Other research projects
On this page members of the Chair of Macroeconomics present to you their current research projects to provide an insight into the Chair’s fields of activity.
Growth, climate change and societal values
The investigation of this project focuses on the link between economic growth and climate change on the basis of a system-dynamic-model. Here, societal values are considered as central determinant used for investments in growth-enhancing applications, as well as investments in measures for climate and environmental protection. The key insight of the model is that climate protection is only possible, if it is in line with prevalent societal values. If the majority of the society is more materialistic, the measures for climate protection remain insufficient and global warming will continue, almost unrestrained.
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Project participants: Prof. Dr. Michael Roos
Which factors hinder and foster new economic thinking among junior researchers?
The initial hypothesis of this project is that new economic thinking in science is spread, especially, among new generations of junior researchers. At the same time, however, it is difficult and risky for that particular group to strike a new path. The research project deals with two central subjects. First, we conduct a survey of how PhD students are currently trained and how they evaluate their own education. In a second round, the survey is used as a basis, in order to develop some improvements for the doctoral training, which are supposed to ease new economic thinking.
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Project participants: Prof. Dr. Michael Roos, Dr. Julia Sprenger
You can get futher information about the project under the following link:
Escaping lock in: financing the transition to a sustainable economy through unconventional monetary policy. An agent-based approach.
Policies aimed at promoting economic recovery and fostering the transition to a green economy are drawing considerable attention both among policy makers and academic researchers.
From a (economic) theoretical perspective, among the approaches that have dealt with climate change, ecological economists have demonstrated the inadequacy of conventional macroeconomic thinking in addressing the fundamental social problems of a transition to sustainability. According to the standard economic approach, price policies can steer the market economy towards a sustainable pattern of growth and resource use. Other economists believe that more substantial measures are needed, and this requires a rethinking of the growth paradigm and the associated standard economic assumptions.
Data on investments in energy efficiency and low-carbon technologies highlight a need to foster investments in the so-called green sectors in order to limit the climate change to 2 degrees C. Recently, there have been several proposals to attain the goal of tackling the climate change and meet the 2 degrees C limit: they range from the issue of Special Drawings Rights (SDR) by the IMF to green unconventional monetary policies to Carbon Certificates (CC) mechanisms.
In this research project, we tackle the issue of the transition towards a sustainable economy by adopting a bottom up approach.
The existing contributions, both in the evolutionary literature as well as models adopting explicitly the Agent-Based Modeling approach, that focus on the transition towards sustainable growth patters usually investigate:
- On the demand side, the role of consumers’ preferences and behaviors in affecting the structural change.
- On the supply side, lock-in and path dependence, which depend on consumers’ preferences but also on regulations and policies.
The model developed in our research project emphasizes both the demand and the supply side of the economy. On the one hand, it explicitly accounts for heterogeneous consumers that give rise to different consumption patterns (choice of green or non-green goods) that in turn affect the technological evolution of the economy. Regarding this point, our Agent-based computational model will account for product’s novelty. In particular, we consider that goods progress on a “green” ladder and because climbing the ladder entails costs for the production sector, the aim of the model is to find out the best incentives framework that unlocks and speeds up the climb. On the other hand, the investigation is focused on policies directed to the supply side, aimed at boosting the transition to a more sustainable economy.
The overall aim of the model is to investigate the interaction between the real and the financial side of the economy and the extent to which a green unconventional monetary policy can lead to a structural technological change and, consequently, to a transition towards a more sustainable economy. The role of this kind of policy is of utmost importance especially in presence of lock-in mechanisms and, in particular, in the case of eco-innovation.
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Project participants: Paola D'Orazio, Ph.D.
Income and wealth distribution, consumers’ indebtedness and effectiveness of fiscal policies. The emergent properties of an Agent-based Macroeconomic Model
This research project aims at developing an Agent-based macroeconomic model (ABM-M) to study the links among consumers’ debt behavior, income distribution and systemic (macroeconomic) instability. The model features a household, a firm, a banking and government sector which are interrelated by their balance sheets; the model is also enriched with a stock-flow consistent accounting framework.
The focus is on the household sector, in particular on their micro heterogeneous behaviors and the emergent aggregate patterns they give rise to and on the role of both income and wealth distributions in affecting the consumption behavior of the household sector. As pointed out by some scholars, it is worthwhile investigating in this direction because distributional issues proved to be of crucial relevance for the increasing indebtedness of households in the years preceding the Great Recession.
Different policies experiments and policy scenarios are considered in order to study which fiscal policies can be better suited to prevent and/or recover an economic system after a recession.
The research projects aims also at providing an ex-post validation of the results obtained by running the simulations. The aim of this empirical analysis is to assess if the model is able to replicate some stylized facts observed at the European level, with particular attention to the German and Italian cases.
The empirical analyses takes into account household-level data on balance sheets, wealth and income distribution and are based on time series retrieved from the HFCS (European Household Finance and Consumption Survey), the SOEP (Sozio-oekonomische Panel) and the SHIW (Italian Survey of Household Income and Wealth).
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Project participants: Paola D'Orazio, Ph.D.
Financial decision making
For many financial decisions people have the option to seek external information before making their choice. However, more information does not necessarily prevent suboptimal choices. This project tries to shed some light on information acquisition behavior prior to decisions in the field of personal finance. It pursues the question: How do people arrive at a financial decision?
The focus of interest is on the relationship between the individual level of financial literacy and the way external information is integrated into the decision making process. A series of laboratory experiments investigates in how far the level of financial literacy influences demand for information, how it shapes information preferences and strategies, and how it affects the willingness to follow expert as well as naive financial advice.
Insights from experimental and behavioral finance allow for creating a more complete picture of the factors driving financial decision making. Moreover, recognizing certain biases can help identifying groups especially vulnerable to overreliance on internal sources of information and to inconsistencies in the conduct towards advice. The project thus relates to the broader debate about financial education, consumer protection, and financial consulting.
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Project participants: Julia Sprenger
Budgetary Policy, Social Security and Private Saving Behavior in an agent-based model
The sustainability of social systems and fiscal policy is seriously challenged by the demographic change and public over-indebtedness. The generosity of the existing welfare state seems threatened by an ageing population and declining birth rates raising future redistributional and inequality issues. This research project aims to analyse the important and yet widely neglected interrelation of budgetary policy, social security and private saving behavior on individual level. An agent-based model is used to conduct scenario analyses and to provide qualitative insights into possible future developments of the German social system. The main tested hypothesis is whether the forecasted negative demographic scenario requires more policy adjustments and leads to higher inequality. As individuals react and adapt to policy changes by the government, a theoretically founded consumption/savings behavior on individual level is taken into account. Possible policy implications can be derived from the underlying baseline framework consisting of an interplay of governmental and private behavior.
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Project participants: Natalie Fritzler
Sustainability, Resources and Post-Growth
One of the most important challenges that will shape future societies and economies is their reaction to climate change, increasing pollution, and overstraining of natural resources. Standard economic science usually tends to view the economy detached from external influences. Unfortunately, this approach may sometimes lead to neglecting complex relations and interdependencies between the economy, the society, and the environment, resulting in the loss of explanatory power in extreme cases.
Our research project on sustainability, resources and post-growth tries to accommodate the complexity of these relationships. We use agent-based models in order to analyze emergent economic properties of society as whole by simulating a multitude of agents and their individual decision making.
The main focus is currently on modelling the changes in consumption patterns in reaction to external influences such as climate change and the prospects of policy measures that aim to influence this change.
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Project participants: Florian Lewalder
Segregation in urban areas – how do market processes interact with intolerance?
There has been done a lot of research concerning segregation of social groups in urban areas. As many authors pointed out, local areas tend to drive towards homogeneity, as soon as critical thresholds are surpassed. However, such a system does not only show dichotomous outcomes, but may converge to a mixed state as well, if individuals with different ethnicities have a high tolerance for agents with other ethnical, religious or socioeconomic background. The subsequent question here is, how intolerance is influenced by these different attributes. The exogenous approach, which has solely been used until now, seems not realistic, since agents are heterogeneous and are affected by different circumstances.
To take this into account, the investigation of the project follows several steps. First, the focus lies on the endogenization of “intolerance of others”. This is based on an empirical analysis conducted earlier to show the effects of certain socioeconomic variables. In the next step, a model will be built in order to construct market processes, i.e. in the housing market, as well as functions which represent quantities of how different agents are from each other. Put together, the analysis will be conducted with an agent-based model in order to determine how market processes interact with intolerance and how it affects the segregation pattern on the macro level.
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Project participants: Benjamin Bonakdar
Labor market policies in times of labor market rationing
In my thesis, I am going to analyze the effect of labor market policies in times when labor supply permanently and to a considerable extent exceeds the labor demand (labor market rationing). Do policies which are tailored to affect labor supply (i.e. unemployment benefits) help to overcome unemployment? Therefore, I am going to introduce a rationing scenario into a standard ABM (Agent-Based Model) and analyze afterwards how labor market reforms (i.e. unemployment benefits) affect the labor market performance.
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Project participants: Tom Bauermann