European Economic Review最新文献

We describe and analyze the voting process leading to the compromise achieved in the Weimar Flag Controversy. We also offer a simple theoretical model that attempts to capture the main forces at work. These forces are: (1) the addition of a compromise alternative that is located between the main ideological positions on the left and on the right; (2) the interdependence of preferences that makes the compromise salient; and (3) a voting process that gradually reveals and aggregates information. Finally, we compare the theoretical insights with the observed outcome.

We analyze the relationship between climate-related disasters and sovereign debt crises using a model with capital accumulation, sovereign default, and disaster risk. We find that disaster risk and default risk together lead to slow post-disaster recovery and heightened borrowing costs. Calibrating the model to Mexico, we find that the increase in cyclone risk due to climate change leads to a welfare loss equivalent to a permanent 0.95% consumption drop. However, financial adaptation via catastrophe bonds and disaster insurance can reduce these losses by about 21%. Our study highlights the importance of financial frictions in analyzing climate change impacts.

This paper studies the asymmetry in the macroeconomic effects of central bank asset market operations induced by state dependency and the associated role of household heterogeneity. We build a New Keynesian model with borrowers and savers in which quantitative easing and tightening operate through portfolio rebalancing between short-term and long-term government bonds. We highlight the significance of an occasionally binding zero lower bound in explaining a weaker aggregate impact of asset sales relative to asset purchases. In this context, when close to the lower bound, raising the nominal interest rate prior to unwinding quantitative easing mitigates the economic costs of monetary policy normalization. Furthermore, our results imply that household heterogeneity in combination with state dependency amplifies the revealed asymmetry, while household heterogeneity alone does not enhance the aggregate effects of asset market operations.

Firms without paid employees account for up to 80 % of all firms, but only a small minority ever hires. This paper investigates the relationship between labour costs and the decision to hire a first employee and become an employer. Leveraging a unique policy in Belgium that permanently reduced the labour cost of the first employee by 13 %, we find that the number of new, first-time employers jumped by 31 % immediately following the reform. The elasticity of the probability to hire the first employee with respect to the labour cost is −2.39 [95 % CI: −3.45, −1.25].

Recent public and corporate policies restricting social identity expression, such as the face-covering restrictions in many European countries, presume that prominent signals of our social identity differences drive division even when inference about social identity is unaffected. Social identity theory predicts that limiting identity expression could positively or negatively affect how groups interact. We use an experiment to test whether a treatment that bans displaying an identity pin affects cooperation in public goods provision. Our subjects are U.K. residents who were in favor of leaving or remaining in the European Union. Each subject is simultaneously in two different yet economically identical environments that are distinguished only by the social identities of the group members. They play two simultaneous one-shot public goods games, one with others who share their identity (in-group public good), and one with a mixture of Leavers and Remainers (mixed-group public good). The political identities of all subjects and the structure of each group are known by everyone. Our treatments vary whether there exists a ban on displaying a Leaver/Remainer identity pin to others and whether Leavers or Remainers are the majority identity in the mixed groups. We find that banning pinning increases contributions to the mixed group when Leavers are the majority. These increases can be explained by changes in beliefs rather than the notion that shared group identity per se affects behavior. These setting- and identity-specific results suggest that policies designed to promote integration should be examined in the context in which they will be applied.