Research Seminar

NAFTA and drug-related violence in Mexico

(with Eduardo Hidalgo and Pablo Selaya)

We study how NAFTA changed the geography of violence in Mexico. We propose that open borders increased trafficking profits of Mexican cartels and resulted in violent competition among them. We test this hypothesis by comparing changes in drug-related homicides after NAFTA’s introduction in 1994 across municipalities with and without drug-trafficking routes. Routes are optimal paths connecting municipalities with a recent history of drug trafficking with U.S. ports of entry. On these routes, homicides increase by 27% relative to the pre-NAFTA mean. These results cannot be explained by changes in worker’s opportunity costs of using violence resulting from the trade shock.

23 April 2024

Martin Fischer (Lund University )

Labour market returns to compulsory schooling in the presence of school tracking

Returns to education from instrumental variable estimation using compulsory schooling reforms have been interpreted as local average treatment effects (LATE) with school dropouts as the complier sub-population. I show that within traditional European school systems employing academic tracking, compulsory schooling reforms do not necessarily warrant such an interpretation. The complier population instead includes a further, conceptually different group of students which face constraints imposed by the institutional setting. These students are unable to attend their desired amount of schooling within the non-academic track. Leveraging two quasi-experiments in Sweden, I can compare labour market returns for students who were given the option to attend one additional year of education in lower secondary school to students who were mandated to take an additional school year. Results for life-cycle earnings show that only those who were forced to stay gained large labour market returns following an additional year of schooling (12% vs. OLS returns to education of 6%). In contrast, students student who voluntarily stayed in school for another year gained substantially smaller labour market returns on average. Interpreting the results within a marginal treatment framework, students with a higher resistance to stay in school had the highest earnings gains from additional schooling. The results are in line with findings on the so-called incarceration effect and conceptually connect compulsory schooling reforms with changes in the school minimum leaving age, which naturally target drop-outs only.

30 April 2024

Patrick Lehnert (University of Zurich)

The Effect of Postsecondary Educational Institutions on Local Economies: A Bird’s-Eye View

(with Patrick Lehnert, Madison Dell, Uschi Backes-Gellner and Eric Bettinger)

Over the last 50 years, nations worldwide have established higher education institutions to stimulate local economic growth. However, empirical evidence on local economic outcomes is still scarce, mainly because of a lack of adequate data. This paper provides evidence on the expansion of branch campuses in Tennessee and Texas, two states that are representative of the underlying patterns in the U.S. as a whole. As we expect the economic effect to be very localized, we use a novel and highly disaggregated proxy for regional economic activity based on daytime satellite imagery. Applying three panel estimation methods—traditional difference-in-differences (DD), heterogeneityrobust DD, and instrumental variables (IV)—we find positive associations for Tennessee and Texas in all estimations. In Tennessee, the traditional DD approach yields an increase in GDP of 1.4 percent after a campus opens (according to our most conservative estimate) and is driven by two-year branch campuses. In Texas, this effect amounts to 5.9 percent, with both two- and four-year branch campuses contributing to it. In our IV estimations, we take advantage of local taxing regulations that influence the decision to open branch campuses in certain locations but not the local economic conditions. We use this exogenous variation to estimate causal effects and find an even larger positive effect of 12.5 percent for the most conservative estimate. Given the widespread use of higher education expansion to induce economic growth, particularly in rural areas, this paper contributes important evidence on the economic impact of such campus openings on regional economic activity.

7 May 2024

Christina Gathmann (University of Luxembourg)

AI and the Labor Market: Impact on Job Tasks, Firm Employment and Local Labor Markets

How will AI reshape jobs and labor markets, and how does its impact differ from prior waves of technological change like robots?. To answer this question, we develop new measures for the advancement of AI and robotics technologies in Europe using Natural Language Processing techniques on patent data. Combining the patent-based measures with survey data on tasks, we find that AI exposure shifts the content of jobs from non-routine abstract tasks towards routine tasks, the opposite of what is observed for robots. These task shifts occur mainly within narrowly defined occupations within manufacturing and services. Combining the patent-based measures with administrative data on establishments and workers in Germany, we find negative employment effects for AI whereas robots negatively affect low-skill employment but increase medium- and high-skill employment. We also investigate the employment and wage responses in local labor markets using a shift-share design. In both manufacturing and services, AI reduces employment for medium-skill workers, while robots replace mostly low-skilled workers in manufacturing.

14 May 2024

Raoul van Maarseveen (University of Cologne)

Urbanization and educational attainment: evidence from Africa

Despite the rapid urbanization of the developing world, little remains known about how urban residency and migration affect childhood outcomes. Using census data for 14 African countries combined with an age-at-move design, I show that childhood exposure to cities significantly increases primary school completion and literacy rates of children, even for poor urban households. The availability of schools and the lower opportunity costs of education appear to be the main factors explaining the higher education attainment in urban regions. The paper thus provides evidence of a novel channel through which urban migration can promote economic development in developing countries.

11 June 2024

Eric Maurin (Paris School of Economics)

Sick of Working from Home?

Driven by new information technologies, working from home has experienced unprecedented growth since the COVID pandemic. We contribute to the debate on the consequences of this development by drawing on a French reform conducted in 2017, with the aim of facilitating telework agreements between employers and employees. We show that the reform was followed by a boom in working from home, particularly in mid-level occupations. On the other hand, employees in lower-level occupations were virtually unaffected. By comparing occupational groups before and after the reform, in firms that have signed telework agreements and in firms that have not, we find that the development of working from home coincides with a significant deterioration in the health status of mid-level employees, particularly men. Wages and number hours worked, on the other hand, remain largely unaffected.

18 June 2024

Christian Traxler (Hertie School)

Swiftness and Delay of Punishment

(with Libor Dušek)

This paper studies how the swiftness and delay of punishment affect behavior. Using rich administrative data from automated speed cameras, we exploit two (quasi-)experimental sources of variation in the time between a speeding offense and the sending of a ticket. At the launch of the speed camera system, administrative challenges caused delays of up to three months. Later, we implemented a protocol that randomly assigned tickets to swift or delayed processing. We identify two different results. First, delays have a negative effect on payment compliance: the rate of timely paid fines diminishes by 7 to 9% when a ticket is sent with a delay of four or more weeks. We also find some evidence that very swift tickets – sent on the first or second day following the offense – increase timely payments. These results align with the predictions of expert scholars that we elicited in a survey. Second, speeding tickets cause a strong, immediate, and persistent decline in speeding. However, we do not detect any robust, differential effects of swiftness or delay on speeding. This challenges widely held beliefs, as reflected in our survey. Yet, we document large mechanical benefits of swift punishment and provide a theoretical framework of learning and updating that explains our findings.

25 June 2024

Kristina Strohmaier (University of Duisburg Essen)

Tax Enforcement Spillovers – Evidence from Business Tax Audits in South Africa

(with Nadine Riedel and Collen Lediga)

Taxpayer audits are key instruments to combat tax evasion. Whether they deter tax non-compliance beyond audited taxpayers is largely unclear, however. Drawing on rich tax administrative data for South Africa, we show that business tax audits enhance the tax reporting compliance of unaudited firms in the same local network as the targeted business. On average, firms’ reported tax liability increases by 1% when a business in close proximity (located within a 100m radius) undergoes an audit. This estimate translates into sizable aggregate revenue gains, as audited firms are linked to numerous neighbors. Additional analyses show that audit spillovers emerge across a larger spatial scale within industry and tax preparer networks. Our findings carry important implications for the design of tax enforcement policies.

9 July 2024

Sebastian Findeisen (University of Konstanz)

Family-Friendly Workplace Policies

(with Julián Costas-Fernández, Anna Raute, Uta Schönberg)

The literature has studied the willingness to pay for family-friendly amenities, but less is known about the supply side and the incentives for firms to provide these amenities. There are two main incentives for firms to offer family-friendly workplace policies. First, such amenities may increase employee retention or reduce the duration of labor market breaks after the arrival of children. Second, if some workers are willing to pay for these amenities, firms can offer them to attract new workers.

Our study utilizes German matched employer-employee data combined with detailed survey panel data on firm provision of childcare to examine these motives. We find that firm-provided childcare enhances retention and shortens labor market breaks for mothers, especially for high-wage mothers. It also contributes to employment growth, disproportionately driven by firms attracting female talent. These findings can be rationalized through a stylized model of imperfect competition in the labor market, where family-friendly workplace policies are modeled as an amenity with direct production benefits.

Previous seminars

Winter 2023/ 2024

The research seminar invites external researchers on a regular basis and is open to the public. It is part of the RTG day and takes place in the Math Tower, at Technical University of Dortmund , Vogelpothsweg 87,44227 Dortmund, in Room: 127 on Tuesdays from 16:15 to 17:30 during the winter term 2023/2024. The best way to reach here is by S-bahn (S1), which has a stop at “Dortmund Universität”.

17 October 2023

Dávid Krisztián Nagy (Barcelona School of Economics)

Room: 127

Math Tower, TU Dortmund

The Death and Life of Great British Cities

(with Stephan Heblich, Alex Trew and Yanos Zylberberg)

This paper studies how cities’ industrial structure shapes their life and death. Our analysis exploits the large heterogeneity in the early composition of English and Welsh cities. We extract built-up clusters from early historical maps, identify settlements at the onset of the nineteenth century, and isolate exogenous variation in the nature of their rise during the transformation of the economy by the end of the nineteenth century. We then estimate the causal impact of cities’ population and industrial specialization on their later dynamics. We find that cities specializing in a small number of industries decline in the long run. We develop a dynamic spatial model of cities to isolate the forces which govern their life and death. Intratemporally, the model captures the role of amenities, land, local productivity and trade in explaining the distribution of economic activity across industries and cities. Intertemporally, the model can disentangle the role of aggregate industry dynamics from city-specific externalities. We find that the long-run dynamics of English and Welsh cities is explained to a large extent by such dynamic externalities a la Jacobs.

24 October 2023

Pierre Magontier (University of Bern)

Room: 127

Math Tower, TU Dortmund

The Unintended Consequences of Post-Disaster Policies for Spatial Sorting

(with Marcel Henkel and Eunjee Kwon)

We provide new empirical and theoretical evidence on the spatial consequences of public policies driven by electoral motives. Using exogenous variation in the timing of natural disasters, we show that hurricanes occurring close to Election Day in the United States lead to increased local post-disaster efforts. These electorally motivated measures lead populations to sort into hazard-prone areas. To comprehend the aggregate implications of this sorting pattern, we introduce the relationship between electoral cycles and public policies in a spatial equilibrium model. These electorally motivated policies generate considerable productivity and output losses without being compensated by aggregate welfare gains.

7 November 2023

Steffen Altmann (University of Duisburg-Essen)

Room: 127

Math Tower, TU Dortmund

The Direct and Indirect Effects of Online Job Search Advice

(with Anita Glenny, Robert Mahlstedt and Alexander Sebald)

We study how online job search advice affects the job search behavior and labor market outcomes of unemployed workers. In a large-scale field experiment, we provide job seekers with vacancy information and occupational recommendations through an online dashboard. A two-stage randomized design with regionally varying treatment intensities allows us to account for treatment spillovers. Our results show that online advice is highly effective and significantly increases job seekers’ working hours and labor market earnings when the share of treated workers is relatively low. At the same time, we find substantial negative spillovers on other treated job seekers for higher treatment intensities, resulting from increased competition between treated job seekers who apply to the same vacancies. The negative indirect effects completely offset the positive direct effects of search advice when approaching a full roll-out.

14 November 2023

Armando Miano (IAB)

Room: 127

Math Tower, TU Dortmund

Search Costs, Outside Options, and On-the-Job Search

I study how beliefs about search costs, returns to search effort, and outside options relate to the job mobility decisions of employed workers. I design an online survey and administer it to a representative sample of wage and salaried workers in the US. I directly measure employed workers’ perceptions of search costs—time, money, stress—and the perceived return to their job search effort—the expected success rate of their job applications. I also elicit workers’ beliefs about their opportunities outside of their current job and measure their knowledge of the wage distribution in their occupation. I document significant heterogeneity in expectations across demographic groups. Women expect higher costs and lower returns to effort than men. I find that beliefs about outside options and returns to effort are strong predictors of job search intentions. In addition, respondents who expect to spend more time looking for job openings have a lower propensity to search, consistent with the relevance of information frictions. Using two information experiments, I show that accurate information about the median wage does not shift search intentions, while positive information on the recent search experience of similar workers is more effective for groups that are more worried about search costs.

21 November 2023

Philipp Meinen (Deutsche Bundesbank)

Room: 127

Math Tower, TU Dortmund

The effect of EU ETS on productivity

(with Arne Nagengast)

Recent research documents that the European Union’s (EU) Emissions Trading System (EU ETS) has led to significant reductions in CO₂ emissions of regulated sectors and firms (e.g., Beyer and Aklin, 2020; Dechezleprêtre et al., 2023). By contrast, the implications of the EU ETS on competitiveness and productivity dynamics of regulated sectors are still a matter of debate (see, for example, Martin et al., 2016 for a review). In this paper, we evaluate the effect of the EU ETS on economic performance by analysing a rich panel of 24 sectors in 20 EU countries between 1995 and 2017. We do so by exploiting recent advances in the literature on policy evaluation methods, which incorporate machine-learning approaches to improve upon existing estimation techniques (Athey et al., 2021). This allows us to identify the causal effect of the EU ETS on a range of economic performance measures at aggregate and disaggregate levels. Overall, we find a positive causal effect of the EU ETS on labour productivity of regulated sectors. This result is robust to a variety of sensitivity checks. Altogether, we find evidence for two adjustment mechanisms that reduce CO₂emissions. On the one hand, there is investment-led change in the production process, resulting in increases in productivity accompanied by higher output against the background of higher capital intensity and lower CO₂emission intensity of regulated sectors. On the other hand, the results are also consistent with a shakeout in some sectors, involving a decline in employment, output and CO₂ emissions as well as an increase in imported intermediate goods.

12 December 2023

Wolfgang Keller (University of Colorado Boulder/ NBER)

Room: 127

Math Tower, TU Dortmund

Colocation of Production and Innovation: Evidence from the United States

Is the decline of manufacturing behind new ideas getting harder to find? Shrinking manufacturing production in many advanced countries has raised concerns that the rate of innovation will fall as well because geographically proximate production may be a key input into innovation. This paper provides new evidence on the benefits from collocating innovation and production activities in the same firm. We also examine whether other firms benefit from the colocation of innovation in their region. Geo-coding all plants in US Census data, we provide the first decomposition of US innovation by firm type. We show, first, that manufacturing firms that have plants dedicated to innovation patent more than other manufacturing firms. Second, manufacturing firms with innovation plants close to their production facilities patent more than those with innovation plants further away. Possible implications for economic policy are discussed.

9 January 2024

Maksym Obrizan (Kyiv School of Economics)

Poverty, Unemployment and Displacement in Ukraine: three months into the war

This paper identifies the causal effects of full-scale kremlin aggression on socio-economic outcomes in Ukraine three months into the full-scale war. First, forced migration after February 24th, 2022 is associated with an elevated risk of becoming unemployed by 7.5% points. Second, difference-in-difference regressions show that in regions with fighting on the ground females without a higher education face a 9.6-9.9% points higher risk of not having enough money for food. Finally, in the regions subject to ground attack females with and without a higher education, as well as males without a higher education are more likely to become unemployed by 6.1-6.9%, 4.2-4.7% and 6.5-6.6% points correspondingly. This persistent gender gap in poverty and unemployment, when even higher education is not protective for females, calls for policy action. While more accurate results may obtain with more comprehensive surveys, this paper provides a remarkably robust initial estimate of the war’s effects on poverty, unemployment and internal migration.

16 January 2024

Erik Bengtsson (Lund University)

Room: 127

Math Tower, TU Dortmund

The Social Origins of Democracy and Authoritarianism Reconsidered: Prussia and Sweden in Comparison

(with Felix Kersting)

The implications of land inequality for politics and democratization is a classical debate in social sciences and political economy. A recurring argument is what the political scientist Carles Boix has formulated as that “The absence of landlordism constitutes a necessary precondition for the triumph of democracy”. We revisit this debate by studying two in various ways crucial cases: Prussia, the locus classicus of the pernicious effects of landlordism, and Sweden, often perceived to be Prussia’s opposite, as a farmer-dominated social structure led to stable democratization. Our comparison shows the flaws of these interpretations: on standard measures of land inequality, Sweden was more unequal than Prussia in the late 1800s, but nevertheless, obviously, the political outcomes were very different. We explore why land inequality had such different effects on politics in Sweden compared to Prussia, utilizing various measures of land inequality (share of land held by nobles; distribution of farm sizes; presence of large estates), looking at 241 election districts in Sweden from the imposition of universal male suffrage in 1909 to the 1940s, and 236 election districts in Prussia for all general election between 1871 and 1912. Land inequality, in its different measures, had no negative effect on vote participation in Sweden, no positive effect on the Conservative vote share, and no negative effect on the Socialist vote share. We explore why in a qualitative-historical section focusing on Scania, the most unequal region in Sweden but also the hotbed of democratic movements. For Prussia, land inequality is correlated with votes for the conservative party, however, not with turnout as measure of democratic participation. We relate the (in part) opposing findings to the different responses to growing import competition during the first wave of globalization.

23 January 2024

Christian Traxler (Hertie School)

Room: 127

Math Tower, TU Dortmund

Swiftness and Delay of Punishment

(with Libor Dusek)

This paper studies how the swiftness and delay of punishment affect behavior. Comprehensive administrative data from automated speed cameras allow us to track the driving records of cars over time. We also observe the exact date of speeding ticket dispatch, delivery, and payment. At the start of the speed camera system, administrative challenges caused delays in ticket dispatch of up to three months. Later, we implemented a protocol to randomize the sequence of ticket processing. Utilizing these two (quasi-)experimental sources of variation in the time between an offense and ticket dispatch, we present two different results. First, we identify a significant effect of delays on payment compliance: The rate of timely paid fines diminishes by 7 to 9% when a ticket is sent with a delay of four or more weeks after an offense. We also find some evidence that sending tickets swiftly – on the first or second days following the offense – increases timely payments. These results align with the predictions of academic economists and criminologists, as elicited in a survey. Second, we show that speeding tickets cause a strong, immediate, and persistent decline in speeding. However, we do not detect any robust, differential effects of swiftness or delay. This challenges widely held beliefs, as reflected in our survey. Yet, we document large mechanical benefits of swift punishment and provide a theoretical framework that explains our findings.

30 January 2024

Albrecht Ritschl (LSE)

Room: 127

Math Tower, TU Dortmund

Seniority Reversals and Endogenous Sudden Stops: Some Transfer Problem Dynamics

(with Tai-Kuang Ho)

Sovereign debt restructuring often ends in abject failure, as analogies from corporate debt restructuring are applied without proper analysis of dynamic disincentives (Bulow and Rogoff, 1989). In this paper we analyze the dynamic incentive effects of debt restructuring and changes in seniority among rivalling debt elements in a stochastic endowment economy with a risk averse sovereign debtor. Away from the default zone, the debtor will prefer to hold senior debt to signal creditworthiness and to obtain a so-called good housekeeping seal of approval. After a major adverse shock and within the default zone, fresh money will only be granted if the debtor is allowed to issue senior debt, making legacy debt junior. This leads to a borrowing binge and is often followed by sudden stop and default episodes in which the junior debt is defaulted on first. We calibrate the model to interwar Germany under the Dawes Plan of 1924-29, where new debt was issued in large amounts. Our simulation results bear out the predictions of Keynes (1922, 1929) about the dim prospects of recovering reparations.

Previous seminars

Summer 2023

The research seminar invites external researchers on a regular basis and is open to the public. It is part of the RTG day and during the Summer term 2023 it will take place at UDE’s Duisburg Campus in LC 026, on Tuesdays from 16:15 to 17:30. The easiest way to reach Duisburg Campus is by Bus #933 or #926 from Duisburg Central Train Station. Because of the construction at the East Entrance (Osteingang), please follow the signs to reach the bus stop at the Mülheimer Straße. This bus stop is called “Duisburg Hbf”.

The RTG Day will take place in LF212, and LB 338 is reserved from 10 am to 3 pm for the courses taught on the RTG day.

18 April 2023

Jan Nimczik (ESMT Berlin)

UDE, Duisburg Campus

Workplace Connections and Migration: Evidence from German Reunification

(with Michelle Hansch, Ole Monscheuer, and Alexandra Spitz-Oener)

We study the impact of co-worker networks on the migration decisions of East Germans after reunification. Based on a novel data set that links rich administrative data from the German Democratic Republic (GDR) in 1989 to German social security data, we identify East Germans’ workplace connections formed in the GDR as well as their labor market trajectories after reunification. We then analyze how former GDR co-workers who have migrated to West Germany impacted the migration decision of East Germans after reunification. For identification, we focus on East Germans who are displaced by establishment closures between 1992 and 2005. Having a former GDR co-worker who works in West Germany substantially increases the probability to move to West Germany after job displacement. We find that contacts who work in high-quality firms in West Germany are particularly important in triggering East-West migration.

25 April 2023

Wilhelm Kohler (University of Tübingen)

UDE, Duisburg Campus

Pandemics, Public Policy, and Peltzman Effects

The study of infection dynamics routinely relies on versions of the compartmental SIR model. We extend the basic SIR model to explore the trade-offs which govern individual behavior. We limit our analysis to a highly stylized version of the model and analyze peoples’ response to specific public policies in closed form. For both, vaccination and lockdown policies we establish Peltzman effects: As policies lower the risk of infections, people become more socially active, in turn, undermining their effectiveness. Data for US states and countries in Western Europe suggest that such effects are shaping actual infection dynamics to a considerable extent.

2 May 2023

Hannah Illing (University of Bonn)

UDE, Duisburg Campus

Hiring and the Dynamics of the Gender Gap

(with Hanna Schwank and Linh Tô)

To understand how the gender wage gap interacts with job mobility, we examine the internal and external labor market responses to exogenous hiring shocks by gender. Using matched employer-employee data from Germany, our empirical strategy leverages 50,000 unexpected worker deaths to characterize how firms respond to exogenous vacancies of positions formerly held by male or female workers. We find that female replacement workers take up positions with lower average existing wages regardless of the gender of their predecessors. Furthermore, female replacement workers have significantly lower starting wages than male replacement workers, by between 15 to 19 log points, and their wages grow much more slowly over time.

9 May 2023

Bernd Fitzenberger (IAB Nürnberg)

UDE, Duisburg Campus

The role of unemployment and job change when estimating the returns to migration

(with Julian Emmler)

Estimating the returns to migration from East to West Germany, we focus on pre-migration employment dynamics, earnings uncertainty, and job change. Migrants are found to be negatively selected with respect to labor market outcomes, with a large drop in earnings and employment during the last few months before migration. We find sizeable positive earnings and employment gains of migration both in comparison to staying or job change. The gains vary considerably with pre-migration earnings and with the counterfactual considered. Future migrants have worse expectations for their labor market prospects in the East and migrants show a greater openness to mobility.

(Canceled) 16 May 2023

Ismir Mulalic (Copenhagen Business School)

UDE, Duisburg Campus

Productivity and wage effects of an exogenous improvement in transport infrastructure: accessibility and the Great Belt Bridge

(with Bruno De Borger and Jan Rouwendal)

In this paper, we study the short-run effects on firm productivity and wages of a large and very localized discrete shock in the quality of transport infrastructure, viz. the opening of the Great Belt Bridge connecting the Copenhagen area with the neighbouring island Funen and the mainland of Denmark. The empirical results are consistent with the view that the new

infrastructure facilitated matching between firms and workers in the areas surrounding the bridge, increasing both productivity and wages, but there are also wider ranging effects that cannot be explained by labour market matching. Specifically, we find that productivity significantly increased in the regions near the bridge only, especially for relatively small firms in the retail industry and, to a lesser extent, the construction industry. Unlike the productivity effects, increasing wages are not limited to the areas surrounding the bridge but are significant throughout the country, also in regions and industries where productivity remained unaffected. We further find that the opening of the bridge increased inequality between workers: wages of male workers reacted stronger than those of female workers, and the wage effect was found to increase in education.

6 June 2023

Evaluation Day, Regional Disparities and Economic Policy

13 June 2023

Pierpaolo Parrotta (IÉSEG School of Management)

UDE, Duisburg Campus

Breaking Up Cartels, Self-Reporting and Innovation Outcomes

(with Marianna Marino, Giacomo Valletta, Valerio Sterzi, Annabelle Jochem)

In this paper, we report evidence on the effect of self-reporting behavior on innovation outcomes in cartelized industries. We test the hypothesis that self-reporting behavior, compared to direct detection, provides the anti-trust authority with a superior set of information to eradicate the anti-competitive effects of cartel persistence. Our estimation strategy is based on a difference- in-difference approach that compares industries in which cartels have been self-reported (treated) with those affected by cartels that have been detected directly by the European Commission (controls) over the 1996-2012 period. Our results show that cartel breaking due to self-reporting increased the (quality weighted) number of patent applications and patenting firms in previously cartelized industries, being both effects mainly led by non-collusive and new patenting companies, respectively. Furthermore, introducing the 2002 reform of EU leniency program in our estimation setting, we find that the effects due to self-reporting enlarge after the aforementioned reform, which enhanced both transparency and predictability of the leniency policy.

20 June 2023

Daniel Sturm (London School of Economics and Political Science)

UDE, Duisburg Campus

How Useful are Quantitative Urban Models for Cities in Developing Countries?

(with Kohei Takeda and Anthony J. Venables)

Most of the world’s urban population lives in cities in developing countries where data from traditional sources is often scarce. In this paper we show how quantitative urban models can be estimated in such data-scarce environments using data from Dhaka. Building on recent work estimating commuting costs using increasingly available mobile phone data together with Google travel times, we show how this data can be combined with newly available satellite data on building heights to estimate the key structural parameters of an urban model. We use the model to estimate the price of land and floor space in each ward of Dhaka, which are typically difficult to directly observe in developing country cities. To illustrate how the model can be used for policy analysis, we consider model counterfactuals of the impact of an increase in density, which we model as an increase in the floor space supply elasticity, and the construction of a new radial road.

27 June 2023

Hans Koster (Vrije Universiteit Amsterdam)

UDE, Duisburg Campus

Identifying Housing Preferences in Regulated Markets: Evidence from Waiting Lists

(with Jos van Ommeren and Zhiling Wang)

In many markets, goods are not allocated based on prices. A prominent example is public housing that is typically allocated based on waiting times. Using a dynamic framework, we show that these waiting times are informative on household preferences regarding the quality of public housing. We apply this framework to estimate the internal and external effects of a large-scale Dutch policy to improve public housing. By estimating unconditional quantile regressions, we show that public housing tenants have a strong preference to reside in newly-built housing units and positively value new public housing units nearby. In addition, we find that owner-occupying residents only weakly value nearby newly-built public housing. These results emphasize that the welfare benefits of improvements in public housing are likely to be strongly underestimated if effects on household residing in the regulated public housing sector are not taken into account.

4 July 2023

Michael Oberfichtner (IAB Nürnberg)

UDE, Duisburg Campus

The wage elasticity of recruitment

One of the factors likely to affect the market power of employers is the sensitivity of the flow of recruits to the offered wage, but there is very little research on this. This paper presents a methodology for estimating the wage elasticity of recruitment and applies it to German data. Our estimates of the wage elasticity of recruitment are about 1.4. We also report evidence that high-wage employers are more selective in hiring, in which case the relevant recruitment elasticity should be higher, about 2.2. Together with prior estimates of the quit elasticity these results imply that wages are 72–77% of the marginal product of labour. Further, we find lower elasticities for recruits hired from non-employment as well as for women, non-German nationals, non-prime-age workers, less skilled workers, and workers with less complex jobs.

Winter 2022/2023

The research seminar invites external researchers on a regular basis and is open to the public. It is part of the RTG day and takes place in the Math Tower, at Technical University of Dortmund , Vogelpothsweg 87,44227 Dortmund, in Room: 127 on Tuesdays from 16:15 to 17:30 during the winter term 2022/2023. The best way to reach here is by S-bahn (S1), which has a stop at “Dortmund Universität”.

25 October 2022

Andreas Mense (Institute for Employment Research (IAB), London School of Economics)

Room: 127

Math Tower, TU Dortmund

The Determinants of Homeownership across Space

In this paper, we employ a new instrumental variable strategy to identify the causal effect of the accommodation type on the housing tenure choice. According to our estimates, a ten percentage points increase in the share of multi-family housing causes the homeownership rate to decrease by eight percentage points. Because housing is durable, this very tight relationship has important long-run consequences for the location choices of homeowners, and hence for local inequality within and between cities. Two complementary theoretical mechanisms likely explain this result: A landlord production efficiency advantage, and a coordination failure for owner-occupiers in multi-family housing.

08 November 2022

Brigitte Hochmuth (University of Vienna, Department of Economics,IHS)

Room: 127

Math Tower, TU Dortmund

Financial Constraints, Firm Age, and the Labor Market

This paper shows that credit crunches cause labor market effects that are nonlinear over time and heterogeneous by firm age. During the Great Financial Crisis, a credit supply shock caused young firms to reduce employment significantly more than old firms, because the housing bust in 2006 led to a decline in young firms’ housing collateral and restricted their ability to borrow. To understand the underlying mechanism, I propose a financial frictions model with an explicit firm age structure. A simultaneous credit crunch and a decline in young firms’ net worth can reconcile the model with my empirical results. While old firms switch to equity financing, young firms depend on debt financing and cut labor demand. As young firms disproportionately account for aggregate job growth, my findings explain the sluggish labor market recovery after the Great Financial Crisis. A counterfactual experiment shows that absent the net worth shock, the U.S. unemployment rate would have been back to its pre-crisis level two years quicker.

15 November 2022

Nicola Fontana (Trinity College Dublin)

Room: 127

Math Tower, TU Dortmund

Backlash against Airbnb: Evidence from London

Anti-globalization sentiments have been on the rise in recent years. In urban contexts, these attitudes may take the form of backlash against tourism. In this paper, I examine the role of Airbnb, a major short-term rental platform, in explaining the rising discontent against tourists. To do so, I construct a rich and spatially disaggregated dataset to study the consequences of Airbnb penetration in London. First, I document that 1 additional Airbnb tourist per 1000 residents increases complaints against tourists by 2.2 per cent. Secondly, I explore the roots – pecuniary and non-pecuniary – of these reactions. I find that higher Airbnb penetration is associated with a decrease in neighbourhood quality, while the housing market is only marginally affected. These negative externalities can be explained by a lack of monitoring and coordination by hosts, which are key differences between short-term renting and traditional hotel accommodations. Finally, I provide evidence that the deterioration of neighbourhood quality markedly reduces social capital, as measured by the number of charitable organizations, and worsens attitudes towards globalization, leading to higher support for Brexit.

22 November 2022

Holger Görg (Kiel University)

Room: 127

Math Tower, TU Dortmund

Who is to suffer? Quantifying the impact of sanctions on German firms

We use novel and hitherto unavailable firm level panel data for German firms to look at the effects of the 2014 Sanctions against Russia on German firms. Using a difference-in-differences analysis, we study the impact on trade volumes, quantities and prices, as well as other aspects of firm performance such as employment and productivity.

13 December 2022

Volker Nitsch (TU Darmstadt)

Room: 127

Math Tower, TU Dortmund

Smart or Smash? The Effect of Financial Sanctions on Trade in Goods and Services

(with Tibor Besedeš and Stefan Goldbach)

The recent empirical literature shows that financial sanctions reduce German cross-border financial flows with sanctioned countries. Against this background, this research project deals with the question of whether financial sanctions also affect trade in goods and services. We compare the effect of financial sanctions on cross-border financial flows with their effect on flows of goods and services. The latter can be interpreted as a spillover effect.

10 January 2023

Banu Demir Pakel (Bilkent University, Department of Economics)

Room: 127

Math Tower, TU Dortmund

O-Ring Production Networks

(with Cecilia Fieler, Daniel Xu, and Kelly Yang)

We study a production network where quality choices are interconnected across firms. High-quality firms are skill intensive and trade more with other high-quality firms. Using data from Turkish firms, we document strong assortative matching of skills in the production network. A firm-specific export demand shock from a rich country increases the firm’s skill intensity and shifts the firm toward skill- intensive domestic partners. We develop a quantitative model with heterogeneous firms, endogenous quality choices, and network formation. An economy-wide export demand shock of 5 percent induces exporters and non-exporters to upgrade quality, raising the average wage by 1.2 percent. This effect is about nine times the effect in a special case of the model with no interconnection of quality choices.

17 January 2023

Lena Dräger (Leibniz University of Hannover)

The Hidden Heterogeneity of Inflation and Interest Rate Expectations: The Role of Preferences

(with Michael J. Lamla and Damjan Pfajfar)

Using a new consumer survey dataset, we show that consumers with the same inflation or interest rate expectations can differently assess whether the level of the corresponding variable is appropriate for the economy or too high/too low. This `hidden heterogeneity’ in expectations is relatively stable over time, even with large changes in actual inflation. Macroeconomic preferences are correlated with the related macroeconomic expectations, but vary also across sociodemographic characteristics and net wealth position. We also show that the variation in inflation preferences can be explained with risk preferences. Overall, this adds a new dimension to the definition of anchored expectations.

24 January 2023

Sebastian Till Braun (University of Bayreuth)

Room: 127

Math Tower, TU Dortmund

Reversing Fortunes of German Regions, 1926–2019: Boon and Bane of Early Industrialization?

(with Paul Berbée and Richard Franke)

This paper shows that 19th-century industrialization is an important determinant of the significant changes in Germany’s economic geography observed in recent decades. Using novel data on economic activity in 163 labor market regions in West Germany, we establish that nearly half of them experienced a reversal of fortune between 1926 and 2019, i.e., they moved from the lower to the upper median of the income distribution or vice versa. Economic decline is concentrated in North Germany, economic ascent in the South. Exploiting plausibly exogenous variation in access to coal, we show that early industrialization turned from an advantage for economic development to a burden after World War II. The dominant position of heavy industry, supported by the local political-administrative system, limited regional adaptability when the old industries fell into crisis. Today, the early industrialized regions suffer from low innovation and deindustrialization. The (time-varying) effect of industrialization explains most of the decline in regional inequality observed in the 1960s and 1970s and about half of the current north-south gap in economic development.

31 January 2023

Oliver Rehbein (University of Bonn)

Room: 127

Math Tower, TU Dortmund

Using a hand-collected data set on almost one million local television news stories in the U.S., this paper shows that depositors respond to changes in the intensity of reporting about the COVID-19 pandemic by holding more demand deposits. Counties, where pandemic news stories are 10 percentage points more frequent relative to all news stories hold 1.3% more demand deposits after the onset of the pandemic. This effect holds when controlling for the intensity of the pandemic and several other alternative explanations. Further evidence suggests that local news reflects the intensity of local discourse, which in turn causes a spike in deposits, especially in counties with a weaker social structure. The results suggest that the intensity of societal discourse around an event can have significant implications for banks and the real economy.

Summer 2022

The research seminar invites external researchers on a regular basis and is open to the public. It is part of the RTG day and takes place in room WST-A.12.04, Weststadttürme, Essen on Tuesdays from 16:15 to 17:30 during the summer term 2022.

Due to the spread of the coronavirus it is possible that some talks will be given in a virtual seminar. Further information will be released on this website.

12 April 2022

Andreas Lichter (HHU Düsseldorf, DICE)

WST-A. 12.04,

Weststadttürme, Essen

Fiscal and Economic Effects of Local Austerity

(with Melinda Fremerey and Max Löffler)

We study the fiscal and broader economic consequences of a large-scale consolidation program in Germany’s most populous state, North Rhine-Westphalia. For identification, we exploit political discretion in the composition of the treatment group that allows us comparing municipalities subject to fiscal consolidation to neighbors under similar financial distress ultimately not chosen for program participation. Overall, the policy helped targeted municipalities to considerably consolidate budgets. Whereas the amount of consolidation was remarkably homogeneous across the distribution of treated municipalities, strategies of consolidation differed substantially between smaller and larger municipalities. The former primarily cut spending on public services and raised property taxes, whereas the latter imposed no cuts on residents’ amenities but shifted parts of the burden of consolidation on local businesses. Smaller municipalities subject to treatment further experienced declines in population levels and average house prices after policy implementation, whereas larger ones saw no adverse economic outcomes.

19 April 2022

Katharina Erhardt (HHU Düsseldorf, DICE)

WST-A. 12.04,

Weststadttürme, Essen

Empirical Productivity Distributions and International Trade

(with Peter Egger and Sergey Nigai)

We use firm-level data for 15 countries and 13 manufacturing sectors to estimate firm-level
productivity parameters and to establish representative country-sector-specific empirical
productivity distributions. We use these distributions against the backdrop of multi-sector versions of the models of Eaton and Kortum (2002) and Melitz (2003) to quantify the role of technology in shaping international trade flows. We find that, on average, absolute advantage measured as productivity differences across countries within sectors explains 15% and 21% of the total variation in bilateral trade shares in the models of Eaton and Kortum (2002) and Melitz (2003), respectively. In contrast, on average, comparative advantage measured as productivity
differences across sectors within countries explains 39% and 47% of the variation in trade flows in these two models. We also demonstrate that empirical productivity distributions entail
quantitatively important micro-to-macro implications for marginal responses of trade flows to changes in trade costs, for gravity-type estimation of trade models, and for comparative statics
isomorphism between the customarily parameterized models of international trade. We confirm the predictions of the two aforementioned models under empirical productivity distributions in the data.

26 April 2022

Nina Boberg-Faclic (University of Southern Denmark)

WST-A. 12.04,

Weststadttürme, Essen

Winners and Losers from Agrarian Reform: Evidence from Danish Land Inequality 1682-1895
(with M. Lampe, P. L. Martinelli, and P. Sharp)

Pro-market and pro-farmer agrarian reforms enacted in eighteenth century Denmark laid the basis for rural development but we demonstrate that they also resulted in increased inequality. We investigate this using a novel parish-level database spanning more than two centuries. We identify the impact of land quality on inequality following the reforms by instrumenting with soil type and find increases in areas with more productive land. We propose and find evidence for a mechanism whereby agrarian reforms allowed areas with better soil quality to realize greater productivity gains. This in turn led to greater population increases, and a larger share of smallholders and landless laborers. Finally, we demonstrate the impact on the winners and losers: more unequal areas witnessed increases in top incomes, but greater emigration of the rural poor, to the United States in particular. Thus, the losers were able to vote with their feet, in stark contrast to those who might lose from similar reforms in developing countries today.

3 May 2022

Daniel Avdic (Monash University, Center for Health Economics)

WST-A. 12.04,

Weststadttürme, Essen

Provider responses to market entry under competing health technologies

(with Nils Gutacker, Giovanni van Empel and Johan Vikström)

We analyze supplier-induced demand as a strategic response to market entry by exploiting the relaxation of regulatory restrictions in cardiac care that led to an expansion in the number of hospitals providing catheter-based treatment (PCI) to patients in Sweden. Since patients’ choice of hospital in the Swedish healthcare system is determined by their place of residence, hospital providers exert local monopoly powers with incentives to treat patients in-house rather than sending them to other hospitals. This may lead to non-optimal treatment choices. Relating observed treatments of residents in catchment areas where hospitals opened a PCI lab to residents in unaffected catchment areas in a difference-in-differences empirical design, we find that patients with clinical indications for cardiac surgery (CABG) were five percentage points more likely to receive a PCI after their local hospital opened a PCI lab. In contrast, we find no corresponding effect that incumbent hospitals reduced their use of PCI on their remaining patient population to offset the reduction in CABG surgery. We conclude that the expansion of PCI labs was a likely contributor to the respective rise and decline of PCI and CABG over time in Sweden.

10 May 2022

Sonia Bhalotra (University of Warwick, Department of Economics)

Antidepressant Use and School Academic Achievement
(with Meltem Daysal, Nis Lydiksen and Mircea Trandafir)

We investigate impacts of antidepressant treatment on academic achievement among Danish children who are referred to a child psychiatrist. Leveraging quasi-random assignment of patients to psychiatrists with different prescribing tendencies, we find that treatment significantly increases test scores, especially in math and among girls. Treatment effects are larger among children of less educated mothers who, in general, are less likely to be treated, indicating negative selection on gains based on observables. However, there is positive selection on gains based on unobservables. The effect of treatment on the treated exceeds the average treatment effect, but the effect of treatment on the untreated is positive, suggestive of under-prescribing of SSRI for children. Estimates of policy relevant treatment effects reinforce the evidence of under-prescribing. These results are relevant in view of controversy over prescribing antidepressants to children.

17 May 2022

Board Meeting

7 June 2022

Internal Seminar (Pfingstwoche)

14 June 2022

Frédéric Robert-Nicoud (University of Geneva)

WST-A. 12.04,

Weststadttürme, Essen

Attention: starts at 14.30

Sorting to Expensive Cities

(with Cecile Gaubert)

We develop a spatial general equilibrium model featuring heterogeneous households holding non-homothetic preferences and cities endowed with heterogeneous consumption and production amenities. In equilibrium, desirable and productive locations command high housing prices; they are disproportionately inhabited by high-income earners; the cost of living of high-income earn- ers relative to the cost of living of low-income earners is lower in expensive cities than in more affordable ones. These equilibrium properties are all related: we show that high-ability/high- income households sort disproportionately to expensive and/or productive places if housing is the income inelastic good under general non-homothetic preferences.

21 June 2022

Jonathan Colmer (University of Virginia)

Air Pollution and Economic Opportunity in the United States

Neighborhoods are an important determinant of economic opportunity in the United States. Less clear is how neighborhoods affect economic opportunity. Here we provide early evidence on the importance of environmental quality in shaping economic opportunity. Combining 36 years of satellite derived PM2.5 concentrations measured over roughly 8.6 million grid cells with individual-level administrative data provided by the U.S. Census Bureau and Internal Revenue Service (IRS), we first document a new fact: early-life exposure to particulate matter is one of the top five predictors of upward mobility in the United States. Next, using regulation-induced reductions in prenatal pollution exposure following the 1990 Clean Air Act Amendments, we estimate significant increases in adult earnings and upward mobility. Combined with new
individual-level measures of pollution disparities at birth our estimates can account for up to 20 percent of Black-White earnings gaps, and 25 percent of the Black-White gap in upward mobility estimated in Chetty et al. (2018b). Combining our estimates with experiment-induced reductions in pollution exposure from the Moving to Opportunity (MTO) experiment, we can account for 16 percent of the total neighborhood earnings effect estimated in Chetty et al. (2016). Collectively, these findings suggest that environmental injustice may play a meaningful role in explaining observed patterns of racial economic disparities, income inequality and economic opportunity in the United States.

28 June 2022

Sebastian Krautheim (University of Passau)

WST-A. 12.04,

Weststadttürme, Essen

Corporate Social Responsibility along the Global Value Chain

(with Philipp Herkenhoff, Finn Ole Semrau, and Frauke Steglich)

Firms are under increasing pressure to meet stakeholders’ demand for Corporate Social Responsibility (CSR) along their global value chains. We study the incentives for and investments in CSR at different stages of the production process. We analyze a model of sequential production with incomplete contracts where CSR by independent suppliers differentiates the final product in the eyes of caring consumers. The model predicts an increasing CSR profile for suppliers along the value chain: from upstream suppliers with low CSR to downstream suppliers with higher CSR. We confirm this prediction using Indian firm-level data. We compute a firm’s value chain position combining product-level information in our data with the World Input-Output Database. We find that more downstream firms have higher CSR expenditures as measured by a combination of staff welfare spending and social community spending.

5 July 2022

Wilhelm Kohler (University of Tübingen) (CANCELLED)

The Pandemic, Public Policy, and Behavioral Adjustment

Public policies have been adjusted quickly and strongly in response to the rising number of Covid-19 infections. Lockdown measures and vaccinations, in particular, have been deployed with great determination. Yet, their success in stemming the waves of infections and deaths has been limited. We offer a simple explanation for this observation – centered around the notion of behavioral adjustment, or risk compensation. We extend a stylized SIRD-model to account for behavioral adjustment and show that vaccinations, provided they are successful in reducing mortality risk, have an ambiguous effect on infections. Similarly, lockdowns may raise the case fatality rate if they are imposed uniformly on a population that is heterogeneous in its vulnerability. Lastly, we put forward panel-data evidence which supports the notion that behavioral adjustment indeed reduces the success of lockdown measures and vaccinations to a considerable extent.

12 July 2022

Andrea Weber (Central European University)

WST-A. 12.04,

Weststadttürme, Essen

What can we learn from temporary layoffs and recall hires about firm and worker expectations?

(with Arash Nekoei)

In this paper we argue that temporary layoffs and recalls reveal important information on firms’ expectations of business development and workers’ expectations concerning employment opportunities and wages. We exploit a match of linked employer employee data and unemployment records from Austria, which contain information on temporary layoffs and expected recall dates. We study the type of firms that use temporary layoffs and examine variation in the layoff size and the share of temporary layoffs on hiring patterns. On the workers’ side we examine how their own and their co-workers’ expected recall dates affect search outcomes.

Winter 2020/2021

Due to the spread of the coronavirus it is possible that some talks will be given in a virtual seminar. Further information will be released on this website.

19 October 2021

Miriam Kohl (University of Mainz)

WST-A. 12.04,

Weststadttürme, Essen

Unilateral Tax Policy in the Open Economy

This paper examines the effects of a unilateral reform of the redistribution policy in an economy open to international trade. We set up a general equilibrium trade model with heterogeneous agents allowing for country asymmetries. We show that under international trade compared to autarky, a unilateral tax increase leads to a less pronounced decline in aggregate real income in the reforming country, while income inequality is reduced to a larger extent for sufficiently small initial tax rates. We highlight as a key mechanism a tax-induced reduction in the market size of the reforming country relative to its trading partner, resulting in a firm selection effect towards exporting. From the perspective of a non-reforming trading partner, the unilateral redistribution policy reform resembles a unilateral increase in trade costs leading to a deterioration of terms-of-trade and a decline in both aggregate real income and inequality.

26 October 2021

Anna Raute (Queen Mary University of London)

Wind of Change? Cultural Determinants of Maternal Labor Supply
(with Barbara Boelmann and Uta Schönberg)

Does the culture in which a woman grows up influence her labor market decisions after she has had a child? And to what extent can exposure to a different cultural group in adulthood shape maternal labor supply? To address these questions, we exploit the setting of the German reunification. A state socialist country, East Germany strongly encouraged mothers to participate in the labor market full-time, whereas West Germany propagated a more traditional male breadwinner-model. After reunification, these two cultures were suddenly brought together, with consequent increased social interactions between East and West Germans through migration and commuting. Zooming in on East and West Germans who migrated across the former inner-German border, we document a strong asymmetry in the persistence of the culture in which women were raised. Whereas East German female migrants return to work earlier and work longer hours than their West German colleagues even after long exposure to the more traditional West German culture, West German migrants adjust their post-birth labor supply behavior nearly entirely to that of their East German colleagues. West German return migrants continue to be influenced by the more gender egalitarian East German norm even after their return to the West, pointing towards the importance of learning from peers. Finally, taking advantage of differential inflows of East German migrants across West German workplaces in the aftermath of reunification, we show that even a partial exposure to East German colleagues induces “native” West German mothers to accelerate their return to work after childbirth, suggesting that migration might be a catalyst for cultural change.

02 November 2021

Daniel Kühnle (University of Duisburg-Essen)

WST-A. 12.04,

Weststadttürme, Essen

NPIs and the 1918-Pandemic: Evidence from half a million death certificates and 1,285 school closures in Sweden

09 November 2021

David Agrawal (University of Kentucky)

The Marginal Value of Public Funds in a Federation

(with William H. Hoyt and Tidiane Ly)

Our objective is to establish and provide a framework for quantifying the welfare effects of fiscal policies in an open economy, with an emphasis on state and local governments in a federalist system. To do this, we develop a model of fiscal policy when there are spillovers and mobility effects from changing taxes and expenditures among competing local jurisdictions. We then derive how mobility and spillovers influence the marginal value of public funds (Hendren 2016). Because a federal planner internalizes the interjurisdictional externalities, the MVPF for a federal and local planner can diverge substantially. We provide guidance on the additional empirical components of the marginal value of public funds necessary to understand the welfare effects of policies in a federalist system.

16 November 2021

Claudia Steinwender (LMU Munich)

Omnia Juncta in Uno: Foreign Powers and Trademark Protection in Shanghai’s Concession Era
(with Laura Alfaro, Cathy Ge Bao, Maggie X. Chen, and Junjie Hong)

Intellectual property (IP) institutions have been a salient topic of economic research and political disputes. In this paper, we investigate the effects of trademark protection, an underexamined form of IP protection, by exploring a historical precedent: China’s trademark law of 1923—an unanticipated, disapproved response to end conflicts between foreign powers. Exploiting a unique, newly digitized firm-level dataset from Shanghai in 1870-1941, we show that the trademark law spurred growth and brand investment for Western firms with greater dependence on trademark protection. In contrast, Japanese businesses, who had frequently been accused of counterfeiting, experienced employment contractions while attempting to build their own brands after the law. Further, the trademark law led to greater domestic integration both within and outside the boundary of Western firms and the growth of Chinese agents. A comparison with previous attempts by foreign powers to strengthen trademark protection — such as extraterritorial rights, bilateral commercial treaties, and an unenforced legal trademark code — shows the alternative institutions were ultimately unsuccessful.

23 November 2021

internal seminar

14 December 2021

Hylke Vandenbussche (KU Leuven)

Consumer Taste in Trade: a method to identify taste shifts after COVID

(with Bee Yan Aw and Yi Lee)

This paper documents the importance of consumer taste for the food industry using firmproduct level customs data by destination country. We identify consumer taste through the use of a control function approach and estimate it jointly with other demand parameters using a flexible demand specification. We find that, on average, consumer taste explains about as much of the variation in export revenue as marginal costs. The contribution of consumer tastes to export revenue variation ranges from 2% to 30% depending on product category in the food industry. Our results also show that consumer taste decreases in distance but this relationship is non-monotonic.

21 December 2021

internal seminar

11 January 2022

Mikael Lindahl (University of Gothenburg)

WST-A. 12.04,

Weststadttürme, Essen

Earnings Expectations and Educational Sorting: An Ex-Ante Perspective on Returns to University Education

(with Nikolay Angelov, Per Johansson, and Ariel Pihl)

We estimate means and distributions of ex-ante treatment effects for obtaining university education relative to high school. To achieve this, we conducted a survey which elicited earnings expectations associated with counterfactual educational choices for a sample of high-school students in Stockholm. We find average ex-ante returns to university to be 36%, with higher returns for females, those with high SES backgrounds, and high math scores. The returns vary considerably and are highest for those that choose university, but also positive and sizable for those who do not. Our results imply that students sort into education based on their comparative advantage. Nevertheless, our results suggest that an OLS estimator of the returns to university education should be expected to be quite similar to the average treatment on the treated effect for university education. Additionally, we find evidence that the positive ex-ante earnings returns to high paying fields, among those that do not choose these fields, can (partly) be reconciled by individuals expecting to be compensated through higher non-pecuniary returns to those fields.

18 January 2022

Georg Wamser (University of Tübingen)

Link to the seminar (ZOOM)

Taxes, Profit Shifting, and the Real Activities of MNEs: Evidence from 898 Corporate Tax Notches

(with Jaqueline Hansen and Valeria Merlo)

This paper exploits exogenous variation in tax notches created by controlled foreign corporation (CFC) rules to better understand the profit-shifting behavior of multinationals. Using new data on CFC rules and bilateral parent-affiliate ownership data, we estimate a profit-shifting semi-elasticity of about 0.32. Furthermore, we provide evidence that the unilateral implementation of anti-tax-avoidance regulation at the parent location leads to profit relocations consistent with tax-minimizing behavior. We do not find any evidence that parent countries benefit from this regulation (in terms of repatriated tax base) or that parent firms bear the economic costs (real outcomes of parents remain unaffected).

25 January 2022

Geir Godager (University of Oslo)

WST-A. 12.04,

Weststadttürme, Essen

& online

Imperfect quality competition in regulated health care markets

(with Ge Ge)

We study equilibrium quality in a health care market with regulated prices. Demand-side behavior is derived from choice axioms, and the demand-side responds imperfectly to differences in provider quality. The quality-responsiveness of the demand-side, medical technology and cost structure determines a unique payoff matrix for providers. Payoffs to providers are vectors with two elements: profit and patient benefit. For alternative degrees of quality-responsiveness, we derive the set of pure strategies that constitute feasible Pareto equilibria or Bayesian Nash equilibria in a duopoly market. The minimal quality that can be implemented as a Pareto equilibrium or Bayesian Nash equilibrium rises if the demand-side becomes more responsive to quality.

Exploiting data from an incentivized laboratory experiment on strategic medical choices, we find that for 36 % of cases, decision-makers choose medical treatments that are dominated by other treatment strategies. We compute the quantal response equilibria for alternative levels of quality-responsiveness and show that equilibrium qualities are positively related to the quality-responsiveness of the demand-side. The consequences for the market equilibrium of a more quality responsive demand-side are qualitatively similar in a quantal response equilibrium and in a Bayesian Nash equilibrium.

Our results illustrate how and why choice opportunities for patients cause quality incentives for providers, even in markets where the demand side has an imperfect quality response. An important policy implication is that policies that succeed in raising the quality-responsiveness of the demand-side will lead to a rise in equilibrium qualities provided to the market. Classic examples include lowering transaction costs and transportation costs.

01 February 2022

Kalina Manova (University College London)

Firm Heterogeneity and Imperfect Competition in Global Production Networks

(with Hanwei Huang and Frank Pisch)

We study the role of firm heterogeneity and imperfect competition for global production networks and the gains from trade. We develop a quantifiable trade model with (i) two-sided firm heterogeneity, (ii) matching frictions, and (iii) oligopolistic competition upstream. Combining highly disaggregated data on firms’ production and trade transactions for China and France, we present empirical evidence in line with the model that cannot be rationalized without features (i)-(iii). Downstream French buyers import higher volumes and quantities at lower prices when upstream Chinese markets become more competitive. These effects are stronger for larger, more productive buyers and weaker when input suppliers are more heterogeneous. Counterfactual analyses indicate that lower barriers to entry upstream, lower matching costs, and lower trade costs amplify firm productivity, firm size dispersion and aggregate welfare downstream. These effects operate through a combination of improved matching of buyers and suppliers, gains from variety, and lower mark-ups. Global production networks thus generate greater impacts and international spillovers from national industrial policy and trade liberalization.

Research Seminar & RTG Day

Summer 2021

The research seminar invites external researchers on a regular basis and is open to the public. It is part of the RTG day and takes place Tuesdays from 16:15 to 17:30 during the summer term 2021.

Due to the spread of the coronavirus we are planning to provide a virtual seminar. Further information will be released on this website. If you would like to receive invitations to our seminar please send a mail to contact@regional-disparities.de.

20 April 2021

internal seminar

27 April 2021

Wen-Tai Hsu (Singapore Management University)

Innovation, Growth, and Dynamic Gains from Trade

How large are the welfare gains from trade? Would such gains be significantly amplified in the long run when productivity is endogenously enhanced? We address these questions by focusing on the dynamic effect of trade, in particular, how trade affects the incentives for technological advancement. We construct an innovation-based endogenous-growth model of North-South trade. There are two types of innovation: one by the North to upgrade the general-purpose technology (GPT) and another by both countries to advance entrepreneurial knowledge for producing differentiated products. We first clarify the mechanism using a two-country economy and show that the North-South trade structure is instrumental to the growth mechanism. We then develop and calibrate a multi-country quantitative model to evaluate welfare gains from trade. We find substantial gains from trade, around 20% on average, with the dynamic gains account for around 80%. We also find that the dynamic gains are larger when trade costs are higher.

04 May 2021

Christian Volpe Martincus (Inter-American Development Bank)

Trade Promotion and the Indirect Effects of Exporting

It is already well-known that exporting firms tend to be larger and more productive than their non-exporting domestic peers. The extent to which the former and the latter are actually linked with each other and the implications of these linkages are far lesser known. In this paper, we show that firms that become exporters favor an expansion of their local suppliers in terms of sales, number of employees, and sales per employee. We use a unique dataset that combines data on domestic firm-to-firm transactions and firm-level characteristics, exports, and trade promotion assistance status. In order to accurately identify these indirect effects, we exploit the fact that trade promotion support is associated with a significant increase in the probability that a domestic firm starts exporting but can be considered otherwise unrelated with suppliers’ performance.

11 May 2021

Karen Helene Ulltveit-Moe (University of Oslo)

Trade From Space: Shipping Networks and The Global Implications of Local Shocks

This paper examines the structure of the shipping network and its implications on global trade and welfare. Using novel data on the movements of container ships, we calculate optimal travel routes. We then estimate the impact of a shock to the network on global trade by analyzing the effect of the 2016 Panama Canal Expansion. Trade between country pairs using the canal increased by 10% after the expansion. While the building costs were borne by Panama alone, a model-based quantification analysis shows that the welfare gains were shared by many countries, due to the network structure of shipping.

18 May 2021

Maria Petrova (Pompeu Fabra University)

Automation, Career Values, and Political Preferences

Recently, there has been much evidence linking economic shocks in the form of automation to employment and wage outcomes, as well as political outcomes. In this paper, we try to understand the mechanisms behind these effects. In particular, we go beyond current worker outcomes by introducing a new measure of future career prospects. We show that automation does not only affect current wages, but that occupations also differ in the degree to which workers’ future career is affected by automation, as automation affects both wages in jobs that workers might aspire to move into, and the likelihood of different career transitions. Moreover, the labor market effects of automation differ by demographic group and local area characteristics. We then demonstrate that these patterns of heterogeneity in the impact of automation align with shifts in voter preference towards Donald Trump in the 2016 election — with negative impacts predicting a shift in preference towards Trump.

25 May 2021

internal seminar

15 June 2021

internal seminar

22 June 2021

Hanna Hottenrott (Technische Universität München)

Location-based Accessibility and Innovation Performance

While the importance of local characteristics for innovation activities has been shown in prior research, it remains largely unknown to which extent better accessibilities facilitate innovation. This study builds on data from a country-wide transport model to derive travel times and accessibilities at the level of so called “Travel Analysis Zones” for different modes of transport and using different approaches for modeling congestion. We employ these accessibilities to investigate their role for local innovation activities. Besides geographical information drawn from patent data, which is traditionally employed as indicator of inventive efforts, this project makes use of website texts to generate novel innovation indicators based on natural language processing techniques. The results suggest there is both more inventive and more innovative activities in regions with better accessibility. Yet, the web-based indicators appear to be better suited than patent indicators to capture innovation activities in cities reversing previous findings that suggested that innovation rates decline in highly dense locations. The results from this study have implications for research on the geography of innovation and the development of measures for non-technological innovation.

29 June 2021

Camille Hémet (École Normale Supérieure & Paris School of Economics)

Neighbors’ Effect and Track Choice

The aim of the paper is to analyze the effect of neighbors’ choices on individual track choices at the end of lower secondary education. To take account of endogenous location decisions, we use within-catchment-area variation in location between small statistical units in the municipality of Paris. The results suggest that close neighbors do matter in track choices at the end of lower secondary education, but only for pupils going to a vocational track. Pupils who continue in an academic track are not influenced by their neighbors. Neighbor effects tend to accentuate social segregation across high school tracks.

06 July 2021

Eve Colson-Shira (Hebrew University of Jerusalem)

Market Integration and Cultural Homogenization in Consumption Patterns

This paper examines the convergence of consumption patterns over time using detailed household surveys on food purchases in France for 1974 and 2005. We first document that geographically closer regions are more similar in their food tastes. Second, we find that tastes have become more homogeneous during those thirty years of deep market integration. Relying on a structural demand estimation, we show that food taste homogenization is not fully explained by changes in the economic environment. Moreover, we find evidence that taste homogenization strongly correlates with convergence in cultural traits.

13 July 2021

Sybille Lehmann-Hasemeyer (University of Hohenheim)

120 Years of Going Public – IPOs on German Stock Exchanges

20 July 2021

internal seminar

Research Seminar & RTG Day

Winter 2020/2021

The research seminar invites external researchers on a regular basis and is open to the public. It is part of the RTG day and takes place Tuesdays from 16:15 to 17:30 during the winter term 2020/2021.

27 October 2020

Maximilian Todtenhaupt (NHH Norwegian School of Economics)

International Taxation and Productivity Effects of M&As

We investigate how changes in firm productivity after M&As are affected by differences in profit taxation between the target and the acquirer. We argue that tax differentials distort the efficient allocation of productive factors following an M&A and thus inhibit the realization of productivity improvements. Using firm-level data on inputs and outputs of production as well as on corporate M&As, we show that the absolute tax differential between the locations of two merging firms reduces the subsequent total factor productivity gain. This effect is less pronounced when firms can use international profit shifting to attenuate effective differences in taxation.

3 November 2020

Alessandro Sforza (University of Bologna)

Globalization in time of COVID-19

The economic effects of a pandemic crucially depend on the extent to which countries are connected in global production networks. In this paper we incorporate production barriers induced by the COVID-19 shock into a Ricardian model with sectoral linkages, trade in intermediate goods and sectoral heterogeneity in production. We use the model to quantify the welfare effect of the disruption in production that started in China and quickly spread across the world. We find that the COVID-19 shock has a considerable impact on most economies in the world, implying an average 12.9% drop in GDP across countries. Moreover, we show that global production linkages have a clear role in explaining the observed magnitudes. Finally, we show that the economic effects of the COVID-19 shock would have been marginally worse in a closer economy, with an average drop of GDP of 13% across countries. Our results contribute to the recent debate on the renationalization of global production. We show that renationalization would not help countries mitigate the impact of global pandemic shocks, and would itself imply enormous GDP losses.

10 November 2020

internal seminar

17 November 2020

Elisabet Viladecans (Universitat de Barcelona)

The political economy of coastal destruction

We study the role of inter-governmental cooperation in the preservation of coastal land from development in Spain. Keeping coastal land undeveloped may provide benefits (e.g., preservation of open space) or costs (e.g., foregone jobs) to both residents and non-residents in the political jurisdiction. Therefore, local governments deciding in isolation –and not accounting for the welfare of non-residents– may not choose the right amount of development. We rely on a close-elections Regression Discontinuity Design to investigate how political alignment among neighboring municipalities –which may enhance the incentives to cooperate, and so to account for the welfare of non-residents– affects development close to shore. We find that municipalities where the party ruling a majority of municipalities in a neighboring area barely won the local election develop less land than municipalities where the same party barely lost, a result suggesting that lack of cooperation leads to over-development.

24 November 2020

Joan Monras (Pompeu Fabra)

Immigration and Spatial Equilibrium: The Role of Expenditures in the Country of Origin

We show that immigrants in the US concentrate in expensive cities, the earnings gap between natives and immigrants is larger in these cities, and these patterns are stronger when prices in the country of origin are lower. To rationalize this empirical evidence, we propose a quantitative spatial equilibrium model in which immigrants spend a fraction of their income in their countries of origin. Our model serves two purposes. First, to develop a new instrument for immigrant shocks that we use to test the model’s predictions on native internal relocation responses. Second, to evaluate the consequences of immigration for aggregate productivity.

1 December 2020

Krisztina Kis-Katos (Georg-August-Universität Göttingen)

Palm Oil and the Politics of Deforestation in Indonesia

This paper studies the interactions between political and economic incentives to foster forest conversion in Indonesian districts. Using a district–level panel data set from 2001 to 2016, we analyze variation in remotely sensed forest loss and forest fires as well as measures of land use licensing. We link these outcomes to economic incentives to expand oil palm cultivation areas as well as political incentives arising before idiosyncratically–timed local mayoral elections. Empirical results document substantial increases in deforestation and forest fires in the year prior to local elections. Additionally, oil palm plays a crucial role in driving deforestation dynamics. Variations in global market prices of palm oil are closely linked to deforestation in areas which are geo-climatically best suited for growing oil palm and they amplify the importance of the political cycle. We thus find clear evidence for economic and political incentives reinforcing each other as drivers of forest loss and land conversion for oil palm cultivation.

15 December 2020

Yanos Zylberberg (University of Bristol)

Migrants and Firms: Evidence from China

How does rural-urban migration shape urban production in developing countries? We use longitudinal data on Chinese manufacturing firms between 2000 and 2006, and exploit exogenous variation in rural-urban migration induced by agricultural price shocks for identification. We find that, when immigration increases, manufacturing production becomes more labor-intensive and productivity declines. This adjustment reflects both directed technological change, with firms moving away from capital-intensive technologies and new production methods, and a shift towards final products that use low-skilled labor more intensively.

22 December

internal seminar

12 January 2021

Martina Kirchberger (Trinity College Dublin)

Perpetual Motion: Human Mobility and Spatial Frictions in Three African Countries

Frictions affecting human mobility have been identified as important potential sources of the spatial gaps in wages and living standards that characterize many low-income countries. However, little direct data has been available to characterize high-frequency mobility. We use a novel data source that provides highly detailed location data on more than one million devices across three large African countries for an entire year. This allows us to examine high-frequency mobility patterns for a subset of high-quality observations for whom we can determine home locations confidently. We link our users with spatial data on population density and nationally representative micro-survey data to characterize this non-random sample. We then propose a number of metrics to characterize mobility related to frequency, spatial extent and densities visited. We find that users are remarkably mobile in terms of the fraction of days seen at least 10km away from their home location, and the average distance for non-home location pings. Individuals residing in low-density locations are well linked to high-density locations and a significant fraction of visitors to the largest cities comes from non-urban areas. Finally, the observed mobility patterns suggest large agglomeration effects: a doubling of population is associated with a doubling of city fixed effects. Our estimates are in line with previous gravity estimates in the literature across a wide range of spatial and temporal scales.

19 January 2021

Sam Asher (Johns Hopkins University)

Residential Segregation and Unequal Access to Public Goods in India

Economists have long studied the role of location in shaping the economic opportunities available to households and firms. There is a particularly rich literature in rich countries, particularly the US, on how segregation along ethnic lines affects access to public goods, jobs, and other economic outcomes. Yet despite much work on ethnic disparities and tensions in lower income countries, there is little quantitative work on segregation. In this paper, we study residential patterns and economic outcomes for India’s two largest marginalized groups (MGs): Scheduled Castes and Muslims. We assemble a novel dataset of neighborhood-identified microdata on households and public goods for 7000 urban and rural areas. We establish three primary new facts by studying outcomes at both the neighborhood and city/subdistrict levels. First, the government provides fewer health and educational facilities to neighborhoods with higher MG shares. Second, households in high MG share neighborhoods are poorer than comparable households elsewhere, and more so when they belong to these MGs. Third, high segregation cities and subdistricts are poorer and provide fewer public goods to MGs than low segregation areas.

26 January 2021

Sebastian Siegloch (ZEW Mannheim)

Spill-Over and Welfare Effects of Place-Based Policies: Evidence from Investment Subsidies in East Germany

We study the effects of investment subsidies targeted at East German manufacturing firms post reunification. Exploiting quasi-experimental variation in the regional subsidy rates and detailed administrative data linked employer-employee data, we the causal reduced-form policy effects. We show that a 1 percentage point decrease in subsidy rates leads to 1 percent decrease in manufacturing employment and an increase in local unemployment. Moreover, we analyze various policy spill-over: While we do not find significant regional spill-overs within the commuting zone, we demonstrate significant local multiplier effects at the county as the un-treated construction and retail sectors is also negatively affected by the subsidy. Last, we show that local policy makers react to the national subsidy cut by increase local taxes. In a last step, we assess the welfare implications of the policy calculating the marginal value of public funds. The specific place-based policy is comparable to policies targeted at similar age groups, like unemployment benefits. Without the sectoral and policy spill-overs, the welfare effects of the policy are 50% lower.

2 February 2021

no seminar

Research Seminar & RTG Day

Summer 2020

The research seminar invites external researchers on a regular basis and is open to the public. It is part of the RTG day and takes place Tuesdays from 16:15 to 17:30 during the summer term 2020.

28 April 2020

Dennis Novy (University of Warwick)

Exchange Rates and Consumer Prices: Evidence from Brexit

This paper studies how the depreciation of sterling following the Brexit referendum affected consumer prices in the United Kingdom. Our identification strategy uses input-output linkages to account for heterogeneity in exposure to import costs across product groups. We show that, after the referendum, inflation increased by more for product groups with higher import shares in consumer expenditure. This effect is driven by both direct consumption of imported goods and the use of imported inputs in domestic production. Our results are consistent with complete pass-through of import costs to consumer prices and imply an aggregate exchange rate pass-through of 0.29. We estimate the Brexit vote increased consumer prices by 2.9 percent, costing the average household £870 per year. The increase in the cost of living is evenly shared across the income distribution, but differs substantially across regions.

5 May 2020

Fernando Parro (Penn State University)

The Quantitative Effects of Trade Policy on Industrial and Labor Location

One justification for trade protectionism is the benefits of terms-of-trade manipulation. Another reason, more central in trade policy negotiations, is the ideathat trade protectionism brings industries back home. The new economic geography theory has provided intuitive insights on how the location effect of trade policy shapes welfare in the protecting country. Previous work, however, has been able to say much less about the quantitative effects of trade policy on the location of firms across space and over time, and its welfare implications. We develop a multi-country dynamic general-equilibrium trade and spatial model with forward-looking decisions of firms on where to locate production, forward-looking decisions of workers on where to supply labor, and endogenous capital structure accumulation. We take the model to the data using trade and production data for many locations and industries, as well as using data on firms’ demographics from several data sources. We use the model to study how trade protectionism impacts the location of production across space and over time, as well as its welfare consequences. We find quantitative evidence that protection relocates production to the protected country but that this comes at the cost of higher prices and lower welfare.

12 May 2020

Hanna Brenzel, Maren Köhlmann & Axel Ramstein (Destatis)

Please send a mail to
contact@regional-disparities.de
to receive an invitation.

Geo-Coordinates as a variable for linkage

19 May 2020

Gianmarco Ottaviano (Bocconi University)

Cultural Diversity and Immigrant Inventors in the Age of Mass Migration

This paper investigates the role of cultural diversity in attracting global talents and fostering foreign-born scientists’ invention during the Age of Mass Migration. More specifically, we examine the impact of birthplace diversity in US counties on both location choices and innovation outcomes of immigrant inventors arrived at the turn of the 20th century. We combine unique text-mined USPTO historical patent records with Census data and exploit exogenous variation in both immigration flows and diversity indexes induced by former settlements, World War I and the Immigration Acts passed in the 1920s. We hence identify the impact of immigration on invention through its effect on both the size (share of foreign born) and the composition (diversity) of migrants in the locations of destination. Our results show that cultural diversity is a significant pull factor of immigrant inventors, over and above co-ethnic network and immigration size effects. We also find that diversity spurs foreign inventors’ patenting activity at the local level, which is consistent with a model where the dominant mechanism is productive rather than consumption amenities.

9 June 2020

internal seminar

16 June 2020

Arnaud Chevalier (Royal Holloway, University of London)

Asian Gold – Expected Returns to Crime and Thieves Behaviour

Using plausibly exogenous changes in the prices of goods, we show that variations in the price of specific goods affects the location of crime as criminals reallocate efforts towards potential targets with higher probability of ownership of these goods. Our identification strategy relies on the common perception in the UK that families of South Asian descent keep a substantial amount of gold jewellery in their houses. The expected gains from targeting these households for burglaries consequently change exogenously with the gold price. Using a neighbourhood level panel on reported crime from UK police forces combined with census information and official gold prices, we find that neighbourhoods with a larger share of South Asians face a disproportionate increase in property crime relative to other neighbourhoods in the same municipality when the price of gold increases. Additionally, we estimate no displacement either from other crimes or geographically.

23 June 2020

James Fenske (University of Warwick)

Tradition and mortality: Evidence from twin infanticide in Africa

30 June 2020

Andrew Seltzer (Royal Holloway, University of London)

The Impact of Public Transportation and Commuting on Urban Labour Markets: Historical Evidence from the New Survey of London Life and Labour

7 July 2020

Ines Helm (Stockholm School of Economics)

The Dynamic Response of Municipal Budgets to Revenue Shocks

We study the response of municipal budgets to intergovernmental grants, based on quasi-experimental variation within Germany’s ﬁscal equalization scheme. Because transfers depend on population counts, the 1987 Census led to a permanent shift in municipal revenues. By tracking the ﬁscal and tax response to these gains or losses, we study the dynamics of the adjustment process over time. Budgets do not adjust instantly: municipal spending adapts over three to four years, predominantly driven by capital and infrastructure investments. Spending adjusts more rapidly to revenue losses than gains, but the response is symmetric in the long run. Local tax rates adapt only slowly, with adjustments stretching over more than a decade. We contrast these ﬁndings with prior evidence on the “ﬂypaper eﬀect” and other anomalies in public ﬁnance. While we ﬁnd such anomalies in the short run, the long-run decision-making of municipal governments appears consistent with standard theories of ﬁscal federalism.

14 July 2020

Yoto Yotov (Drexel University)