Pub Date : 2025-10-21DOI: 10.1016/j.euroecorev.2025.105187
Carlos J. Charotti , Nuno Palma , João Pereira dos Santos
Spain was one of the world’s richest countries around 1500. Two centuries later it was a backwater. We rely on a synthetic control methodology to study the long-run impact of the influx of silver from the New World since 1500 for the economic development of Spain. Compared with a synthetic counterfactual, the price level increased by up to 200% by the mid-seventeenth century. Spain’s GDP per capita outperformed other European nations for around a century, but by 1750, GDP per capita was around 40% lower than it would have been if Spain had not been the first-stage receiver of the American treasure.
{"title":"American treasure and the decline of Spain","authors":"Carlos J. Charotti , Nuno Palma , João Pereira dos Santos","doi":"10.1016/j.euroecorev.2025.105187","DOIUrl":"10.1016/j.euroecorev.2025.105187","url":null,"abstract":"<div><div>Spain was one of the world’s richest countries around 1500. Two centuries later it was a backwater. We rely on a synthetic control methodology to study the long-run impact of the influx of silver from the New World since 1500 for the economic development of Spain. Compared with a synthetic counterfactual, the price level increased by up to 200% by the mid-seventeenth century. Spain’s GDP per capita outperformed other European nations for around a century, but by 1750, GDP per capita was around 40% lower than it would have been if Spain had not been the first-stage receiver of the American treasure.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105187"},"PeriodicalIF":2.4,"publicationDate":"2025-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364192","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-18DOI: 10.1016/j.euroecorev.2025.105186
Teppo Felin , Madison Singell
Recombination has long been seen as a central mechanism for explaining technological evolution and economic growth. Yet this view suggests several puzzles. First, the set of potential combinations is astronomically large, raising the question of how humans somehow arrive at useful combinations (amongst indefinite possibilities). And second, just as possible combinations are “unprestatable” in advance, the same goes for the elements or components that might serve as building blocks of combination. The central question, then, is how actors generate salience for useful combinations as well as plausible combinatorial components. We argue that theory-driven experimentation generates combinatorial salience by providing a shortcut for brute force search—making the combinatorial explosion analytically tractable. We link our argument to existing approaches to combination and technology, in particular, Koppl et al.’s Explaining Technology. We augment long-run, evolutionary explanations of combinatorial technology with a more decision-oriented approach. In all, we argue that human theorizing—the forward-looking use of science and causal reasoning—functions as a generative metatechnology that guides experimentation and enables the discovery of useful combinations.
{"title":"Technology: Theory-driven experimentation and combinatorial salience","authors":"Teppo Felin , Madison Singell","doi":"10.1016/j.euroecorev.2025.105186","DOIUrl":"10.1016/j.euroecorev.2025.105186","url":null,"abstract":"<div><div>Recombination has long been seen as a central mechanism for explaining technological evolution and economic growth. Yet this view suggests several puzzles. First, the set of potential combinations is astronomically large, raising the question of how humans somehow arrive at useful combinations (amongst indefinite possibilities). And second, just as possible combinations are “unprestatable” in advance, the same goes for the elements or components that might serve as building blocks of combination. The central question, then, is how actors generate salience for useful combinations as well as plausible combinatorial components. We argue that <em>theory-driven experimentation</em> generates combinatorial salience by providing a shortcut for brute force search—making the combinatorial explosion analytically tractable. We link our argument to existing approaches to combination and technology, in particular, Koppl et al.’s <em>Explaining Technology.</em> We augment long-run, evolutionary explanations of combinatorial technology with a more decision-oriented approach. In all, we argue that human theorizing—the forward-looking use of science and causal reasoning—functions as a generative metatechnology that guides experimentation and enables the discovery of useful combinations.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"181 ","pages":"Article 105186"},"PeriodicalIF":2.4,"publicationDate":"2025-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145419636","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-18DOI: 10.1016/j.euroecorev.2025.105189
Behnud Mir Djawadi, Sabrina Plaß, Sabrina Loer
Social norms shape economic decision-making, yet individuals often systematically misperceive what others think and do, potentially leading to suboptimal social outcomes. While existing research has demonstrated the prevalence and consequences of norm misperceptions across various domains, the literature has remained surprisingly silent on norm-enforcing behaviours. Despite their important role in providing collective benefits, these behaviours are regularly avoided because they may be viewed ambivalently by peers and create personal costs and interpersonal conflict for the actor. Using whistleblowing as an example of a broader category of regulatory behaviour, we examine whether i) norm misperceptions inhibit enforcement actions in the form of whistleblowing, and ii) norm-based interventions can effectively induce a behavioural change in this challenging domain. Through survey data and an incentivised laboratory experiment, we demonstrate that while a majority of individuals (77.55 %) privately support whistleblowing, almost half (45.92 %) misperceive the majority's view. This misperception has significant behavioural consequences: even when individuals personally support whistleblowing, their likelihood of reporting decreases by more than 30 % when normative expectations are perceived to favour silence rather than reporting. A social information intervention revealing the distribution of peer support shows only modest effectiveness. While it marginally increases whistleblowing among those already personally favouring reporting, it does not affect those who personally oppose whistleblowing. Our findings demonstrate the boundaries of norm interventions in enforcement contexts and suggest that, specifically for whistleblowing, corrections of norm misperceptions should not be viewed as substitutes for conventional approaches, such as financial incentives or whistleblower protection, in promoting whistleblowing.
{"title":"“I don’t believe that you believe what I believe”: an experiment on misperceptions of social norms and whistleblowing","authors":"Behnud Mir Djawadi, Sabrina Plaß, Sabrina Loer","doi":"10.1016/j.euroecorev.2025.105189","DOIUrl":"10.1016/j.euroecorev.2025.105189","url":null,"abstract":"<div><div>Social norms shape economic decision-making, yet individuals often systematically misperceive what others think and do, potentially leading to suboptimal social outcomes. While existing research has demonstrated the prevalence and consequences of norm misperceptions across various domains, the literature has remained surprisingly silent on norm-enforcing behaviours. Despite their important role in providing collective benefits, these behaviours are regularly avoided because they may be viewed ambivalently by peers and create personal costs and interpersonal conflict for the actor. Using whistleblowing as an example of a broader category of regulatory behaviour, we examine whether i) norm misperceptions inhibit enforcement actions in the form of whistleblowing, and ii) norm-based interventions can effectively induce a behavioural change in this challenging domain. Through survey data and an incentivised laboratory experiment, we demonstrate that while a majority of individuals (77.55 %) privately support whistleblowing, almost half (45.92 %) misperceive the majority's view. This misperception has significant behavioural consequences: even when individuals personally support whistleblowing, their likelihood of reporting decreases by more than 30 % when normative expectations are perceived to favour silence rather than reporting. A social information intervention revealing the distribution of peer support shows only modest effectiveness. While it marginally increases whistleblowing among those already personally favouring reporting, it does not affect those who personally oppose whistleblowing. Our findings demonstrate the boundaries of norm interventions in enforcement contexts and suggest that, specifically for whistleblowing, corrections of norm misperceptions should not be viewed as substitutes for conventional approaches, such as financial incentives or whistleblower protection, in promoting whistleblowing.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105189"},"PeriodicalIF":2.4,"publicationDate":"2025-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364196","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-18DOI: 10.1016/j.euroecorev.2025.105189
Behnud Mir Djawadi, Sabrina Plaß, Sabrina Loer
Social norms shape economic decision-making, yet individuals often systematically misperceive what others think and do, potentially leading to suboptimal social outcomes. While existing research has demonstrated the prevalence and consequences of norm misperceptions across various domains, the literature has remained surprisingly silent on norm-enforcing behaviours. Despite their important role in providing collective benefits, these behaviours are regularly avoided because they may be viewed ambivalently by peers and create personal costs and interpersonal conflict for the actor. Using whistleblowing as an example of a broader category of regulatory behaviour, we examine whether i) norm misperceptions inhibit enforcement actions in the form of whistleblowing, and ii) norm-based interventions can effectively induce a behavioural change in this challenging domain. Through survey data and an incentivised laboratory experiment, we demonstrate that while a majority of individuals (77.55 %) privately support whistleblowing, almost half (45.92 %) misperceive the majority's view. This misperception has significant behavioural consequences: even when individuals personally support whistleblowing, their likelihood of reporting decreases by more than 30 % when normative expectations are perceived to favour silence rather than reporting. A social information intervention revealing the distribution of peer support shows only modest effectiveness. While it marginally increases whistleblowing among those already personally favouring reporting, it does not affect those who personally oppose whistleblowing. Our findings demonstrate the boundaries of norm interventions in enforcement contexts and suggest that, specifically for whistleblowing, corrections of norm misperceptions should not be viewed as substitutes for conventional approaches, such as financial incentives or whistleblower protection, in promoting whistleblowing.
{"title":"“I don’t believe that you believe what I believe”: an experiment on misperceptions of social norms and whistleblowing","authors":"Behnud Mir Djawadi, Sabrina Plaß, Sabrina Loer","doi":"10.1016/j.euroecorev.2025.105189","DOIUrl":"10.1016/j.euroecorev.2025.105189","url":null,"abstract":"<div><div>Social norms shape economic decision-making, yet individuals often systematically misperceive what others think and do, potentially leading to suboptimal social outcomes. While existing research has demonstrated the prevalence and consequences of norm misperceptions across various domains, the literature has remained surprisingly silent on norm-enforcing behaviours. Despite their important role in providing collective benefits, these behaviours are regularly avoided because they may be viewed ambivalently by peers and create personal costs and interpersonal conflict for the actor. Using whistleblowing as an example of a broader category of regulatory behaviour, we examine whether i) norm misperceptions inhibit enforcement actions in the form of whistleblowing, and ii) norm-based interventions can effectively induce a behavioural change in this challenging domain. Through survey data and an incentivised laboratory experiment, we demonstrate that while a majority of individuals (77.55 %) privately support whistleblowing, almost half (45.92 %) misperceive the majority's view. This misperception has significant behavioural consequences: even when individuals personally support whistleblowing, their likelihood of reporting decreases by more than 30 % when normative expectations are perceived to favour silence rather than reporting. A social information intervention revealing the distribution of peer support shows only modest effectiveness. While it marginally increases whistleblowing among those already personally favouring reporting, it does not affect those who personally oppose whistleblowing. Our findings demonstrate the boundaries of norm interventions in enforcement contexts and suggest that, specifically for whistleblowing, corrections of norm misperceptions should not be viewed as substitutes for conventional approaches, such as financial incentives or whistleblower protection, in promoting whistleblowing.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105189"},"PeriodicalIF":2.4,"publicationDate":"2025-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364195","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-17DOI: 10.1016/j.euroecorev.2025.105152
Matthias Kaldorf , Joost Röttger
How does convenience yield interact with sovereign risk and the supply of government bonds? We propose a model of sovereign debt and default in which convenience yield arises because investors are able to pledge government bonds as collateral on financial markets. Consistent with euro area data, convenience yield is large if government bonds are (i) scarce due to investors’ high collateral valuation or (ii) safe due to a small collateral haircut being applied to them. Calibrating the model to the data, we demonstrate that convenience yield improves the fit of sovereign default models to developed economy bond market data, contributes substantially to the public debt-to-GDP ratio, and rationalizes prolonged periods of negative bond spreads – even in the presence of default risk. A large debt elasticity of investors’ collateral valuation is key to these results. In this setting, highly debt-elastic collateral haircuts exacerbate collateral scarcity in crisis times, raising government bond prices and eroding fiscal discipline.
{"title":"Convenient but risky government bonds","authors":"Matthias Kaldorf , Joost Röttger","doi":"10.1016/j.euroecorev.2025.105152","DOIUrl":"10.1016/j.euroecorev.2025.105152","url":null,"abstract":"<div><div>How does convenience yield interact with sovereign risk and the supply of government bonds? We propose a model of sovereign debt and default in which convenience yield arises because investors are able to pledge government bonds as collateral on financial markets. Consistent with euro area data, convenience yield is large if government bonds are <em>(i)</em> scarce due to investors’ high <em>collateral valuation</em> or <em>(ii)</em> safe due to a small <em>collateral haircut</em> being applied to them. Calibrating the model to the data, we demonstrate that convenience yield improves the fit of sovereign default models to developed economy bond market data, contributes substantially to the public debt-to-GDP ratio, and rationalizes prolonged periods of negative bond spreads – even in the presence of default risk. A large debt elasticity of investors’ collateral valuation is key to these results. In this setting, highly debt-elastic collateral haircuts exacerbate collateral scarcity in crisis times, raising government bond prices and eroding fiscal discipline.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105152"},"PeriodicalIF":2.4,"publicationDate":"2025-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364200","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-17DOI: 10.1016/j.euroecorev.2025.105183
Giovanni Andreottola , Barton E. Lee
Legislative hostage-taking — whereby the minority party refuses to pass a bipartisan policy unless another divisive or contentious policy also passes — has become a frequent occurrence, especially in American politics. We develop a dynamic model of legislative bargaining and electoral politics to provide insights into why hostage-taking occurs, which policies are held hostage, and which policies are demanded as ransom. Our key insight is that (credible) hostage-taking can only occur if the divisive policy benefits the voter. Furthermore, when hostage-taking occurs, it benefits the voter. However, these benefits are potentially tempered if parties can engage in policy design. In particular, hostage-taking can generate a perverse incentive for the majority party to engage in money burning to shield themself from the minority party’s hostage-taking.
{"title":"Legislative hostage-taking","authors":"Giovanni Andreottola , Barton E. Lee","doi":"10.1016/j.euroecorev.2025.105183","DOIUrl":"10.1016/j.euroecorev.2025.105183","url":null,"abstract":"<div><div>Legislative hostage-taking — whereby the minority party refuses to pass a bipartisan policy unless another divisive or contentious policy also passes — has become a frequent occurrence, especially in American politics. We develop a dynamic model of legislative bargaining and electoral politics to provide insights into why hostage-taking occurs, which policies are held hostage, and which policies are demanded as ransom. Our key insight is that (credible) hostage-taking can only occur if the divisive policy benefits the voter. Furthermore, when hostage-taking occurs, it benefits the voter. However, these benefits are potentially tempered if parties can engage in policy design. In particular, hostage-taking can generate a perverse incentive for the majority party to engage in money burning to shield themself from the minority party’s hostage-taking.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105183"},"PeriodicalIF":2.4,"publicationDate":"2025-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364198","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-17DOI: 10.1016/j.euroecorev.2025.105183
Giovanni Andreottola , Barton E. Lee
Legislative hostage-taking — whereby the minority party refuses to pass a bipartisan policy unless another divisive or contentious policy also passes — has become a frequent occurrence, especially in American politics. We develop a dynamic model of legislative bargaining and electoral politics to provide insights into why hostage-taking occurs, which policies are held hostage, and which policies are demanded as ransom. Our key insight is that (credible) hostage-taking can only occur if the divisive policy benefits the voter. Furthermore, when hostage-taking occurs, it benefits the voter. However, these benefits are potentially tempered if parties can engage in policy design. In particular, hostage-taking can generate a perverse incentive for the majority party to engage in money burning to shield themself from the minority party’s hostage-taking.
{"title":"Legislative hostage-taking","authors":"Giovanni Andreottola , Barton E. Lee","doi":"10.1016/j.euroecorev.2025.105183","DOIUrl":"10.1016/j.euroecorev.2025.105183","url":null,"abstract":"<div><div>Legislative hostage-taking — whereby the minority party refuses to pass a bipartisan policy unless another divisive or contentious policy also passes — has become a frequent occurrence, especially in American politics. We develop a dynamic model of legislative bargaining and electoral politics to provide insights into why hostage-taking occurs, which policies are held hostage, and which policies are demanded as ransom. Our key insight is that (credible) hostage-taking can only occur if the divisive policy benefits the voter. Furthermore, when hostage-taking occurs, it benefits the voter. However, these benefits are potentially tempered if parties can engage in policy design. In particular, hostage-taking can generate a perverse incentive for the majority party to engage in money burning to shield themself from the minority party’s hostage-taking.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105183"},"PeriodicalIF":2.4,"publicationDate":"2025-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364123","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-17DOI: 10.1016/j.euroecorev.2025.105152
Matthias Kaldorf , Joost Röttger
How does convenience yield interact with sovereign risk and the supply of government bonds? We propose a model of sovereign debt and default in which convenience yield arises because investors are able to pledge government bonds as collateral on financial markets. Consistent with euro area data, convenience yield is large if government bonds are (i) scarce due to investors’ high collateral valuation or (ii) safe due to a small collateral haircut being applied to them. Calibrating the model to the data, we demonstrate that convenience yield improves the fit of sovereign default models to developed economy bond market data, contributes substantially to the public debt-to-GDP ratio, and rationalizes prolonged periods of negative bond spreads – even in the presence of default risk. A large debt elasticity of investors’ collateral valuation is key to these results. In this setting, highly debt-elastic collateral haircuts exacerbate collateral scarcity in crisis times, raising government bond prices and eroding fiscal discipline.
{"title":"Convenient but risky government bonds","authors":"Matthias Kaldorf , Joost Röttger","doi":"10.1016/j.euroecorev.2025.105152","DOIUrl":"10.1016/j.euroecorev.2025.105152","url":null,"abstract":"<div><div>How does convenience yield interact with sovereign risk and the supply of government bonds? We propose a model of sovereign debt and default in which convenience yield arises because investors are able to pledge government bonds as collateral on financial markets. Consistent with euro area data, convenience yield is large if government bonds are <em>(i)</em> scarce due to investors’ high <em>collateral valuation</em> or <em>(ii)</em> safe due to a small <em>collateral haircut</em> being applied to them. Calibrating the model to the data, we demonstrate that convenience yield improves the fit of sovereign default models to developed economy bond market data, contributes substantially to the public debt-to-GDP ratio, and rationalizes prolonged periods of negative bond spreads – even in the presence of default risk. A large debt elasticity of investors’ collateral valuation is key to these results. In this setting, highly debt-elastic collateral haircuts exacerbate collateral scarcity in crisis times, raising government bond prices and eroding fiscal discipline.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105152"},"PeriodicalIF":2.4,"publicationDate":"2025-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364194","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-17DOI: 10.1016/j.euroecorev.2025.105178
Jagjit S. Chadha , Germana Corrado , Luisa Corrado , Ivan De Lorenzo Buratta
We investigate whether macroprudential policies support broader economic stability, particularly the welfare of households. For this purpose, we develop a New Keynesian business cycle model with agents subject to credit constraints and asset price fluctuations. The model differentiates between savers, who own firms and banks, and borrowers. The commercial bank sets the loan rate as a function of risk, specifically the value of housing collateral. We use occasionally binding constraints to capture non-linearities arising from the zero lower bound (ZLB) on the policy interest rate and the borrowing constraint faced by borrower households. We examine two macroprudential tools: a countercyclical loan-to-value (LTV) ratio and a bank reserve requirement. We find that macroprudential tools significantly reduce the volatility of consumption and lending cycles, and decrease both the expected frequency and severity of ZLB episodes. More generally, by attenuating the variance of the business cycle, particularly for borrower households, macroprudential tools reduce the need for monetary policy interventions.
{"title":"The role of macroprudential policy in times of trouble","authors":"Jagjit S. Chadha , Germana Corrado , Luisa Corrado , Ivan De Lorenzo Buratta","doi":"10.1016/j.euroecorev.2025.105178","DOIUrl":"10.1016/j.euroecorev.2025.105178","url":null,"abstract":"<div><div>We investigate whether macroprudential policies support broader economic stability, particularly the welfare of households. For this purpose, we develop a New Keynesian business cycle model with agents subject to credit constraints and asset price fluctuations. The model differentiates between savers, who own firms and banks, and borrowers. The commercial bank sets the loan rate as a function of risk, specifically the value of housing collateral. We use occasionally binding constraints to capture non-linearities arising from the zero lower bound (ZLB) on the policy interest rate and the borrowing constraint faced by borrower households. We examine two macroprudential tools: a countercyclical loan-to-value (LTV) ratio and a bank reserve requirement. We find that macroprudential tools significantly reduce the volatility of consumption and lending cycles, and decrease both the expected frequency and severity of ZLB episodes. More generally, by attenuating the variance of the business cycle, particularly for borrower households, macroprudential tools reduce the need for monetary policy interventions.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"181 ","pages":"Article 105178"},"PeriodicalIF":2.4,"publicationDate":"2025-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145475370","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-16DOI: 10.1016/j.euroecorev.2025.105154
Štěpán Mikula , Mariola Pytliková
This paper examines how improvements in air quality affect migration behavior. We exploit a natural experiment in the Czech Republic, where rapid desulfurization of coal-fired power plants in the 1990s led to a sharp reduction in SO2 pollution—from extremely high levels to below EU/WHO limits—without directly impacting economic activity. Using a difference-in-differences approach, we find that cleaner air reduced emigration from previously heavily polluted municipalities by 24% and increased net migration by 78%, with effects strongest in the most formerly polluted areas. The impact was particularly pronounced among highly educated individuals. Migration responses were strongest in municipalities with weaker social capital and fewer public amenities, suggesting that environmental improvements matter most where other local advantages are limited. In contrast, anti-emigration monetary subsidies—such as those offered during the socialist period in polluted areas—had no effect. Overall, our findings highlight the potential of environmental policies to support re-population and regional revitalization—especially when combined with investments in infrastructure and public services.
{"title":"Migratory responses to air pollution reduction: Evidence from large-scale desulfurization programme","authors":"Štěpán Mikula , Mariola Pytliková","doi":"10.1016/j.euroecorev.2025.105154","DOIUrl":"10.1016/j.euroecorev.2025.105154","url":null,"abstract":"<div><div>This paper examines how improvements in air quality affect migration behavior. We exploit a natural experiment in the Czech Republic, where rapid desulfurization of coal-fired power plants in the 1990s led to a sharp reduction in SO<sub>2</sub> pollution—from extremely high levels to below EU/WHO limits—without directly impacting economic activity. Using a difference-in-differences approach, we find that cleaner air reduced emigration from previously heavily polluted municipalities by 24% and increased net migration by 78%, with effects strongest in the most formerly polluted areas. The impact was particularly pronounced among highly educated individuals. Migration responses were strongest in municipalities with weaker social capital and fewer public amenities, suggesting that environmental improvements matter most where other local advantages are limited. In contrast, anti-emigration monetary subsidies—such as those offered during the socialist period in polluted areas—had no effect. Overall, our findings highlight the potential of environmental policies to support re-population and regional revitalization—especially when combined with investments in infrastructure and public services.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"181 ","pages":"Article 105154"},"PeriodicalIF":2.4,"publicationDate":"2025-10-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145340945","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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