes from a religious sender rather than a tax official, and whether people react differently to the information when reminded about a regularly paid tax beforehand. To study these questions, we conduct a lab-in-the-field experiment among market traders in Tanzania, a country characterized by limited enforcement capacity. The results indicate that informing participants about tax benefits increases voluntary tax compliance, but only when they are not reminded about a tax they regularly pay. When reminded, the effect of the information turns negative. These effects are mainly driven by participants who receive the tax benefits information from a religious sender, rather than a tax official. Chapter 4 examines how culturally determined time preferences– specifically, the degree of patience –affect decisions to invest in continued education. The chapter uses an epidemiological approach to isolate the effect of patience on investments in continued education by focusing on immigrants living in Germany. Immigrants are influenced by the preferences prevalent in their countries of origin, but make decisions within the institutional framework of their new resident country. By combining German Microcensus data with a country-level measure of patience, the analysis explores how patience affects immigrants’ investments in continued education. The results show that immigrants from countries with higher average levels of patience are more likely to invest in continued education. This relationship holds for both first and second generation immigrants, though it is stronger for those who migrated at an older age or have spent less time in Germany. Chapter 5 synthesizes the findings and discusses their broader policy implications, highlighting how the insights gained from this thesis can inform public policy design. Additionally, the chapter identifies potential avenues for future research.
Fundamental parity conditions in international finance
(2024) Mößler, Markus; Jung, Robert
This thesis investigates the persistent deviations from Covered Interest Rate Parity (CIP), a cornerstone arbitrage condition in international finance, which have increasingly surfaced since the Global Financial Crisis (GFC) of 2007–2008. Despite the CIP condition being fundamental to the valuation of foreign exchange instruments, significant and sustained violations have challenged its empirical validity and puzzled both academics and practitioners. This study provides a comprehensive theoretical and empirical analysis of the CIP condition and its deviations, focusing on the contemporaneous and dynamic relationships between interest and exchange rates, as well as the role of arbitrage bounds. Employing a cointegrated regression model, the thesis first analyzes the structure of arbitrage strategies implied by CIP. It then utilizes a cointegrated vector autoregressive (VAR) model to assess the persistence of deviations and the speed of adjustment toward CIP equilibrium. Furthermore, the role of arbitrage bounds, such as transaction costs, is examined as a potential explanation for post-GFC anomalies. A macro-level comparison across multiple currency pairs, maturities, and time periods complements the analysis, extending beyond the traditionally studied USD-centric frameworks. The empirical findings reveal that while CIP held before the GFC, deviations became both large and persistent in the aftermath—particularly for the USD/EUR pair—with no sufficient justification from arbitrage bounds alone. The estimated arbitrage strategy weights and slower post-crisis adjustment dynamics underscore structural shifts in market functioning. These insights contribute to a deeper understanding of modern financial market frictions and open pathways for further research into evolving global financial architectures.
Essays on gender differences in pay
(2024) Satlukal, Sascha; Osikominu, Aderonke
The three empirical studies underlying this dissertation all deal with the gender difference in pay. In particular, they analyze gender differences in expectations and aspirations about wages as well as beliefs about job insecurity and job finding chances and their effect on the observed wage inequality between women and men. In the first research article I evaluate, together with Stephanie Briel, Aderonke Osikominu, Gregor Pfeifer, and Mirjam Stockburger, wage expectations of prospective university students. For this analysis, we exploit a survey among applicants at Saarland University in Germany. The survey primarily asks respondents about their expectations of their own starting salary when entering the labor market as well as about their expectations regarding the average starting salary of other students in their study field. In a first step, we estimate unexplained gender gaps at various quantiles of the conditional and unconditional distribution of respondents' expected own salary and expected average salary. Our results reveal sizable gender differences across the distributions of both expected salaries. Based on the quantile regressions, the wage expectations of females are 5 to 15 percent lower than those of males. Yet, the gender gaps are more pronounced in case of the expected own salary. Likewise, the gender gaps are larger at the lower end of the wage expectation distributions. In the next step, we decompose the raw gender gaps at unconditional quantiles and document that a substantial portion of the gaps can be attributed to the choice of the study field. In the last step, we compute two measurements of biased beliefs and study their role in explaining the gender gap in wage expectations. The first measurement compares students' perceptions of their own earning potential relative to other students in their field of study to their relative performance in high school. The second measurement confronts students' expectations about the average starting salary to observed starting salaries of university graduates. We show that biased beliefs about the relative earnings potential and average salaries together can explain a large part of the gender gap across the distribution of expected own salaries. Thus, our study contributes to the literature by highlighting that biased beliefs are major drivers of the gender gap in wage expectations. In the second research article Marina Töpfer and I analyze gender differences in reservation wages of non-employed job seekers. To do so, we use survey data from the German Socio-Economic Panel Study which asks non-employed participants about their monthly reservation wage and their intended weekly working hours. Based on the reported monthly reservation wages and intended working hours we compute the hourly reservation wage of individuals and find that women in our sample set 3 percent lower reservation wages compared to men. Next, we estimate the unexplained gender gap in reservation wages with a variety of parametric and semiparametric estimators. In addition, we use conventional as well as data-driven model specifications for the estimation. Hence, we can compare the results of different estimation approaches. All of our estimates of the unexplained gender gap suggest that women set lower reservation wages than men with similar observed characteristics. The estimates are all statistically significant and range between 5 and 8 percent. Comparing the different estimates of the unexplained gender gap we see that our estimate is relatively robust with regard to the model specifications, but is more sensitive to the choice of the estimator. Furthermore, we assess heterogeneity of the gender gap across the reservation wage distribution and with regard to characteristics such as marital status, children, and education. Our findings indicate that the gender gap in reservation wages is particularly pronounced at the top of the reservation wage distribution, among the high-skilled, and among individuals who live in a household with a child. In the third research article I investigate gender differences in beliefs about job insecurity and job finding chances and their consequences for the gender gaps in wages and reservation wages. To address this research question, I again utilize date from the German Socio-Economic Panel Study, which provides information on individuals' perceptions of their job insecurity or their chances of finding a job. Whereas employed respondents are asked how likely it is that they lose their job within the next two years, unemployed respondents are asked how likely it is that they find a job within the next two years. As the first step of my analysis, I compare these subjective beliefs to objective probabilities that I predict with machine learning methods using a large set of predictors. I find that employed individuals considerably overestimate the probability of a job loss on average, while unemployed individuals slightly overestimate the probability of finding a job. But, women are significantly more pessimistic with regard to both expectations compared to men. These gender differences in beliefs do also persist when I control for a large set of observed characteristics. Subsequently, I relate the job loss expectations to wages of employees and the job finding expectations to reservation wages of unemployed job seekers. My results suggest a negative relationship between job loss expectations and wages on the one hand, and a positive relationship between job finding expectations and reservation wages on the other hand. Finally, I estimate the effect of the gender differences in the beliefs to the gender gaps in wages and reservation wages and find a small positive contribution in both cases. But, only the contribution of job loss expectations to the gender gap in wages is statistically significant. In addition, I demonstrate that the effect of job loss expectation to wages is larger for workers without a collectively agreed wage and for college graduates.
Collusive behavior in markets: partial cartels, tacit collusion, and artificial intelligence
(2023) Grüb, Jens T.; Schwalbe, Ulrich
This cumulative dissertation thesis consists of five papers on collusive behavior. The individual research areas are (i) the link between partial cartels and mergers, (ii) the effect of price announcement letters on the cement price in Germany, (iii) limitations of the transferability of experimental results with Q-learning agents in economic environments, (iv) the strategic choice of price-setting algorithms in a game theoretic model, and (v) the influence of algorithm heterogeneity on the ability to collude. It is often assumed that a cartel consists of all firms in a market. Cartels, however, do not necessarily have to be all-inclusive. If only some firms in a market are part of a cartel, it is called a partial cartel. The structure of such a partial cartel as well as the behavior of outside firms are explained in the literature. How such a partial cartel is formed, however, is not explained. This question is addressed by establishing the link between mergers and partial cartels in a Bertrand model with heterogeneous capacities and heterogeneous discount factors. The critical change in the discount factor induced by a merger which then leads to a partial cartel is described. Thus, it is also shown that coordinated and non-coordinated effects can occur simultaneously. While the hard-core cartel in the German cement market has been analyzed in several studies, a phase of tacit collusion with parallel behavior between 2008 and 2017 has not been investigated as thoroughly. During this period, 15 firms that covered 93 percent of the cement sales in Germany had sent so-called ``price announcement letters'' to all customers. Due to the fact that the firms are customers of each other and the vertical integration on the supply side of this market, these letters were effectively sent between all firms in this market. This can be seen as a means to induce parallel behavior and reduce competition. The resulting increase in the cement price is estimated using the traditional before-and-after approach and a simple forecast. In addition, the price increase is estimated using a forecast with an autoregressive integrated moving average (ARIMA) error to check the robustness of the mentioned estimates. The price increase is estimated to be 6 percent. It is, therefore, comparable to the estimated overcharge of 7.6 percent of the hard-core cartel which shows that tacit collusion in the form of price announcement letters can be as harmful as a hard-core cartel. The third major topic is algorithmic collusion. Because of technological advances, especially in the field of artificial intelligence, more and more firms are able to use self-learning algorithms. The major concern with these algorithms is that -- without being explicitly programmed to do so -- they learn to behavior collusively. Experiments with algorithms employing reinforcement learning have been carried out that confirm such concerns. How the results of these experiments transfer to more realistic settings is extensively discussed. For these specific algorithms, technical and economic limitations hinder the direct application to real-world markets. Using the same type of algorithm, experiments are carried out to investigate how this algorithm compares against one simpler learning algorithm and two non-learning algorithms. The results of the experiments are used in a simple one-shot game where the players select from one of the algorithms instead of setting prices directly. The payoffs are generated by letting the algorithms play a Bertrand duopoly game. Analyzing the game reveals that both players choosing a self-learning algorithm is not a Nash equilibrium. Simpler yet effective pricing rules are more profitable for firms. Besides the reinforcement algorithms discussed so far, there are also deep-learning algorithms that make use of advanced methods like artificial neural networks. These do not suffer from some of the shortcomings of the above-mentioned algorithms and have a broader field of application. Such deep-learning algorithms are used in experiments to analyze how sources of heterogeneity affect the level of collusion. Heterogeneity is introduced by using two different types of algorithms and two different parameter settings. Experiments are run in various economic environments. First, the level of collusion depends on the economic environment and algorithm type. Secondly and more importantly, the level of collusion almost always decreases with heterogeneity. In even more complex markets with more firms and multiple products, this indicates that algorithmic collusion is not yet an issue.
Does India use development finance to compete with China? A subnational analysis
(2025) Asmus-Bluhm, Gerda; Eichenauer, Vera Z.; Fuchs, Andreas; Parks, Bradley; Asmus-Bluhm, Gerda; Department of Economics, University of Hohenheim, Germany; Eichenauer, Vera Z.; KOF Swiss Economic Institute, ETH Zürich, Switzerland; Fuchs, Andreas; Department of Economics, University of Göttingen, Germany; Parks, Bradley; AidData, Global Research Institute, William & Mary, Williamsburg, VA, USA
China and India increasingly provide aid and credit to developing countries. This article explores whether India uses these financial instruments to compete for geopolitical and commercial influence with China. We build a new geocoded dataset of Indian government-financed projects in the Global South between 2007 and 2014 and combine it with data on Chinese government-financed projects. Our regression results for 2,333 provinces within 123 countries demonstrate that India’s Exim Bank is significantly more likely to locate a project in a given jurisdiction if China provided government financing there in the previous year. Since this effect is more pronounced in countries where India is more popular relative to China and where both lenders have a similar export structure, we interpret this as evidence of India competing with China. By contrast, we do not find evidence that China uses official aid or credit to compete with India through co-located projects.
Governance of responsible research and innovation: A social welfare, psychologically grounded multicriteria decision analysis approach
(2025) Paredes-Frigolett, Harold; Pyka, Andreas; Bevilacqua Leoneti, Alexandre; Nachar-Calderón, Pablo
Our article deals with the governance of responsible research and innovation (RRI) and aims to set out a first psychologically grounded decision-theoretic method for the governance of RRI. We approach the governance of RRI as a multicriteria group decision analysis problem of delivering social welfare in an innovation ecosystem. Following such a methodological approach, we develop a psychologically grounded multicriteria group decision analysis method that integrates in its value function the main psychological effects captured in the value function of prospect theory as the main theory of individual decision-making under risk. The method first applies a psychologically motivated multicriteria decision analysis function that measures the welfare delivered to all stakeholders involved in a research and innovation consortium. The method then applies a social welfare function on the welfare measurements of stakeholders to propose a social welfare solution that emerges as an RRI-compliant solution for the consortium. The results are a first psychologically grounded multicriteria group decision analysis method and its first application to the governance of RRI. The implications of our results are theoretical but also practical, as our method contributes not only to the established field of multicriteria decision analysis by setting out new method but also to the field of RRI by delivering a psychologically grounded decision-theoretic method for the governance of RRI.
Comparing cars with apples? Identifying the appropriate benchmark countries for relative ecological pollution rankings and international learning
(2021) Hartmann, Dominik; Ferraz, Diogo; Bezerra, Mayra; Pyka, Andreas; Pinheiro, Flávio L.
One of the most difficult tasks that economies face is how to generate economic growth without causing environmental damage. Research in economic complexity has provided new methods to reveal structural constraints and opportunities for green economic diversification and sophistication, as well as the effects of economic complexity on environmental pollution indicators. However, no research so far has compared the ecological efficiency of countries with similar productive structures and levels of economic complexity, and used this information to identify the best learning partners. This matters, because there are substantial differences in the environmental damage caused by the same product in different countries, and green diversification needs to be complemented by substantial efficiency improvements of existing products. In this article, we use data on 774 different types of exports, CO2 emissions, and the ecological footprint of 99 countries to create first a relative ecological pollution ranking (REPR). Then, we use methods from network science to reveal a benchmark network of the best learning partners based on country pairs with a large extent of export similarity, yet significant differences in pollution values. This is important because it helps to reveal adequate benchmark countries for efficiency improvements and sustainable production, considering that countries may specialize in substantially different types of economic activities. Finally, the article i) illustrates large efficiency improvements within current global output levels, ii) helps to identify countries that can best learn from each other, and iii) improves the information base in international negotiations for the sake of a cleaner global production system.
Sustainable human development at the municipal level: A data envelopment analysis index
(2022) Lima, Pedro A. B.; Paião Júnior, Gilberto D.; Santos, Thalita L.; Furlan, Marcelo; Battistelle, Rosane A. G.; Silva, Gustavo H. R.; Ferraz, Diogo; Mariano, Enzo B.
The development of indexes for human development and environmental sustainability issues are an emerging topic in the current literature. However, the literature has put less emphasis on municipal indexes, which is the focus of this research. In this paper, we considered municipal environmental management as the adoption of environmental activities and the development of infrastructural and technical capacities in municipalities. This article aims to create a sustainable human development index with municipal data from the state of São Paulo in Brazil. Using information from the Municipal Human Development Index (IDHm) and the GreenBlue Municipal Program (PMVA), we applied the data envelopment analysis (DEA) technique to connect human development and environmental sustainability in 645 Brazilian municipalities. Our findings show that regions with higher human development present better DEA scores on the Sustainable Human Development Index. In contrast, regions with a low or a middle level of human development do not present significant change considering both dimensions. Moreover, our findings reveal that PMVA certification has a different and statistically significant impact on the DEA score considering certified, qualified, or not qualified regions. We found similar results for urbanized and service-oriented municipalities. Our indicator is an essential and straightforward tool for regional policymakers, helping to allocate resources and to find human development and environmental sustainability benchmarks among developing regions.
Effects of inbound tourism on the ecological footprint. An application of an innovative dynamic panel threshold model
(2022) Li, Xiaojuan; Meo, Muhammad Saeed; Aziz, Noshaba; Arain, Hira; Ferraz, Diogo
This study uses a new and innovative dynamic panel threshold technique to examine the relationship between inbound tourism and ecological footprint (EF). This method was applied to the 10 most popular destinations spanning 1995–2021. These findings demonstrate that inbound tourism and EF have a threshold effect. To be specific, we find that only a certain threshold of tourism is beneficial to the environment; beyond that point, increasing tourism is likely to cause EF. Additionally, economic growth, infrastructure investment, and energy all benefited the EF. But water availability negatively affects EF. The findings of this study may have important policy implications for policymakers.
Navigating the biocosmos: Cornerstones of a bioeconomic utopia
(2023) Onyeali, Wolfgang; Schlaile, Michael P.; Winkler, Bastian
One important insight from complexity science is that the future is open, and that this openness is an opportunity for us to participate in its shaping. The bioeconomy has been part of this process of “future-making”. But instead of a fertile ecosystem of imagined futures, a dry monoculture of ideas seems to dominate the landscape, promising salvation through technology. With this article, weintend to contribute to regenerating the ecological foundations of the bioeconomy. What would it entail if we were to merge with the biosphere instead of machines? To lay the cornerstones of a bioeconomic utopia, we explore the basic principles of self-organization that underlie biological, ecological, social, and psychological processes alike. All these are self-assembling and self-regulating elastic structures that exist at the edge of chaos and order. We then revisit the Promethean problem that lies at the foundation of bioeconomic thought and discuss how, during industrialization, the principles of spontaneous self-organization were replaced by the linear processes of the assembly line. We ultimately propose a bioeconomy based on human needs with the household as the basic unit: the biocosmos. The biocosmos is an agroecological habitat system of irreducible complexity, a newhumanniche embedded into the local ecosystem.
Modelling and diagnostics of spatially autocorrelated counts
(2022) Jung, Robert C.; Glaser, Stephanie
This paper proposes a new spatial lag regression model which addresses global spatial autocorrelation arising from cross-sectional dependence between counts. Our approach offers an intuitive interpretation of the spatial correlation parameter as a measurement of the impact of neighbouring observations on the conditional expectation of the counts. It allows for flexible likelihood-based inference based on different distributional assumptions using standard numerical procedures. In addition, we advocate the use of data-coherent diagnostic tools in spatial count regression models. The application revisits a data set on the location choice of single unit start-up firms in the manufacturing industry in the US.
Editorial: Financial and trade globalization, greener technologies and energy transition
(2023) Mariano, Enzo Barberio; Ferraz, Diogo; Radulescu, Magdalena; Shahzadi, Irum
Curtailment of civil liberties and subjective life satisfaction
(2021) Windsteiger, Lisa; Ahlheim, Michael; Konrad, Kai A.
This analysis focuses on the lockdown measures in the context of the Covid-19 crisis in Spring 2020 in Germany. In a randomized survey experiment, respondents were asked to evaluate their current life satisfaction after being provided with varying degrees of information about the lethality of Covid-19. We use reactance as a measure of the intensity of a preference for freedom to explain the variation in the observed subjective life satisfaction loss. Our results suggest that it is not high reactance alone that is associated with large losses of life satisfaction due to the curtailment of liberties. The satisfaction loss occurs in particular in combination with receiving information about the (previously overestimated) lethality of Covid-19.
Bioeconomy innovation networks in urban regions: The case of Stuttgart
(2023) Stöber, Lea F.; Boesino, Marius; Pyka, Andreas; Schuenemann, Franziska
For a successful transformation towards a sustainable bioeconomy, cooperative knowledge creation leading to innovations through research at the company and academic level are important. Urban regions are the centre of economic and research activities. The example of the region of Stuttgart, which aims to complement its mature industrial structure with new opportunities related to the knowledge-based bioeconomy, is an interesting case for the application of social network analysis to shed light on the dynamics of innovation networks to support the transformation of urban regions. As with smaller spatial levels of observation connectivity in network decreases, we find a scale-free network structure for the supra-regional network and a star-like network structure for the regional network, with two universities and one transfer-oriented research institutes at the core. While research collaborations beyond regional borders and across different industries foster knowledge co-creation, the central actors can be recognized as gatekeepers who dominantly influence knowledge flows. To potentially strengthen the resilience of the network, policy and industry associations serving as network facilitators can foster collaboration between periphery actors. The case of the Stuttgart region impressively illustrates the opportunities of the knowledge-based bioeconomy for urban regions and the complementary role traditional manufacturing sectors can take in the transformation towards higher degrees of sustainability.
The role of consumers in business model innovations for a sustainable circular bioeconomy
(2023) Lang, Stephanie; Minnucci, Giulia; Mueller, Matthias; Schlaile, Michael P.
Over the last decade, various governments and supranational bodies have promoted the development of a circular bioeconomy (CBE) as a response to sustainability challenges. The transition towards a CBE requires the collaboration of different actors in the innovation (eco)system. With this conceptual paper, we apply a circular business model lens to address the research question: “What are the archetypical roles of consumers in business model innovations for a sustainable CBE?” We use a combination of complementary theories from the circular economy and bioeconomy literature, evolutionary innovation economics, sustainability transitions research, the business model literature, and the work on active consumers. Considering consumers’ agency as a continuum between the manufacturer-active paradigm and the consumer-active paradigm, we propose: (i) consumers in the manufacturer-active paradigm can actively influence circular business models with their purchase decision; (ii) consumers can act as lobbyists and influencers for circular business model innovation; (iii) in their different roles as customer, user, repairer, and reseller, consumers can incentivize organizations to adapt their business models to their needs; (iv) consumers can become key partners in the process of defining the normative orientation of the innovation paradigm for a CBE; (v) consumers can actively co-create value by means of co-ownership (e.g., through platform cooperatives).
Responsibly shaping technology innovation for the energy transition: an RRI indicator system as a tool
(2023) Buchmann, Tobias; Wolf, Patrick; Müller, Matthias; Dreyer, Marion; Dratsdrummer, Frank; Witzel, Bianca
Efforts to reduce global greenhouse gas emissions have had limited success. For many, the hopes rest on new energy innovations to advance the energy transition process. In this paper, we develop a Responsible Research and Innovation (RRI) base indicator system to steer the design of innovations in the field of energy transition innovations and, thus, improve social acceptance of these innovations. We propose a guideline for its application to assist R&D performing organizations and funding organizations in the design, selection, and communication of research proposals. The indicator system is intended to promote early integration of environmental and social aspects, support the formation of teams aware of the different responsibility aspects of innovation, and monitor progress in regard to relevant RRI dimensions.
Editorial: Responsible research and innovation as a toolkit: Indicators, application, and context
(2023) Buchmann, Tobias; Dreyer, Marion; Müller, Matthias; Pyka, Andreas

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