Summary of All Sessions
Click here for an index of all participants

#	Date/Time	Title/Location	Papers
1	July 14, 2026 8:15-16:00	Registration     Location: Foyer	0
2	July 14, 2026 8:45-9:00	Opening     Location: Audi Max (HG F 30)	0
3	July 14, 2026 9:00-11:00	Political Economy I: EU Policy     Location: H GE 21	3
4	July 14, 2026 9:00-11:00	Banking and Finance     Location: H GE 33.5	4
5	July 14, 2026 9:00-11:00	Climate I: Macro Impact     Location: H GE 33.3	4
6	July 14, 2026 9:00-11:00	Development I: Public Policy     Location: H GE 22	4
7	July 14, 2026 9:00-11:00	International I: Trade Policy     Location: H GE 23	4
8	July 14, 2026 9:00-11:00	Macro I: Inflation     Location: H GE 33.1	4
9	July 14, 2026 11:00-11:30	Coffee break     Location: Foyer Audimax	0
10	July 14, 2026 11:30-12:30	Keynote Lecture I: “Do Economists Give Good Environmental Policy Advice? Externalities in a Broader Economic Context” — Lint Barrage (ETH Zurich and CEPR)     Location: Audi Max (HG F 30)	0
11	July 14, 2026 12:30-13:30	Lunch     Location: Foyer Audimax	0
12	July 14, 2026 13:30-15:30	Political Economy II: Institutions and Public Opinion     Location: H GE 21	4
13	July 14, 2026 13:30-15:30	Fiscal I: Public Debt and the Euro     Location: H GE 33.5	3
14	July 14, 2026 13:30-15:30	Climate II: Inequality and Policy     Location: H GE 33.3	3
15	July 14, 2026 13:30-15:30	Development II: Labor Markets     Location: H GE 22	4
16	July 14, 2026 13:30-15:30	International II: Geopolitics and Sanctions     Location: H GE 23	4
17	July 14, 2026 13:30-15:30	Macro II: Heterogeneity     Location: H GE 33.1	4
18	July 14, 2026 15:30-16:00	Coffee break     Location: Foyer Audimax	0
19	July 14, 2026 16:00-18:00	Fiscal II: Public Finance and Health     Location: H GE 33.5	4
20	July 14, 2026 16:00-18:00	Political Economy III: Voting and Institutions     Location: H GE 21	3
21	July 14, 2026 16:00-18:00	Climate III: Economic Policy     Location: H GE 33.3	4
22	July 14, 2026 16:00-18:00	Immigration I: Attitudes     Location: H GE 22	4
23	July 14, 2026 16:00-18:00	International III: Supply Chains     Location: H GE 23	4
24	July 14, 2026 16:00-18:00	Macro III: Fiscal Policy     Location: H GE 33.1	4
25	July 14, 2026 20:00-22:00	Dinner     Location: Dozentenfoyer	0
26	July 15, 2026 8:30-11:00	Registration     Location: Foyer	0
27	July 15, 2026 9:00-11:00	Political Economy IV: Conflict and Security     Location: H GE 21	3
28	July 15, 2026 9:00-11:00	Climate IV: Industrial Policy     Location: H GE 33.3	4
29	July 15, 2026 9:00-11:00	Immigration II: Political Economy     Location: H GE 22	3
30	July 15, 2026 9:00-11:00	International IV: AI and Globalization     Location: H GE 23	3
31	July 15, 2026 9:00-11:00	Macro IV: Monetary Policy     Location: H GE 33.1	4
32	July 15, 2026 11:00-11:30	Coffee break     Location: Foyer Audimax	0
33	July 15, 2026 11:30-12:30	Keynote Lecture II: “Is There a Peace Formula?” — Dominic Rohner (Geneva Graduate Institute and CEPR)     Location: Audi Max (HG F 30)	0
34	July 15, 2026 12:30-13:30	Lunch     Location: Foyer Audimax	0
35	July 15, 2026 14:00-16:00	Development III: Foreign Aid     Location: H GE 23	3
36	July 15, 2026 14:00-16:00	Political Economy VI: Incentives and Information     Location: H GE 33.3	3
37	July 15, 2026 14:00-16:00	Political Economy V: Inequality and Redistribution     Location: H GE 21	4
38	July 15, 2026 14:00-16:00	Immigration III: Integration     Location: H GE 22	4
39	July 15, 2026 14:00-16:00	Macro V: Frictions     Location: H GE 33.1	4

 

39 sessions, 103 papers, and 0 presentations with no associated papers

The 8th International Conference on European Economics and Politics
Detailed List of Sessions

Session 1: Registration July 14, 2026 8:15 to 16:00 Location: Foyer
Session 2: Opening July 14, 2026 8:45 to 9:00 Location: Audi Max (HG F 30)
Session 3: Political Economy I: EU Policy July 14, 2026 9:00 to 11:00 Location: H GE 21
1. I’ll be there for you: natural disasters, aid, and trust in public institutions Abstract This paper examines whether receiving financial assistance from the European Union (EU) after natural disasters during early adulthood shapes individuals’ subsequent confidence in the EU. We focus on the European Solidarity Fund (EUSF) and combine individual-level survey data with information on disasters and EUSF interventions over the 2002–2018 period. Exploiting the conditional exogeneity of natural disasters and geocoded data on their subnational scope, we show that EUSF aid increases citizens’ confidence in the EU. The effect is stronger in regions with lower-quality local governance and among more risk-averse individuals. Finally, we show that the EUSF mitigates the economic downturns that typically follow disasters, providing evidence of both political and economic returns to EU-level solidarity.
By Guglielmo Barone; University of Bologna    Giulia Romani; Joint Research Centre
Presented by: Giulia Romani, Joint Research Centre
2. Hear Me Out : Lobbying Frames and Policy Outcomes in the European Union. Abstract This paper studies how argumentation strategies (framing) affect lobbying success in policy making using evidence from the European Commission. We create a novel dataset of position papers sent within the public consultation stage of upcoming regulations and apply natural language processing (NLP) techniques to measure their influence on policy-makers decisions. Combined with structural topic modeling (STM), we find that emphasizing technical regulatory arguments is associated with a greater influence than advancing arguments centered on ethical or broad global concerns in the policy-making arena. We also find that most influential actors are not businesses but public authorities, academic/research institutions and citizens. Thus we argue that influence is not solely based on stakeholders type but on their capacity to provide critical resources to decision-makers. While technical and regulatory frames provide the expert knowledge the Commission requires to justify its decisions, closer alignment with public authorities, academic/research institutions and citizens rather than firms palliates the institution democratic deficit through representative legitimacy.
By Edgar Jimenez Bedolla    Isac Olave Cruz; NEOMA Business School
Presented by: Edgar Jimenez Bedolla, Paris Dauphine-PSL University
3. The Tyranny of Corporate Control: Subsidies and Ownership Structure Abstract This paper provides causal estimates of the long-run impact of European R&D grants to small and medium-sized enterprises and shows that the effects are mediated by recipients’ ownership structure. We exploit a quality label awarded by the European Commission to high-scoring R&D grant proposals that could not be funded due to budget constraints and find that subsidies have a positive and significant long-run impact on productivity when the recipient has no corporate shareholder or is owned by individuals. In contrast, the effect is at best muted for controlled subsidiaries owned by other corporations. The mediating role of the ownership structure is not driven by firm size, and the results are robust across a battery of alternative performance measures.
By Philipp-Leo Mengel; Bocconi University    Giorgio Presidente; Bocconi University    Silvan Hofer; Bocconi University
Presented by: Silvan Hofer, Bocconi University
Session 4: Banking and Finance July 14, 2026 9:00 to 11:00 Location: H GE 33.5
1. The Capital Asset Pricing Model as Modern Macroeconomics: Theory and Policy Abstract According to macroeconomic theory, capital accumulation today generates supply tomorrow. Will that supply match tomorrows demand? In this paper we study this question in a multi-good and risky environment with an efficient financial system. Towards this end we develop a model based on the Capital Asset Pricing Model (CAPM), Rational Expectations, and the Cobb-Douglas Production Function. Within this framework we show how the financial system in the form of CAPM allocates capital resources across the different sectors in the economy so as to maximize the ratio of expected returns to a measure of risk like the standard deviation of returns for some initial real stock of capital in time period t=0. In t=1 a Cobb-Douglas Production Function subject to a random productivity/finance shock determines actual output and the structure of production. The link between t=0 and t=1 is rational expectations, the assumption that the subjective probability distribution in t=0 on which real investment decisions are made is equivalent to the objective distribution generating the actual returns to capital in t=1. Then via constant factor in the Cobb-Douglas function we obtain aggregate output in t=1. If actual output in t=1 is more (or less) than expected in t=0, we have a cyclical expansion (or recession)_the magnitude of which depends on the spread of the subjective probability distribution in t=0. With this model we discuss: 1) monetary policy under a banking system with legal tender Central Bank digital accounts (CBDC) for all; 2) an all-inclusive transaction tax to substitute for the European present tax system, and 3) the tradeoff between economic growth and the cyclical volatility of the economy.
By Robert Krainer; University of Wisconsin–Madison
Presented by: Robert Krainer, University of Wisconsin–Madison
2. Demand for Dollars: Evidence from Survey Expectations Abstract We study the determinants of US dollar demand across market participants and traded instruments using survey-based exchange rate and macroeconomic expectations. Leveraging granular foreign exchange trading data, we show that forward-looking expectations accurately predict both currency returns and flows. Specifically, we show that the predictability of currency returns at long-horizons can be attributed to price pressure that originates from investors whose trading activity is aligned with survey expectations. To empirically establish the relevance of survey-based expectations for currency flows, we present three results: First, end-user investors increase their dollar holdings when they expect the US dollar to appreciate, whereas dealer banks supply dollar liquidity. Second, cross-sectionally, investors rebalance along the factor structure of currency risk into the US dollar following an expected dollar appreciation. Third, the predictive power of survey forecasts weakens when uncertainty or forecaster disagreement rises. Overall, our findings demonstrate that long-horizon expectations accurately predict dollar demand across spot, swap, and forward currency markets. To rationalise these empirical findings, we develop a model of currency demand.
By Benedikt Ballensiefen; University of Cologne    Fabricius Somogyi; Northeastern University, DMSB    Hannah Winterberg; University of Cologne
Presented by: Fabricius Somogyi, Northeastern University, DMSB
3. Macroprudential policy and French asset market responses: evidence from an ARDL Bounds Testing approach Abstract This paper aims to investigate the effects of macroprudential policy measures on asset price dynamics, focusing on the banking sector stock market and residential house prices in France. Using quarterly data for the period 2000Q3 to 2024Q3, the anlaysis employs an Autoregressive Distributed Lag Bounds Testing framework to examine both the short and long-run relationships between macroprudential policy and the two markets. The empirical results suggest that the effects of macroprudential policy are not uniform across markets. While tighter macroprudential measures tend to reduce bank stock prices in the short run, the relationship with house price dynamics appears more complex.
By Andrea Stoian; INFER
Presented by: Andrea Stoian, INFER
4. Banking competition, short-term finance and loan rates pass-through Abstract We explore the interplay between the number of banks and non-linear resource costs in a setting in which banks can hold liquid assets and borrow by issuing liquid liabilities. We analyze the interactions between dominant banks that have easier access to liquid market liabilities and numerous banks in a competitive fringe that rely more extensively on deposits. These dominant banks act as Stackelberg leaders vis-à-vis the fringe banks. In a low-interest-rate environment dominant banks gain market share, and innovations in short-term interest rates induce stronger portfolio responses from dominant banks than from fringe banks.
By Enzo Dia; Università degli Studi di Milano-Bicocca
Presented by: Enzo Dia, Università degli Studi di Milano-Bicocca
Session 5: Climate I: Macro Impact July 14, 2026 9:00 to 11:00 Location: H GE 33.3
1. Climate Uncertainty Abstract TBA
By Claudio Morana; Università di Milano-Bicocca
Presented by: Claudio Morana, Università di Milano-Bicocca
2. The Long-Run Effects of Temporary Oil Supply Disruptions in European Countries Abstract This paper provides evidence that supply-driven oil price increases depress GDP for more than a decade after oil prices have returned to their pre-shock level. These hysteresis effects are driven by two channels: a contraction in investment, and a steady decline in labour force participation. In contrast, oil price decreases do not produce sustained economic gains, indicating asymmetric effects. Comparing these dynamics to those following persistent demand shocks, I find that these hysteresis effects are caused by similar mechanisms.
By Marthe Mareels; Ghent University
Presented by: Marthe Mareels, Ghent University
3. Stranger Weather: Local Extremes, Shifting Baselines, and German Regional Economic Growth Abstract This paper examines how locally defined weather anomalies and intra-annual climate variability affect regional economic growth in an advanced temperate economy. Using panel data for 400 German counties over 1995-2019, we construct county-specific measures of temperature and precipitation extremes based on both fixed historical benchmarks and rolling reference distributions. A two-way fixed-effects framework with region-specific trends identifies short-run growth responses to deviations from local climatic conditions while controlling for mean climate and higher-order moments. Temperature anomalies -- both unusually hot and unusually cold realizations -- are systematically associated with lower GDP per capita growth, and these effects are robust to alternative definitions of extremes. Precipitation anomalies do not significantly affect aggregate growth, although sectoral estimates reveal meaningful heterogeneity. Intra-annual temperature variability is positively associated with growth, highlighting regional context in distribution-sensitive damage estimation. The findings demonstrate that accounting for local extremes and evolving climatic baselines refines empirical assessments of climate-related growth effects.
By Sukanya Mukherjee; Institute of Economics Research in Halle (Saale)    Oliver Holtemöller; Halle Institute for Economic Research (IWH)
Presented by: Sukanya Mukherjee, Institute of Economics Research in Halle (Saale)
4. Energy and Monetary Policy in the Euro Area Abstract We study the role of energy prices and open economy channels for inflation dynamics and monetary policy transmission in the euro area. We develop and estimate a small open economy DSGE model with nominal rigidities, household heterogeneity, and energy used both in consumption and production. Energy prices are modeled as imported endowments whose fluctuations affect inflation directly through consumer prices and indirectly through firms' marginal costs. Estimating the model on euro area and U.S. data from 1999 to 2023, we find that energy price shocks are a dominant driver of headline inflation, especially at short horizons. Monetary policy responses are substantially amplified by the exchange rate, leading to stronger inflation stabilization at relatively low output costs. Counterfactual experiments show that ignoring energy and open economy channels significantly distorts the policy trade-off. Our results underscore the importance of explicitly modeling energy and exchange rates for understanding recent euro area inflation and the conduct of monetary policy.
By Alice Albonico; Università di Milano-Bicocca    Guido Ascari; University of Pavia and De Nederlandsche    Alexandre Carrier; European Central Bank    Qazi Haque; Adelaide University    Kostas Mavromatis; De Nederlandsche Bank    Andra Smadu; De Nederlandsche Bank (DNB)
Presented by: Alice Albonico, Università di Milano-Bicocca
Session 6: Development I: Public Policy July 14, 2026 9:00 to 11:00 Location: H GE 22
1. Unequal Survival: The Effect of Mortality Decline on Income Inequality Abstract This study investigates the impact of the substantial mortality declines observed globally since 1960 on income inequality within countries. Exploiting a novel source of exogenous variation in mortality, we find that lower mortality has significantly increased inequality. We identify two primary mechanisms driving this result. First, mortality declines have primarily benefited low-income individuals, increasing their relative share of the population without corresponding gains in productivity. This shift has directly contributed to rising inequality. Second, because health gains are marginal, some individuals survive in a state of limited functional independence and require ongoing care. This care is predominantly provided informally, reducing labor market engagement and indirectly affecting earnings among caregivers. Together, these mechanisms offer new insights into the structural drivers of inequality both within and across countries.
By Saeed Khodaverdian; University of Hamburg
Presented by: Saeed Khodaverdian, University of Hamburg
2. The Political Economy of Targeting: An Empirical Assessment of Poland’s Family 500+ Programme Abstract Questions surrounding the allocation and design of social transfers have long intrigued scholars and policymakers in the field of political economy. While transfers targeting those most in need aim to maximize the value of their benefits and improve their livelihood, the political economy of targeting posits that such restrictive eligibility criteria might dampen general social support. This study delves into the social and political sustainability of social protection systems and explores whether and to what extent a broadening of social protection programs impacts society's redistributive and tax preferences. Using longitudinal individual-level data from Poland's Panel Survey, we examine the effects of the 2016 transition from income-tested to quasi-universal child benefits on redistributive, tax, and political preferences. Contrary to expectations from political economy models, the findings reveal nuanced responses among beneficiaries and non-beneficiaries. Beneficiaries do not become more supportive of redistribution, and their political and tax preferences remain similar to those of overall non-beneficiaries. A specific group of non-beneficiaries, the ones with children but excluded due to income requirements, react to the policy change by retaliating against the incumbent party and preferring a tax schedule that shifts the burden to other income groups. Overall, the study advances our understanding of the political economy of targeting social transfers and provides insights for policymakers navigating the trade-offs between targeting efficiency and societal endorsement in welfare policy design.
By Stefanie Roost; United Nations University (UNU-MERIT) / Maastricht University (UM)
Presented by: Stefanie Roost, United Nations University (UNU-MERIT) / Maastricht University (UM)
3. Minimum Wage and Labour Market Dynamics in Pakistan Abstract Public support for raising minimum wages as a policy response to economic inequality is increasing; however, empirical evidence from highly informal and weakly regulated labour markets remains limited. This study estimates the impact of minimum wage increases on earnings and hours worked in Pakistan, drawing on 21 waves of nationally representative Labour Force Survey data between 1992 and 2021. By leveraging national time variation in statutory minimum wages and pre-policy district exposure, proxied by the proportion of workers earning below the minimum wage prior to policy changes, we find that increases in the minimum wage are associated with statistically significant but modest gains in real hourly earnings, with stronger wage pass-through observed in local labour markets with higher initial exposure. The benefits are disproportionately greater for male workers; however, the policy has achieved only limited and uneven progress in reducing gender pay disparities. On the intensive margin, minimum wage increases are associated with reductions in hours worked, particularly among women. This pattern is consistent with adjustment through hours in segments characterised by part-time work and weaker compliance. Overall, the findings indicate that minimum wage policy can increase earnings in low-wage areas under conditions of partial compliance, yet has limited capacity to address persistent structural gender inequality in highly informal contexts. These results underscore the need for stronger enforcement and complementary, gender-sensitive labour market interventions.
By Aicha Kharazi; University of Exeter    Saite Lu; Emmanuel College, University of Cambridge    Ghulam Mustafa; University of Derby
Presented by: Ghulam Mustafa, University of Derby
4. Liquidity Shocks, Crime Perceptions and Household Financial Stability: Theory and Evidence from 2019 Kenyan Demonetisation Abstract The transition from cash-based to digital financial systems is a defining feature of economic development. While digital finance improves institutional capacity, policy interventions designed to force this transition—such as demonetisation—often yield poorly understood welfare impacts. This paper examines Kenya’s 2019 demonetisation through a uniquely combined empirical and theoretical lens. Using a difference-in-differences design with Afrobarometer survey data, we document that demonetisation significantly accelerated mobile money adoption and improved crime perceptions, but imposed severe, asymmetric income shocks on cash-dependent households. To rationalise these heterogeneous findings, we construct a Two-Agent New Keynesian (TANK) model featuring a cash-in-advance constraint and an informal sector subject to a working capital constraint. The model reveals two novel mechanisms. First, demonetisation triggers a “liquidity vacuum” as informal firms hoard cash to survive, causing a severe aggregate recession. Second, material welfare calculations demonstrate that digital infrastructure dictates economic resilience; rural cash-only households suffer the most catastrophic lifetime welfare losses because cash and digital finance remain technological complements rather than substitutes in agricultural economies. These findings underscore that the success of monetary modernisation hinges crucially on pre-existing digital institutional capacity.
By Jiao Wang; University of Sussex
Presented by: Jiao Wang, University of Sussex
Session 7: International I: Trade Policy July 14, 2026 9:00 to 11:00 Location: H GE 23
1. Escaping Protectionism Abstract As global trade barriers escalate, understanding their effects is central. Standard quantitative trade frameworks assume full enforcement, yet in practice, this assumption is often violated through illegal evasion. Linking Russian transaction-level customs records to a new detailed dataset on EU export bans, we document that at least 56% of pre-war exports of sanctioned products from coalition countries to Russia continued to enter via third-country transshipment. To quantify the consequences of evasion, we introduce a model featuring endogenous transshipment, calibrated to product-level trade flows. Our analysis yields three main insights. First, we estimate that sanctions increased effective trade costs from coalition countries to Russia by about 27% on average, well below the prohibitive levels implied by full enforcement. This observed level of evasion reduces Russia’s real income loss by 22% relative to the full-enforcement scenario. Second, pre-shock (“fundamental”) trade costs are highly predictive of which countries become transshipment hubs. However, fundamental trade costs cannot fully explain the observed decline in imports, as higher transportation costs alone would reduce the real income loss by 55% relative to full enforcement, suggesting an additional force constraining transshipment. Third, coalition size raises Russia’s income losses both directly via restricted exports and indirectly by limiting transshipment opportunities.
By David Torun; University of Zurich
Presented by: David Torun, University of Zurich
2. Noisy tariff announcements Abstract We investigate the role of noise during the “Liberation Day” tariff announcement and the subsequent suspension announced shortly thereafter. To this end, we use a two-country New Keynesian DSGE model with an information friction to assess the extent to which market participants and forecasters interpreted the announced tariffs as likely to take effect once the suspension period ended. In our setup, agents must infer whether future tariffs are genuinely expected to be levied or instead largely reflect noise. Comparing model-implied impulse response functions with GDP-growth forecast changes in April 2025, we find that the tariffs announced and then suspended around “Liberation Day” were perceived predominantly as noise generated by the U.S. administration. Next, we conduct counterfactual simulations that vary the precision of the tariff signal. Fully credible announcements would imply expected GDP responses in the United States and the rest of the world that are roughly four to five times larger than those implied by the survey evidence.
By Michał Łesyk    Grzegorz Wesołowski; University of Warsaw
Presented by: Michał Łesyk, Warsaw School of Economics
3. “Preferential” Trade Agreements? Abstract Preferential trade agreements (PTAs) are designed to grant member countries tariff advantages over most-favored-nation (MFN) rates, yet these preferences often fail to materialize in practice. In many agreements, tariffs are phased out gradually from the MFN baseline prevailing at the time of negotiation. However, governments may subsequently reduce MFN tariffs unilaterally. When such reductions fall below the scheduled preferential tariff path, MFN rates can undercut preferential rates, temporarily eliminating the intended tariff advantage. Positive preference margins are only restored as implementation of the agreement progresses. We document that this mechanism is widespread: half of the 356 PTAs notified to the WTO do not adjust preferential rates in response to changes in MFN tariffs. Using transaction-level import data from Colombia during the implementation of its PTAs with the United States and the EU, we find that 35% of imports from the United States and 45% from the EU that were expected to benefit from the agreements did not receive effective preferences in the initial phase of implementation due to unilateral MFN reductions. We use a triple-difference framework to compare imports in products with zero or negative preference margins to imports of the same products from the rest of the world. We find that imports in affected products decline following PTA implementation. For example, in products where preferences were effectively absent, U.S. imports were, on average, 34% lower than comparable imports from other countries. We show that the core assumption that PTAs offer lower, preferential rates often does not hold in practice. Thus, our findings have important implications for how the gains from PTAs are measured and for the political economy of preferential trade liberalization.
By Sebastian Ahlstich; Copenhagen Business School    Jan Stuckatz; Copenhagen Business School
Presented by: Sebastian Ahlstich, Copenhagen Business School
4. The Design and Effect of Tariff Retaliation: Evidence from the European Union Abstract We show that the EU’s 2018 retaliation against US steel and aluminum tariffs targeted goods with low US import dependence and high substitutability. The retaliation had two complementary outcomes: First, for the majority of tariffed goods, the US import share declined notably and remained below pre-2018 levels even after the retaliatory tariffs were lifted, reflecting asymmetric effects of tariffs on trade diversion. Second, although the retaliatory tariffs were instantly and fully passed through to EU importers, we find no inflationary effect on domestic European producer or consumer prices, not even for the most exposed country-product categories.
By Ece Fisgin; Federal Reserve Board of Governors    Johannes Fleck; Federal Reserve Board of Governors    Keith Richards; Federal Reserve Board of Governors
Presented by: Johannes Fleck, Federal Reserve Board of Governors
Session 8: Macro I: Inflation July 14, 2026 9:00 to 11:00 Location: H GE 33.1
1. Inflation and pandemic in Spain Abstract This paper shows what the main inflation macroeconomics drivers in Spain are. Even if there has been a less than two-digit inflation in the last three decades, it can be emphasized the fact that the inflation rate has raised and declined rapidly in recent years because of its fundamental determinants. Main reasons behind the behaviour of the consumption price index are related to higher prices in the energy sector and a higher government expenditure, particularly after the post-pandemic economy re-opening. Proxy variables such as oil prices free on board in the European Brent market, the 12 months Euribor interest rate of the Economic and Monetary Union, the nominal gross domestic product, the government expenditure of the public administration, and fiscal deficits in terms of the gross domestic product are those variables in which the consumer price index depends on. Changes on interest rates have managed to stabilized inflation rates once again, thereby diminishing the percentage change in the consumer price index.
By Leonardo Augusto Tariffi; University of Barcelona / Pompeu Fabra University
Presented by: Leonardo Augusto Tariffi, University of Barcelona e Pompeu Fabra University
2. Natural disasters and inflation crises in Europe Abstract This paper investigates two related questions namely whether inflation crises in Europe are associated with natural disasters, and how long such crises tend to persist. We identify inflation crises following Reinhart & Rogoff's (2011) approach, defining a crisis episode as any period in which the monthly inflation rate exceeds 20% for at least two consecutive months. We then model economic integration as endogenous to the likelihood of entering an inflation crisis. In addition, we apply Probit based Early Warning Systems to forecast future inflation crises, and we estimate crisis duration using Kaplan–Meier survival functions and a Tobit framework. Using monthly data for 17 European countries from January 1990 to December 2024, we find evidence that additional days of natural disasters significantly increase the probability of an inflation crisis. Further analyses show that natural disasters are also associated with longer crisis durations. Indeed, in countries affected by natural disasters, the probability that an inflation crisis persists for 21 months reaches 70%. Moreover, each additional day of natural disaster exposure extends the expected duration of inflation crises.
By Amétépé Egbétoké; University of Picardie Jules Verne
Presented by: Amétépé Egbétoké, University of Picardie Jules Verne
3. Managing the chaos: policy challenges in a hyperinflationary environment Abstract We study how informational frictions constrain discretionary exchange rate policy in economies where nominal anchors are the primary tool for managing inflation expectations. Using a reduced-form framework in which information salience shapes expectation formation, we examine Venezuela's 2018–2019 hyperinflation — an extreme but instructive case where institutional constraints on policy were largely absent and informational frictions became the binding limit on discretion. We document near-complete passthrough from official FX to domestic prices within three months, confirming the exchange rate's role as a critical nominal anchor. Combining novel high-frequency consumer price data with media attention proxies, we find that spikes in demand for uncensored information systematically predict official FX depreciations, while state propaganda cannot fully offset this disciplining effect. This result survives controlling for black-market FX movements and major political events, isolating an independent information channel. Our findings suggest that informational constraints on discretionary policy operate independently of formal institutional accountability — with implications for how governments manage expectations through nominal anchors.
By Andrea Boitani; Università Cattolica    Catalin Dragomirescu-Gaina; Universita Cattolica del Sacro Cuore    Andrea Monticini; Università Cattolica del Sacro Cuore Milano
Presented by: Catalin Dragomirescu-Gaina, Universita Cattolica del Sacro Cuore
4. Inflation Stabilization and Economic Development Abstract This paper studies optimal monetary policy in a two-sector New Keynesian model with subsistence food consumption and imperfect labor mobility across sectors. These features, relevant for developing economies, alter the welfare weights on sectoral inflation and create a wedge between natural and welfare-relevant output. Using a second-order approximation to aggregate welfare, the paper characterizes the resulting policy trade-offs. Limited labor mobility breaks the divine coincidence: optimal policy cannot fully stabilize both core inflation and the welfare-relevant output gap. Food-sector productivity shocks therefore generate a trade-o¤ between inflation and output stabilization. As economies develop and the steady-state share of food consumption declines, this trade-o¤ becomes quantitatively smaller, and full core inflation stabilization emerges as approximately optimal. The paper also studies implementable interest rate rules. CPI-based Taylor rules perform poorly, increasing equilibrium indeterminacy and reducing welfare. In contrast, a rule responding to core inflation and the relative price of food ensures determinacy and can closely approximate optimal policy, with the optimal response to food prices declining with economic development and labor mobility.
By Marco Airaudo; Drexel University, LeBow Business School    Rafael Portillo; International Monetary Fund    Luis-Felipe Zanna; International Monetary Fund
Presented by: Marco Airaudo, Drexel University, LeBow Business School
Session 9: Coffee break July 14, 2026 11:00 to 11:30 Location: Foyer Audimax
Session 10: Keynote Lecture I: “Do Economists Give Good Environmental Policy Advice? Externalities in a Broader Economic Context” — Lint Barrage (ETH Zurich and CEPR) July 14, 2026 11:30 to 12:30 Location: Audi Max (HG F 30)
Session 11: Lunch July 14, 2026 12:30 to 13:30 Location: Foyer Audimax
Session 12: Political Economy II: Institutions and Public Opinion July 14, 2026 13:30 to 15:30 Location: H GE 21
1. Toxic Winds: Mainstream Inertia, Voters' Discontent, and Challenger Success Abstract This paper investigates how voters react to persistent inaction of mainstream parties in government. We study the illegal burial, dumping, and burning of toxic industrial waste perpetrated by criminal organizations in Southern Italy since the late 1980s. We combine plausibly exogenous geographical variation in exposure to pollutants stemming from historical wind trajectories with the sudden release of information about the exact geo-location of contaminated sites. Difference-in-differences estimates show that, after the information shock, municipalities exposed to toxic winds experienced a persistent decline in turnout of 5.8 percentage points relative to non-exposed municipalities. Using individual-level survey data, we also find that exposure to pollutants reduces trust in politics, parties and the national parliament. Finally, we show that exposure to toxic winds increases the vote share of the challenger Five Star Movement (FSM) in national elections, who actively contrasted mainstream parties’ inaction on the issue.
By Davide Cipullo; Università Cattolica del Sacro Cuore    Massimiliano Onorato; University of Bologna    Gianmario Pelleschi; Università Cattolica del Sacro Cuore
Presented by: Gianmario Pelleschi, Università Cattolica del Sacro Cuore
2. From Modi's India to Westminster: How Hindu Nationalism Shapes Anti-Muslim Rhetoric Abroad Abstract In today's connected world, migrants remain tied to their origins in ways that allow events abroad to reverberate within host-country politics. We ask whether homeland shocks that target a diaspora's identity can reshape political rhetoric in host countries. To answer this, we assemble a panel of UK parliamentary speeches from 2013 to 2024 and link them to weekly records of religious violence in India, exploiting the timing of violent events. We find that anti-Hindu violence in India leads MPs in Westminster from constituencies with larger Hindu populations to use significantly more anti-Muslim rhetoric. The effect intensifies after the rise of Hindu nationalism in India and holds regardless of whether Hindus are victims or initiators of violence. These rhetorical shifts reflect constituency pressures, donor influence, and symbolic alignment with diaspora concerns, rather than electoral returns. Our findings highlight how transnational ties can transmit homeland ideologies into host-country politics, underscoring that debates over migration and integration cannot be understood purely through domestic dynamics.
By Apurav Yash Bhatiya; University of Birmingham    Andres Martignano; University of Nottingham    Valeria Rueda; University of Nottingham
Presented by: Andres Martignano, University of Nottingham
3. Do Politicians Misread the Climate Consensus? Correcting Misperceptions with Social Norm Information Abstract Democratic responsiveness depends on politicians’ accurate perceptions of public opinion. Yet policymakers may misread the extent of public consensus on salient issues such as climate change. We examine whether local politicians underestimate public support for climate action and whether correcting these misperceptions affects their policy preferences. We field parallel survey experiments in Italy with a representative sample of approximately 4,000 citizens and nearly 400 municipal mayors. Respondents are randomly assigned to receive information about either behavioral norms (what others do) or injunctive norms (what others believe should be done) regarding climate action. We document substantial pluralistic ignorance: both citizens and mayors systematically underestimate others’ willingness to contribute financially to climate mitigation and the breadth of support for climate policies, with mayors misperceiving the climate consensus despite their higher baseline trust in climate science and stronger pro-environmental orientations. Correcting these misperceptions has meaningful political effects. Information about social norms increases support for climate policies, but responses differ across groups. Citizens respond primarily to behavioral norm information, whereas mayors react more strongly to injunctive norms, but only when evaluating local climate initiatives; no effects are observed among mayors for global climate policies. These findings highlight how elite misperceptions of public opinion can shape policy support and demonstrate the role of social norm information in influencing both mass and elite preferences.
By Piera Bello; Università degli studi di Bergamo    Vincenzo Galasso; Università Bocconi    Luigi Moretti; University of Bergamo
Presented by: Luigi Moretti, University of Bergamo
4. How to Silence Researchers? Evidence from Illiberal Policies inHungary Abstract We explore how contemporary attacks against academic freedom and illiberal policies have detrimental effects on innovation, focusing on academic research. Using rich national research repositories and international bibliometric data, we show that academics’ research trajectories diverge sharply depending on their perceived political alignment and investigates the mechanisms explaining this difference. Academics perceived as political opponents experience large declines both in publication output and collaboration networks, each falling by about one quarter relative to pre-shock levels. Researchers working on politically sensitive topics are also disproportionately affected: they experience a 10% decline in total publications and a 30% decline in publications in top journals. Targeted researchers experience a loss of co-authors and are likely to shift their research agendas in response to these threats. Finally, we conduct cross-country comparisons at the individual level to estimate the global effect of the declining academic freedom. We find that Hungarian researchers increasingly real locate their publication efforts toward lower-ranked national-language journals and are more likely to leave the country altogether.
By Luc Paluskiewicz; Paris School of Economics, Collège de France
Presented by: Luc Paluskiewicz, Paris School of Economics, Collège de France
Session 13: Fiscal I: Public Debt and the Euro July 14, 2026 13:30 to 15:30 Location: H GE 33.5
1. Reversed Synthetic Control: Evaluating Sweden’s Counterfactual Euro Membership Abstract This paper develops a framework for evaluating counterfactual policy participation when treatment has not occurred. While existing studies estimate the realised effects of euro adoption or simulate hypothetical membership using structural models, existing studies rarely combine policy simulation with empirically identified causal effect paths in a unified framework. We propose the Reversed Synthetic Control (RSC) method, which separates identification from simulation. First, a Generalised Synthetic Control estimator recovers dynamic treatment effects of euro adoption within an interactive fixed-effects framework. Second, these event-time effects are transported to a non-adopter using simplex-constrained weights based on pre-treatment similarity. Applied to Sweden using annual data for 1991–2024, the results show strong timing dependence: early adoption would have produced modest short-run gains but weaker long-run performance, whereas adoption around the global financial crisis would have generated positive effects. Overall, euro membership effects appear state-dependent rather than structural.
By Hani Assaf; Philipps-Universität Marburg
Presented by: Hani Assaf, Philipps-Universität Marburg
2. Fiscal Shocks and Public Debt Dynamics in the European Union. New Evidence using Forecast-Error Identification Abstract This paper studies the effects of fiscal shocks on the dynamics of public debt and other fiscal and macroeconomic variables. The data are annual and cover all the members of the European Union from 2001 to 2024. The fiscal shocks are identified using orthogonalised forecast errors computed from European Commission forecasts, and the impulse responses are generated using local projections. Primary balance shocks lower government debt measured in per cent of GDP, but the effect is gradual and is initially modest. There are large differences in how revenue and expenditure measures affect the stock of public debt. Revenue shocks have gradual and statistically insignificant effects, while primary expenditure shocks have fast, relatively large and statistically significant effects. The two types of shock have quite similar macroeconomic effects; the effects on the public debt stock are different because the fiscal reactions are very different depending on whether revenue or spending measures are used. Analyses using various subcomponents reveal that indirect taxes have a stronger effect on public debt than direct taxes and social security contributions do; conversely, public consumption and public investment measures have quite similar effects on public debt.
By Ann Merit Toiger
Presented by: Ann Merit Toiger,
3. Sovereign Debt Dynamics in the Euro-Zone: The Differential Impact of a Common Currency Abstract How did adopting the Euro influence the evolution of government debt in member states? Employing a matrix completion method, we estimate how key debt drivers would have evolved in early-adopting countries without the common currency. Feeding the resulting counterfactual dynamics of nominal interest rates, inflation, real growth, and primary balances into the government debt law of motion, we generate a counterfactual time series for sovereign debt-to-GDP ratios. Moreover, we quantify each factor's contribution to the gap between actual and counterfactual debt ratios. The results reveal large heterogeneity in the impact of Euro adoption. In most Northern European countries debt ratios were pushed down, in Germany mainly through lower nominal rates, in Ireland via higher growth, and in the Netherlands primarily due to higher inflation. Disinflation, in turn, is the main driver in Southern European countries where we find a strong debt-increasing impact of the Euro---a finding that we associate with the fiscal burden of converting long-term national-currency debt into Euro debt. The union as a whole, despite lower nominal rates, experienced an increase in debt to GDP as adopting the Euro came, in the aggregate, with lower inflation, lower growth, and less favorable primary balances.
By Luca Pegorari; Karlsruher Institut für Technologie (KIT)
Presented by: Luca Pegorari, Karlsruher Institut für Technologie (KIT)
Session 14: Climate II: Inequality and Policy July 14, 2026 13:30 to 15:30 Location: H GE 33.3
1. Green Tax Pass-Through to Retail Fuel Prices and Firm Heterogeneity: Evidence from France Abstract Combining a natural experiment and high-frequency information on retail fuel prices, we investigate the level, dynamic, heterogeneity, and dependence of the pass-through of a green tax. The green tax’s economic incidence passes largely to consumers but with significant heterogeneity across gas stations. The magnitude and speed of pass-through vary between 84% and 100%, and two and eleven days. The frequency of price changes shapes the tax’s incidence. Firms frequently adjusting prices pass through the tax, whereas those that do not, adjust their high markups due to strategic complementarities that slow down the pass-through according to a heterogeneous- firm model.
By Nikolaos Charalampidis; Université Laval    Justine Guillochon; Laval University
Presented by: Nikolaos Charalampidis, Université Laval
2. Optimal intertemporal climate policy and inequality Abstract Climate change and economic inequality are two of the most critical challenges for humanity. This paper introduces RISOTTO RICE (Realistic Inequality Subnational Outcomes, Tax and Transfers Optimization in a Regional Integrated Climate-Economy), a novel framework including decile-level heterogeneity and a decentralized economic setting within a state-of-the-art climate-economy model. We employ this model to investigate how endogenous inequality transforms optimal climate policy, specifically carbon taxation. The model successfully captures endogenous feedbacks between climate mitigation and inequality, confirming that optimal carbon taxation strategies are reshaped when inequality is explicitly incorporated into climate-economy frameworks. In particular, to set the optimal carbon tax, the government takes into account the emission tax base erosion and the differential income sources and front-loads the tax schedule.
By Matteo Calcaterra; Politecnico di Milano
Presented by: Matteo Calcaterra, Politecnico di Milano
3. From Annual Income to Lifetime Emissions: A Lifecycle Theory of Carbon Inequality Abstract We study inequality in household carbon footprints in 26 countries of the EU. Using a novel harmonized dataset that combines environmentally extended supply-use tables with the European Household Budget Survey, we document substantial heterogeneity in household level carbon emissions, driven primarily by within-country differences. Most importantly, we find that net income is only a weak predictor of household carbon footprints. To interpret this finding, we develop and calibrate an overlapping generations model with non-homothetic CES preferences. The model is disciplined by three key forces shaping emissions inequality: a non-proportional consumption-income relationship, heterogeneity in consumption baskets, and variation in emissions intensities across goods. It matches the joint distribution of income, consumption, and emissions and provides a framework to evaluate the distributional and welfare effects of carbon pricing. We then use the model to show that the modest cross-sectional relationship between income and emissions may mask a far more substantial underlying connection: when households are evaluated over their life cycle, lifetime income is closely aligned with lifetime carbon footprints, implying a near-proportional relationship between permanent income and emissions.
By Nicole Berr; University of Regensburg    Fabian Kindermann; University of Regensburg    Julia Le Blanc; European Commission Joint Research Centr
Presented by: Nicole Berr, University of Regensburg
Session 15: Development II: Labor Markets July 14, 2026 13:30 to 15:30 Location: H GE 22
1. Structural Change and Hysteresis Effects on the Labour Market Abstract This paper examines the relationship between hysteresis and the intensity of structural change. We investigate whether cyclical unemployment has become more structural and to which extent structural change leads to a higher entrenchment of unemployment. The idea behind stronger hysteresis effects during times of rapid structural change is that work experience and human capital devalue more quickly since there are faster changes in qualification requirements. We use an unobserved components model, which breaks down the unemployment rate into a structural and a cyclical component. Hysteresis is modelled as a delayed spillover effect from cyclical unemployment to structural unemployment. In addition, this effect is interacted with a measure of structural change. The results show significant hysteresis effects for Germany and the UK, while they were less significant for France. After a period of recession, around 11% of the cyclical unemployment of the previous period became entrenched in Germany and around 8% in the UK. However, these values varied depending on the strength of structural change, which had a positive and significant influence on hysteresis effects. The results make it clear that, specifically for Germany, the current risk of unemployment becoming entrenched must be taken seriously.
By Michael Göschl; Institute for Employment Research (IAB)    Christian Hutter; Institute for Employment Research (IAB)    Enzo Weber; University of Regensburg
Presented by: Christian Hutter, Institute for Employment Research (IAB)
2. Do Peer Gender Pay Gaps Depress Productivity? Interlocked Directors’ Proximity to Firm Headquarters Abstract Do gender pay gaps (GPGs) at peer firms spill over into firms’ productivity? Analysing UK firms (2018–2023), we present causal evidence that higher GPGs at board-interlocked peers (PeerGPG) reduce a firm’s Total Factor Productivity (TFP). We theorise and show that this penalty is not inevitable; it is critically moderated by corporate governance. The negative effect is weaker when interlocked directors live near headquarters, consistent with a behavioural governance view where proximity enhances awareness to enable timely correction. Conversely, the penalty is amplified when geographically distant directors are, on average, male, younger, or hold multiple board seats. Causality is supported by an instrumental-variables strategy that leverages interlock-weighted peers’ exposure to female MPs in their parliamentary constituencies and an event study analysing the appointment of new directors connected to high-GPG peers. These findings reveal that peer inequality is a novel networked strategic liability and identify locally embedded boards as a key governance structure to protect firm performance from the spillover of harmful external norms.
By M. Mostak Ahamed; University of Sussex
Presented by: M. Mostak Ahamed, University of Sussex
3. Female occupational intensity and wages across the unconditional wage distribution in Serbia Abstract This paper investigates the impact on wages across the unconditional pay distribution of three-digit female occupational intensity measures in the Serbian labour market across a period of substantive economic reforms between 2008 and 2022. Using Serbian Labour Force Survey data, and applying the recentered influence function (RIF) approach (Firpo et al., 2009), we examine how wages of men and women are affected by working in occupations dominated by either men or women, both at the mean and across the unconditional wage distribution. In general, the existing literature does not inform on the effects of female occupational intensity on wages along the wage distribution, though two studies provide notable exceptions (Salardi (2012) and Espino et al. (2024)). We regress the RIF of the dependent variable (in our case the log of the hourly wage) on the set of explanatory variables (i.e., productivity and other demographic and personal job characteristics, including a measure capturing female occupational intensity) for males and females at the mean and at the 10th, 25th, 50th, 75th and 90th percentiles. Female occupational intensity is the proportion of female workers in each three-digit occupational group. We also exploit two piece-wise linear segments (or splines) as a more appropriate and data-driven approach to capture heterogeneity in the effects of female occupational intensity on wages. Our initial estimates for female occupational intensity reveal that, on average, both women and men are, ceteris paribus, paid less in occupations with a higher proportion of women, and that the wage penalty increased between 2008 and 2022, particularly for women. These estimates appear broadly in line with results obtained in the existing literature. A more detailed analysis of the impact of occupational feminization on wages using the two linear splines (at or below the median and above the median) suggest that being employed in female-dominated occupations (i.e., female intensity above the median) reduces wages, ceteris paribus, for both gender groups, across different quintiles of the wage distribution, but particularly at the upper end of the wage distribution. However, only women in top-paid jobs face a significant wage penalty when working in female-dominated occupations compared to male-dominated occupations over the period 2015-2022. We find that Covid-19 crisis did not induce a significant impact on the wage penalty in female-dominated occupations. The wage disparities that remain between female and male occupations, particularly in the highest-paid jobs, after controlling for differences in productivity characteristics, may suggest a general devaluation of female jobs, but may also be the consequence of voluntary choices. Policy measures aimed at addressing the main cause of female self-selection into these occupations should focus on improving the gender distribution of childcare and family responsibilities, including policies that reduce gender stereotypes in the educational process and in media portrayal. Conversely, wage differences between female and male-dominated occupations might be rooted in the undervaluation of women's work. In this case, anti-discrimination measures might be desirable on welfare grounds.
By Aleksandra Anic    Gorana Krstic; University of Belgrade, Faculty of Economics and Business    Barry Reilly; University of Sussex
Presented by: Aleksandra Anic,
4. Gender Equality and Labour Market Liberalisation: Empirical Evidence from the E.U. Abstract Labour markets are responsible for large part of the levels of gender inequality present in the world and many countries enacted liberal reforms of their labour markets since the 1980s. The present empirical analysis aims at understanding their impact on gender inequalities in the labour market. Using data on gender gaps in the labour market from the European Institute for Gender Equality and economic freedom from the Fraser Foundation, this paper shows that liberal aspects of labour market regulations may increase or decrease gender inequality, depending on several factors. In general, it seems that labour market reforms were not accompanied by interventions in other fields (such as the provision of childcare and eldercare facilities), thus resulting in ambiguous effects in terms of gender equality. However, long-run effects could be more positive for women than they appear in the short run, thus leading to narrowing the gender gaps.
By Matteo Migheli; Università di Torino
Presented by: Matteo Migheli, Università di Torino
Session 16: International II: Geopolitics and Sanctions July 14, 2026 13:30 to 15:30 Location: H GE 23
1. How geopolitics influences the exports of Chinese firms Abstract This paper investigates how geopolitical relationships shape Chinese exports, asking whether ex-porters systematically favor politically aligned countries — and whether that preference holds during periods of geopolitical turbulence. Unlike most existing studies, which focus on imports or multinational enterprises (MNEs) with a Western-centric perspective, we use a high-frequency panel of over 17 million monthly firm-product-destination export transactions from Chinese Cus-toms (2000–2006). We match this data with the Political Relationship Index (𝑃𝑅𝐼) developed by Tsinghua University to analyze how changes in bilateral political relations shape trade flows. Our empirical strategy relies on a robust log-linear specification with firm-product, destination-country, month and year fixed effects, and controls for tariff variation. We test for both asymmetric and non-linear effects by interacting the 𝑃𝑅𝐼 with indicators of extreme positive and negative geopolitical events. Our results consistently show that stronger bilateral political relations significantly increase Chinese exports. We also find evidence of asymmetric responses: exporters react more strongly to diplomatic improvements than to deteriorations. Using extreme geopolitical events, we show that positive events amplify the export response to political alignment, while negative events tend to dampen it. This pattern is especially pronounced among foreign firms and exporters of differentiated products, suggesting that political alignment plays a critical role in global value chain dynamics. In a world of growing political fragmentation, our findings underline the growing interplay between diplomacy and international trade. They reveal that friendtrading is not just a policy discourse — it is already reflected in the strategic behavior of exporters.
By Jamel Saadaoui; University Paris 8
Presented by: Jamel Saadaoui, University Paris 8
2. BRICS Trade Coalitions Under Financial Sanctions Abstract This paper studies when financial sanctions induce BRICS countries to coordinate alternative trade settlement regimes. I develop a dynamic quantitative gravity framework in which countries trade under a dominant dollar-based settlement regime and face stochastic financial sanctions that raise the effective cost of dollar-settled transactions through payment-system frictions. Countries may instead coordinate on an alternative trade settlement arrangement that insulates intra-coalition trade from the sanctions wedge but entails scale-dependent network costs together with one-time switching costs and smaller return costs. Equilibrium wages, prices, and welfare are computed in an Eaton--Kortum general equilibrium, and forward-looking regime choice is determined by value iteration in a persistent sanctions environment. The model generates endogenous switching thresholds corresponding to economically meaningful trade-cost shocks, roughly equivalent to 20–25\% reductions in trade under dollar settlement, together with coalition formation dynamics under collective and sequential arrangements. Quantitative results show that collective adoption becomes optimal at moderate sanctions intensity, while bilateral initiation typically requires higher sanctions because marginal costs remain elevated in small coalitions. The founding bilateral coalition is China--Russia, whose combined trade scale generates sufficient marginal cost compression to trigger an immediate cascade to the full BRICS bloc. Coordination frictions between the collective benchmark and the self-enforcing full-coalition threshold are small, and redistribution can sustain coordination over a somewhat wider range of sanctions intensities. Evaluated at current country-specific sanctions intensities, the model is consistent with the observed bilateral shift in China--Russia trade settlement while explaining the absence of switching among other BRICS pairs. The framework provides a tractable approach to studying trade coalitions and financial sanctions in a geoeconomic environment.
By Alishan Khan; Syracuse University
Presented by: Alishan Khan, Syracuse University
3. Does Trade Follow the Flag? Evidence from Cold War Geopolitical Fragmentation Abstract How much does geopolitical alignment affect international trade? We study this question using the Cold War as a natural experiment in geopolitical fragmentation. Leveraging detailed bilateral trade data from 1945-1990 and measures of ideological distance derived from United Nations General Assembly voting patterns, we document that politically distant countries faced substantially higher trade frictions. The tariff equivalent of the ideological gap between the United States and Soviet Union was approximately 25%, rising to 38% for superpower trade relationships, comparable to the trade costs of armed conflict. However, these gravity estimates confound causation with reverse causality and omitted variables. To establish causality, we exploit sudden shifts in political alignment caused by coups, revolutions, and close elections as exogenous shocks to bilateral political distance. Using event study designs, we find that successful coups that increased (decreased) political distance with trading partners led to significant reductions (increases) in bilateral trade flows, with effects of 15-20% within three to four years. While smaller than the correlational estimates, these causal effects were substantial and strongest when at least one superpower was involved. Importantly, both correlational and causal effects disappeared entirely after the Cold War ended in 1990. Our findings demonstrate that geopolitical fragmentation substantially reshapes international trade patterns, though standard gravity approaches overstate the magnitude, with important implications for understanding current trends toward economic decoupling.
By Nicolas Wesseler; University of British Columbia
Presented by: Nicolas Wesseler, University of British Columbia
4. The Extraterritoriality of Smart Sanctions Abstract This paper presents the Firms Sanctioned DataBase (FSDB), a novel dataset documenting all firms and entities sanctioned by the European Union since 2001. The FSDB details the timeline of sanctions and the exact addresses of every targets inside of sanction programs (e.g., Iran, Russia). Using this granular dataset, I characterize anticipations and location of targets, and study how they affect the identification of the impact of sanctions on disaggregated bilateral trade flows. I find that extraterritorial sanctions decreased flows of firms' sanctioned products by 38%. The estimate is similar when solely accounting for the staggered enforcement, with an higher variance though. Ignoring the staggered enforcement of sanctions considerably biases the estimate.
By Clément Montes
Presented by: Clément Montes,
Session 17: Macro II: Heterogeneity July 14, 2026 13:30 to 15:30 Location: H GE 33.1
1. Optimal Dynamic Tax-Transfer Policies in Heterogeneous-Agents Economies Abstract When designing an optimal tax-transfer system, the existing literature identifies two key factors: labor efficiency and debt efficiency. The labor-efficiency approach emphasizes the trade-off between redistribution and distortion in the labor market, while the debt-efficiency approach emphasizes the trade-off between monopoly rent gains and distortion in the asset market. In this paper, we propose a third factor to consider when designing optimal tax-transfer policies: the dynamic-efficiency approach. To demonstrate this, we use an analytically tractable infinite-horizon model incorporating both ex-ante and ex-post heterogeneity. We show that the optimal tax-transfer system is determined at the point where the intertemporal wedge between the market interest rate and the time discount rate is fully eliminated, regardless of the Laffer curve, provided the government's fiscal space allows for an interior Ramsey steady state. Therefore, incorporating dynamic efficiency could potentially transform the structure of optimal tax-transfer policies within an infinite-horizon model featuring heterogeneous agents.
By YiLi Chien; Federal Reserve Bank of St. Louis    Yi Wen; Antai College of Economics and Management, Shanghai Jiaotong University
Presented by: Yi Wen, Antai College of Economics and Management, Shanghai Jiaotong University
2. Transition Dynamics in Heterogeneous-Agent Models and the Distributional Consequences of Taxation Abstract We examine the distributional consequences of tax policy at the wealth decile level using a heterogeneous-agent (HA) model and a representative ten-agent (TE) model. Although both frameworks generate qualitatively comparable aggregate responses to tax shocks, the heterogeneous-agent model yields irregular and state-dependent impulse responses at the decile level. These features complicate the interpretation of the distributional effects of fiscal interventions, such as increases in tax rates. Our findings indicate that the contraction in aggregate economic activity following hikes in labor and capital income tax rates is predominantly driven by higher-wealth deciles, particularly in the HA model. In addition, the endogenous inter-decile transition dynamics inherent in the HA structure serve to stabilize consumption among low- and middle-wealth deciles. This stabilization operates through downward mobility of households from higher wealth and higher labor-income groups. By contrast, the ten-agent model, which features fixed decile membership, exhibits smoother responses across deciles.
By Alexandra Gutsch    Christoph Schult; Halle Institute for Economic Research (IWH)
Presented by: Alexandra Gutsch,
3. Inflation Inattention and Consumption Gap Abstract This paper studies why inflation inattention varies across households and over time, and how such variation shapes monetary transmission. We propose a behavioral mechanism, grounded in reference dependence and relative consumption, through which inflation inattention depends on the consumption gap between asset holders and non-asset holders. Consistent with this intuition, U.S. data suggest a negative reduced-form relationship between the consumption gap and inflation inattention. Motivated by this pattern, we develop a Two-Agent New Keynesian model with imperfect information in which asset holders endogenously reduce inattention when the consumption gap widens. The mechanism improves the accuracy of inflation expectations and inflation stabilization after cost-push shocks, but at the cost of a deeper contraction in real activity and lower welfare in inefficient steady states.
By Giovanni Di Bartolomeo; Sapienza Univesity of Rome    Francesco Ferlaino; University of Salerno    Carolina Serpieri; University La Sapienza
Presented by: Carolina Serpieri, University La Sapienza
4. Chronic Pain, Occupation Choice, and Retirement Policy Abstract Chronic pain affects over 50 million U.S. adults and is a major determinant of work capacity and retirement, yet little is known about how pain risk varies across occupations or how it should be accounted for in retirement policy. This paper studies how occupational choice shapes chronic pain risk over the life cycle and how pain influences retirement behavior. Using the Wisconsin Longitudinal Study, we document new empirical facts on the prevalence, persistence, and occupational correlates of chronic pain. Pain increases sharply with age, is more prevalent among women, and is especially concentrated among individuals without college degrees. At the occupational level, we construct a measure of chronic pain incidence weighted by cumulative time spent in each occupation and link it to task content measures from Autor and Dorn (2013). We find a strong and robust gradient: occupations low in abstract task content—such as healthcare support, construction trades, and machine operators—exhibit significantly higher chronic pain incidence, while managerial, professional, and teaching occupations exhibit the lowest pain. Manual and routine task intensity alone do not explain these patterns. We further show that chronic pain meaningfully accelerates retirement. Severe pain reported at age 53 strongly predicts retirement by ages 55 and 57, even after controlling for education and gender, indicating that pain plays an important role in mid-life labor force exit. Guided by these findings, we develop a life-cycle directed search model in which occupations differ in wages, finding and separation rates, and chronic pain risk, and workers make endogenous occupation, search, and retirement decisions. Pain evolves according to occupation- and age-specific Markov processes estimated from the data and impacts labor disutility. Model estimation is ongoing. Once complete, the framework will be used to quantify the welfare costs of chronic pain and to assess how retirement policy reforms—such as increases in retirement age—may disproportionately burden workers in pain-intensive occupations.
By Nicholas Garvey; UW-Madison    Meryem Yavas
Presented by: Meryem Yavas,
Session 18: Coffee break July 14, 2026 15:30 to 16:00 Location: Foyer Audimax
Session 19: Fiscal II: Public Finance and Health July 14, 2026 16:00 to 18:00 Location: H GE 33.5
1. Independent Fiscal Institutions and Fiscal Discipline in Sub-Saharan Africa: Quasi-Experimental Evidence. Abstract This paper examines whether independent fiscal institutions (IFIs) improve fiscal discipline in Sub-Saharan Africa. Using a panel of 46 countries observed from 2000 to 2024 and exploiting staggered IFI adoption across four treated countries, the study estimates the effect of IFIs on primary fiscal balances. To address recent concerns about bias in conventional two-way fixed effects settings, the analysis employs the Callaway-Sant’Anna (2021) difference-in-differences estimator, complemented by event-study analysis, synthetic control evidence, and multiple robustness and placebo checks. The results provide no robust evidence that IFI adoption improved primary fiscal balances. Event-study estimates are broadly consistent with parallel trends, but post treatment effects remain statistically insignificant and imprecisely estimated across specifications. The findings suggest that the formal creation of IFIs, by itself, is insufficient to strengthen fiscal discipline in settings where complementary institutions of accountability and fiscal oversight remain weak. More broadly, the paper contributes to the literature on institutional effectiveness by showing that fiscal institutions that appear successful in advanced economies may not generate similar outcomes in weaker governance environments.
By Esau Wesa; University of Szeged
Presented by: Esau Wesa, University of Szeged
2. Sovereign Risk and Subnational Health Outcomes Abstract This paper studies the distributional effects of sovereign debt distress on households, with a focus on Italy. Using patient mobility as a proxy for regional healthcare efficiency, we show that the contraction in health services following the spike in sovereign risk and rising debt servicing costs was more severe in less efficient regions. Leveraging household-level data, we further find that, after the crisis, health insurance spending increased among residents of inefficient regions, while financially constrained households in these regions experienced a contraction in such spending, albeit imprecisely estimated. To our knowledge, this is the first paper to document how sovereign debt distress differentially affects households through regional heterogeneity in healthcare provision in Italy.
By Mattia Longhi; University of Milan-Bicocca    Silvia Marchesi; University of Milano Bicocca, and CefES
Presented by: Mattia Longhi, University of Milan-Bicocca
3. The Impact of Public-Private Partnership on Facility Management Costs: Evidence from Healthcare Sector in England Abstract The private finance initiative (PFI) is a type of public-private partnership (PPP) that has been extensively used in England since the 1990s. This study employs the ERIC panel dataset spanning from 2018 to 2021 to evaluate how hospital procurement type affects the costs of both hard and soft facility management (FM) services. By employing ordinary least squares and two-stage least squares estimations, followed by propensity score matching and Hausman-Taylor estimations, the findings indicate that PFI is associated with increases in both hard and soft FM costs, up to 37.1% and 20.3%, respectively. This effect is particularly pronounced for hospital sites with pre-existing buildings before the signing of PFI contracts, although the trend reverses for soft FM costs. Furthermore, the study reveals that partial PFI financing is linked to higher costs compared to hospital sites procured entirely through PFI. Nonetheless, the study suggests the potential for limited cost savings by considering moderate- and low-risk backlog maintenance costs, as well as capital investments in new construction.
By Evgenii Monastyrenko; STATEC Research    Alena Podaneva; University of York
Presented by: Evgenii Monastyrenko, STATEC Research
4. Fiscal consolidation and political instability Abstract This paper analyses how fiscal consolidation shocks affect political instability in advanced economies. Using data on fiscal tightening in 17 OECD countries from 1980 to 2020, we estimate dynamic effects in a local projection framework employing a narrative-based instrumental variable approach that isolates exogenous fiscal changes motivated by deficit reduction. Fiscal consolidation entails significant short-term political costs: it lowers government approval and increases the likelihood of protests and major government crises. These effects are temporary and dissipate over time. The decline in approval is primarily driven by the contraction in economic activity in response to fiscal adjustment. Consistent with this mechanism, consolidations implemented during economic downturns lead to markedly larger declines in approval, while effects are muted in stronger economic conditions. Turning to the tax-spending composition, we find that approval declines more sharply when adjustments rely only on spending cuts. Under weak economic conditions, a focus on spending cuts also disproportionally increases the short-run likelihood of government crises. Overall, our findings provide new evidence on the political costs of fiscal tightening and highlight the importance of macroeconomic conditions and policy design.
By Philipp Heimberger; Vienna Institute for International Economic Studies    Anna Matzner; Vienna Institute for International Economic Studies
Presented by: Anna Matzner, Vienna Institute for International Economic Studies
Session 20: Political Economy III: Voting and Institutions July 14, 2026 16:00 to 18:00 Location: H GE 21
1. Policy interventions under domestic political constraints Abstract This paper examines how domestic political constraints shape the strategic use of sanctions and rewards in international bargaining under asymmetric information. I develop a sequential game in which a sender policymaker, privately informed about the cost of imposing sanctions, seeks to extract a policy concession from a foreign target by offering a reward while simultaneously threatening sanctions. Without domestic constraints, all offers fail and sanctions are imposed in equilibrium, as signaling frictions prevent credible offers. In contrast, when domestic agents can condition reelection on the negotiation outcome or size of the reward, the policymaker’s office rents act as a commitment device: pooling equilibrium with agreement becomes sustainable, and inefficient bargaining breakdowns are avoided. The analysis shows that office-seeking motives---often viewed as distortions---can enhance welfare by offsetting informational frictions. An extension with heterogeneous citizens demonstrates that strategic delegation to “weaker” representatives, who bear higher sanction costs, may increase the credibility of transfers and facilitate cooperation.
By Sarai Godo Luque; University of Luxembourg
Presented by: Sarai Godo Luque, University of Luxembourg
2. The Transparency Trap: Quality of Public Information and the Intensity of Revolutionary Violence Abstract This paper develops a theoretical framework to study how the quality of public information shapes the intensity of revolt in global games of regime change. Building on the canonical literature, I model citizens deciding whether to attack a regime where intensity determines both effectiveness and failure costs. I extend the framework by endogenizing total conflict intensity through the strategic interaction of vanguard groups seeking to maximize the potential of the attack, and including the regime's response. The analysis reveals a non-monotonic "transparency trap": at intermediate beliefs, the relationship between information quality and total violence becomes U-shaped. Intensity is high when information is scarce (serving as a substitute coordination device), minimizes at intermediate levels, and surges again when high transparency facilitates violent coordination. These dynamics persist when intensity is the outcome of decentralized strategic choice. Moreover, as the number of competing vanguard groups increases, so does the equilibrium intensity. I empirically test these predictions drawing 177 events from the Revolutionary Episodes dataset (1900–2014), combined with historical Freedom of Expression indices. The results provide robust support for the U-shaped hypothesis and confirm that higher vanguard competition structurally escalates conflict. These findings highlight that transparency reforms can have counterintuitive effects, providing relevant policy implications.
By Lorenzo Portaluri
Presented by: Lorenzo Portaluri,
3. A Theory of Intra-Party Bargaining under Supranational Policy Constraints Abstract We develop a model of electoral competition in the context of multi-party systems, where policy platforms consist of traditional spatial positions and a policy in favor or against membership in an international union that imposes binding policy constraint on the traditional left-right dimension. We assume that parties consist of two factions, the \textit{Opportunists} (office-seekers) and the \textit{Militants} (ideologues), and we extend Roemer's (1998) Party Unanimity Nash Equilibrium (PUNE) concept for endogenously formed parties to derive a manifold of equilibria, ranging from moderate pro-membership, to populist, to polarized anti-membership ones. We then apply the Nash bargaining solution---by allowing for the possibility of party splits as disagreement outcomes---in order to refine our equilibrium predictions and infer under what conditions party splits are the more likely outcomes depending on the perceived benefits of union membership and the scope of policy constrains that come with it. We show how populism can arise as the outcome of intra-party bargaining that keeps the party together in the face of strong factionalism over supranational integration. A direct implication of our results is that populism can be innately cyclical. Our model also predicts that party fragmentation (as a result of party splits) and ideological polarization are more likely when the orthogonal benefits of integration are lower and the scope of policy constraints is narrower.
By Nikitas Konstantinidis; IE University
Presented by: Nikitas Konstantinidis, IE University
Session 21: Climate III: Economic Policy July 14, 2026 16:00 to 18:00 Location: H GE 33.3
1. Measuring Local Vulnerability to the Energy Transition: A Municipal-Level Index for French Regions Abstract This paper constructs a composite vulnerability index at the municipal level for mainland France, covering over 34,000 communes, structured around three theoretically grounded dimensions: exposure to carbon-intensive activities, adaptability capacity, and economic resilience. Sub-index scores are derived through a data-driven aggregation procedure to preserve local signal while absorbing neighborhood. LISA decomposition of the synthetic index reveals that vulnerability is regionally systemic rather than idiosyncratic: hot spot clusters concentrate in areas characterized by adaptive deficiency rather than industrial exposure, while cold spots self-reinforce around metropolitan cores. Pillar-level analysis shows that exposure is the dominant discriminating factor, with resilience as a secondary separator and adaptability uniformly low across the national distribution.
By ZOUHAIR AIT BENHAMOU; ULHN    Sandrine Lardic; University of Paris X
Presented by: ZOUHAIR AIT BENHAMOU, ULHN
2. Analysing Stakeholder Sentiment Towards the EU ETS: A Text-Based Econometric Analysis Abstract The political acceptability of carbon pricing depends not only on its economic efficiency but also on how stakeholders perceive its design and evolution. This paper examines stakeholder sentiment toward the EU Emissions Trading System (EU ETS) by analyzing 909 consultation submissions from firms and business associations collected between 2017 and 2024. Using a refined dictionary-based sentiment analysis, we quantify stakeholders’ views and link them to the dynamics of carbon prices in the scheme, free-allocation surpluses, and their interaction. In this regard, the regression models reveal three main results. First, higher carbon prices are associated with more positive sentiment, suggesting that rising costs can signal credibility and long-term commitment rather than automatically generating resistance. Second, greater free-allocation surpluses are linked to systematically lower sentiment, indicating that generous allocation is not necessarily perceived as supportive. Third, the interaction between prices and surpluses plays a key role: while supportive stakeholders remain largely indifferent to changes in allocation, critical stakeholders respond more favorably to price increases only when allocation surpluses are high. By linking textual feedback to market variables and allocation design, this study demonstrates the value of sentiment analysis for understanding the political economy of carbon pricing. The findings underscore the importance of aligning price trajectories with allocation reforms and of anticipating heterogeneous reactions across stakeho
By Simone Borghesi; Università di Siena    Riccardo Colantuono; Università di Siena    Matteo Mazzarano; Università Cattolica del Sacro Cuore Milano
Presented by: Riccardo Colantuono, Università di Siena
3. Stay off the target: Public support for targeted climate policies beyond democracies Abstract Climate justice frameworks emphasize that climate mitigation policies should allocate burdens according to capacity and responsibility. While this principle underlies international climate agreements and domestic legislation, citizens' support for targeted policies remains contested, especially in less democratic countries that include many of the world’s largest emitters, rapidly urbanizing nations, and climate-vulnerable populations. Through original conjoint survey experiments with more than 17,000 respondents across 12 hybrid and authoritarian regimes, this article investigates support for climate policies that differentially allocate burdens. We find that targeted policies that impose costs only on the rich or urban residents reduce, rather than enhance, public support. This raises difficult questions for the politics of just transitions: normatively equitable policies may be politically unsustainable without public support. We argue that this tension reflects concerns with individual costs, policy stringency, and government's capacity to fairly implement targeted policies.
By Henrique Sposito; University of Bern    Quynh Nguyen; University of Bern    Stefano Jud
Presented by: Quynh Nguyen, University of Bern
4. Chilly temperatures, polluted air: the health impacts of residential heating emissions Abstract We study the causal effect of air pollution from residential heating on urgent hospitalizations and in-hospital mortality for cardiovascular and respiratory illnesses in 2015–2019, leveraging staggered heating-system activation in a difference-in-differences design. We show that turning on heating systems raises ambient PM2.5, PM10, and NO2 levels, driving higher hospitalisation rates for Acute Myocardial Infarction, ST and non-ST-segment Myocardial Infarction and Chronic obstructive Pulmonary Disease. In-hospital mortality from Acute Myocardial Infarction, ST and Non ST-Elevation Myocardial Infarction, and Haemorrhagic Stroke are strongly linked to pollution exposure, especially during peak pollution episodes. Vulnerability to these health impacts is unevenly distributed: the elderly, individuals with lower education, patients without pre-existing comorbidities, and residents of some climatic zones—most notably the Po Valley—are disproportionately affected.
By Lorena Popescu; University of Padua
Presented by: Lorena Popescu, University of Padua
Session 22: Immigration I: Attitudes July 14, 2026 16:00 to 18:00 Location: H GE 22
1. The Legacy of Growing Up in a Recession on Attitudes Towards European Union Abstract In an era marked by repeated crises and the growing traction of populist movements, understanding the deep-rooted factors shaping EU cohesion has become increasingly urgent. This paper investigates how lifetime exposure to economic recessions influences individual attitudes toward the European Union (EU). Resorting to rich micro-data from the European Social Survey (ESS) and the Eurobarometer, we construct a detailed measure of economic hardship experienced during lifetime, capturing not just isolated downturns but the accumu- lated burden of multiple recessions over time. Importantly, we distinguish between various types of shocks-including output contractions, unemployment surges, consumption drops, participation in IMF adjustment programs, and the asymmetry or symmetry of crises across EU member states. We show that individuals with greater lifetime exposure to these eco- nomic shocks are more likely to distrust EU institutions, oppose further integration, vote for Eurosceptic parties, and support exiting the EU. These patterns are especially pronounced for asymmetric shocks, which disproportionately affect specific regions or countries, in contrast to symmetric shocks, which appear to foster a sense of shared fate and solidarity. A se- ries of robustness tests-including placebo checks, heterogeneity analyses, diverse shock types and designs exploiting EU institutional structure confirms the persistent impact of economic trauma on EU attitudes, underscoring the need to address historical recessions to safeguard cohesion and democratic legitimacy in the context of the EU.
By Despina Gavresi; University of Bologna
Presented by: Despina Gavresi, University of Bologna
2. REFLECTIVE SOLIDARITY AND THE Reflective solidarity and the construction of the civic “we”: a claims-making analysis of debates about basic income and citizenship Abstract This article examines how public debates on social policy and migration shape the boundaries of solidarity within contemporary welfare states. Drawing on the concept of reflective solidarity, it analyses media claims in the Swiss canton of Ticino across two controversies: the universal basic income referendum and the revision of the Citizenship Act. Combining qualitative and quantitative claimsmaking analysis, the study shows that solidarity is not a stable or universal principle, but a contextdependent process structured by justificatory frames and symbolic boundary-making. Welfare debates tend to mobilize universalistic arguments, while migration-related debates more frequently rely on conditional and boundary-oriented criteria of inclusion. At the same time, migrants are positioned unevenly within the civic “we,” ranging from recognized members to conditionally includable subjects and excluded outsiders. By linking public discourse to processes of recognition and deservingness, the article contributes to research on migration, inequality, and the political economy of welfare state legitimacy.
By Cristina El Khoury; FEEM
Presented by: Cristina El Khoury, FEEM
3. Immigration and Social Distance: Evidence from Newspapers during the Age of Mass Migration Abstract This paper examines how immigrant arrivals affected the perception of social distance in the U.S. during the Age of Mass Migration (1860-1920). Using a corpus of 1.8 million historical newspapers, the authors developed a novel, text-based measure of socio-cultural distance between U.S.-born natives and 21 immigrant groups. Employing a shift-share instrumental variable strategy, the study finds that increased immigration inflows led to higher expressed social distance toward those groups in local discourse. Additionally, the arrival of more distant groups often triggered a re-categorization that reduced perceived distance toward existing, more similar immigrant groups.
By Elliott Ash; ETH Zurich    Anton Boltachka; Bocconi University    Gloria Gennaro; Bocconi University    Dominik Hangartner; ETH Zurich    Alessandra Stampi-Bombelli; UZH
Presented by: Anton Boltachka, Bocconi University
4. Hacking Anti-Immigration Attitudes and Stereotypes: A Field Experiment in Italian High Schools∗ Abstract Growing diversity in advanced economies often fuels hostility toward immigrants. We evaluate a short educational program promoting cultural diversity among high-school students in northern Italy. In a randomized controlled trial with 4,500 students from 252 classes, the program fostered more positive attitudes and reduced discriminatory behavior toward immigrants, particularly in more diverse classrooms. It operated by correcting misperceptions and shifting perceived social norms, without affecting implicit bias, empathy, or social networks. These results suggest that anti-immigration attitudes stem largely from stereotypes and societal concerns, and that active-learning interventions combining factual information with norm-shaping elements can effectively mitigate them.
By Mariapia Mendola; University of Milano Bicocca
Presented by: Mariapia Mendola, University of Milano Bicocca
Session 23: International III: Supply Chains July 14, 2026 16:00 to 18:00 Location: H GE 23
1. The Price of Resilience: Input-Cost Shocks in European Supply Chains under EU Sanctions on Russia Abstract Do broad-based sanctions cause physical supply chain breaks or operate as input-cost shocks? Mapping the 2022 EU embargo through the AI-generated AIPNET production network, I identify indirect exposure across the European manufacturing core. A dynamic diff-in-diff design reveals stable volumes but a 9.7% spike in landed costs—a "price of resilience" totaling 11.1 billion USD—demonstrating that firms internalized this targeted supply shock to maintain production lines. The results provide granular evidence on the cost of geopolitical decoupling within the EU Single Market.
By Mark Spektor; University of Hamburg
Presented by: Mark Spektor, University of Hamburg
2. Dynamic Heat–Eat Trade-offs under Climate Shocks Abstract Households exposed to temperature shocks often face a short-run trade-off between keeping cool or warm and maintaining food consumption. This paper quantifies how food and energy budget shares adjust over time after hot and cold shocks, and how these dynamics differ by household wealth. Using nationally representative household panel data from India linked to state-level temperature shock measures, we estimate panel local projection models to trace the time path of consumption-share responses. We find that both hot and cold shocks induce significant reallocation between food and energy. Poorer households exhibit larger and more persistent trade-offs, consistent with tighter liquidity and limited capacity to smooth consumption. Wealthier households adjust more gradually and preserve relatively higher spending on essential goods during shocks. Interactions between temperature shocks and wealth reveal substantial heterogeneity in adaptive capacity. A battery of robustness checks indicates that the results are not driven by time-invariant household characteristics, price-induced expenditure effects, alternative shock definitions, and state-specific heterogeneity. Overall, temperature shocks reshape household consumption trajectories in ways that are dynamic and unequal, with implications for welfare policy design and climate adaptation in low- and middle-income settings.
By Jaya Gupta; IIT BOMBAY    Sandeep Mohapatra; University of Alberta, Canada    Puja Padhi; IIT BOMBAY
Presented by: Jaya Gupta, IIT BOMBAY
3. A joint assessment of markups and profitability: evidence for Europe over 2007-2022 Abstract This paper examines the evolution of market power in European firms between 2007 and 2022 using firm-level data from the Orbis database. We apply two complementary estimation frameworks: the De Loecker et al. (2020) method (DLEU), which infers markups under the assumption of fully variable intermediate inputs, and the Abraham et al. (2024) approach (ABKR), which jointly estimates price–cost margins, fixed costs, and excess profits. Both methods indicate that average markups in the EU have been broadly stable or only moderately rising over the period, contrasting with the pronounced upward trends documented for the United States. We find that within-firm dynamics, rather than reallocation or entry–exit, drive the modest aggregate increases. Firm-level heterogeneity is substantial: large, listed, and high-tech manufacturing firms exhibit higher DLEU markups but lower ABKR price–cost margins due to lower fixed cost ratios, resulting in higher net profitability. Ownership plays a smaller role in market power differences than firm size.
By Elizaveta Archanskaia; European Commission, DG ECFIN    Yannick Bormans; KU Leuven    Maria Garrone; EU Comission Brussels    WALEED HASSAN; KU Leuven    Anna Thum-Thysen; European Commission, DG ECFIN
Presented by: Elizaveta Archanskaia, European Commission, DG ECFIN
4. Climate and industrial policy with carbon border adjustment Abstract We study how climate and trade policies should be coordinated to improve efficiency and level the playing field while achieving a global greenhouse gas emissions target. We distinguish between cost-effectiveness—the cost of achieving the target— and allocative efficiency—the realization of gains from trade across countries. When trading partners face heterogeneous carbon prices, a carbon border adjustment mechanism (CBAM) levels the playing field and improves cost-effectiveness, but at the expense of allocative efficiency. The carbon price should be lowered to improve both efficiency and fair competition while achieving the same global emissions target. We further analyse how CBAMs should be adapted to different policy regimes, including cap-and-trade systems with free allowance allocation and emissions-intensity standards. Finally, we consider a setting in which one trading partner subsidises decarbonisation (green industrial policy) rather than pricing carbon.
By Federico Esposito; Universita Milano-Bicocca
Presented by: Federico Esposito, Universita Milano-Bicocca
Session 24: Macro III: Fiscal Policy July 14, 2026 16:00 to 18:00 Location: H GE 33.1
1. Fiscal Multipliers and Political Fragmentation Abstract This paper provides novel empirical evidence on how political fragmentation shapes the fiscal transmission mechanism. Using data from 16 OECD countries (1978-2019) and narrative accounts to identify exogenous fiscal interventions, we show that when political fragmentation is high, the fiscal GDP multiplier is significantly lower. The multiplier is above unity and relatively stable over time when fragmentation is low, but generally well below unity when fragmentation is high. We show that fiscal interventions are comparable across states and argue that a conditional confidence channel helps explain our findings: only in low-fragmentation periods do fiscal interventions boost household and business confidence, translating into stronger consumption and investment responses.
By Ricardo Duque Gabriel; Federal Reserve Board    Mathias Klein; Sveriges Riksbank    Marvin Noeller; RWI - Leibniz Institute for Economic Research
Presented by: Marvin Noeller, RWI - Leibniz Institute for Economic Research
2. Implications of Inflation Forecast Targeting for Fiscal Policy Abstract Many modern central banks, like the ECB, explicitly tie their monetary-policy decisions to inflation forecasts at medium-term horizons. Standard New Keynesian models, however, typically abstract from this feature by assuming Taylor rules that respond to contemporaneous or short-horizon expected inflation. This paper studies equilibrium determinacy in a New Keynesian model in which monetary policy targets inflation at a forecast horizon larger than one. We show that forward-looking Taylor rules fundamentally alter the determinacy properties of the model. When policy reacts to sufficiently distant inflation expectations, monetary policy may fail to pin down a unique equilibrium, and stronger reactions to inflation can enlarge rather than shrink the indeterminacy region. This indeterminacy arises from a gap between the inflation rates that the central bank can control and those to which it reacts. Whether monetary policy can achieve determinacy on its own depends critically on the slope of the New Keynesian Phillips curve. We characterize a threshold value of the Phillips-curve slope below which monetary policy can sustain determinacy and above which it cannot. A sufficiently flat Phillips curve weakens the transmission from expectations to current inflation and preserves a determinacy region for monetary policy alone, extending the standard Leeper (1991) classification by an additional structural constraint. By contrast, when the Phillips curve is sufficiently steep, monetary policy cannot achieve determinacy regardless of the size of the inflation response. In this case, introducing fiscal policy restores determinacy in a robust way, but requires fiscal policy to not actively stabilize government debt. This implies that inflation forecast targeting at medium horizons places monetary policy in a passive position and invites fiscal dominance.
By Sophia Oberbrinkmann
Presented by: Sophia Oberbrinkmann,
3. Fiscal Inflation in a Currency Union Abstract This paper studies how funded and unfunded fiscal expansions propagate in a currency union. A funded fiscal expansion implies future tax adjustments, allowing the central bank to control inflation, whereas an unfunded one lacks such adjustments, requiring the central bank to accommodate fiscally driven inflationary pressures. In euro area local projections, fiscal expansions in Germany and Italy are inflationary domestically and in other countries, while fiscal expansions in France are not and are followed by a more contractionary monetary response. We interpret this heterogeneity through a model with partially unfunded debt in the spirit of Bianchi, Faccini, and Melosi (2023). In the model, funded fiscal expansions imply divergent inflation within the union, whereas unfunded fiscal expansions generate union-wide inflationary spillovers because monetary policy accommodates fiscal inflation. This mechanism maps closely to the empirical patterns. The estimation of the quantitative model confirms that Germany and Italy experienced a higher share of unfunded shock than France since the start of the euro area.
By Momo Komatsu; Federal Reserve Board    David Murakami; Bank of England    Ivan Shchapov; Institut Polytechnique de Paris
Presented by: David Murakami, Bank of England
4. Causal Macroeconomic Effects of Public Investment Abstract This paper estimates the causal impact of public investment on economic activity in European economies. While the literature generally agrees that public investment multipliers exceed those of public consumption, existing estimates vary widely and are often based on approaches that are affected by anticipation effects and endogeneity. The methodology of this study is based on forecast errors of public investment as instrument that overcomes endogeneity and anticipation issues. We construct a novel dataset of plausibly exogenous and unexpected forecast errors of public investment based on the historical Economic Outlooks of the European Commission, which covers 18 European countries between 2002 and 2023. Our methodology is also the first to correctly calculate the dynamic and cumulative multipliers of public investment by comprehensively accounting for the full impact of forecast errors on the economy. We find that the cumulative multiplier of public investment reaches approximately 2.1 after five years, with most of the effect materialising within the first two to three years. We also check how its magnitude changes in different economic conditions, and our findings are similar to those established in the literature: public investment has a significantly larger impact on economic growth during recessions, when public debt is low and when the existing public capital stock is relatively low.
By Olegs Matvejevs; Latvijas Banka    Oļegs Tkačevs; Latvijas Banka
Presented by: Olegs Matvejevs, Latvijas Banka
Session 25: Dinner July 14, 2026 20:00 to 22:00 Location: Dozentenfoyer
Session 26: Registration July 15, 2026 8:30 to 11:00 Location: Foyer
Session 27: Political Economy IV: Conflict and Security July 15, 2026 9:00 to 11:00 Location: H GE 21
1. Violent Insurgencies and the Spatial Reorganisation of Economic Activities Abstract This paper examines how the Maoist–Naxalite insurgency reshapes the spatial organisation of economic activity in India between 2016 and 2020. Using georeferenced conflict data combined with satellite-based proxies for economic activity, we distinguish between non-farm and farm activity within the Red Corridor. Non-farm activity is measured using night-time light luminosity, while land-based activity is proxied by the Normalised Difference Vegetation Index (NDVI). To address endogeneity in insurgency exposure, we instrument violent clashes with prior disruptions to the insurgency. The estimates show that a 0.1 unit increase in insurgency expo- sure reduces night-time light luminosity by 18.04% and (weakly) increases NDVI by 0.36% in the following year. The findings suggest that insurgency generates a unique heterogeneous spatial reorganisation of economic activity rather than a uniform contraction. We attribute this divergence to the insurgency’s ideological motivation, not seen in any other form of disorder. Our results are robust to a battery of alternative specifications and tests.
By Kaustabh Adhya; University of Kent    Malavika Thirumalai Ananthakrishnan; Azim Premji University
Presented by: Malavika Thirumalai Ananthakrishnan, Azim Premji University
2. War's Ripple Effect: Regional Banking Dynamics in Times of Conflict - Insights from Ukraine. Abstract This paper examines the impact of the full-scale Russian invasion on regional banking activity in Ukraine, focusing on differences across regions directly affected by military operations, neighboring areas, and non-occupied regions. Using a dynamic difference-in-differences approach with multiple treatments, we find that war-induced disruptions extend beyond directly occupied regions, significantly influencing lending and deposit behavior also in regions neighboring the frontline. Lending in long-term occupied regions experienced the most severe decline, while short-term occupied areas and Kyiv also saw substantial reductions over time. Notably, the lending contraction in the regions neighboring occupied areas followed a pattern similar to that in the temporarily occupied regions, highlighting significant spillover effects. The shift toward short-term lending intensified in all affected regions, reflecting heightened financial uncertainty. The war also led to a widening of interest rate spreads, particularly in Kyiv and short-term occupied areas, signaling elevated credit risk. Although deposits grew, lending remained limited after liberation, highlighting ongoing economic stagnation and constraint created by the partial dollarisation of the economy. These findings have crucial implications for post-war recovery policies, emphasizing the need for targeted financial support that should be extended beyond the regions directly involved in a war.
By Soňa Sivá
Presented by: Soňa Sivá,
3. NATO Membership and Defense Spending: A Causal Analysis Abstract A well-established body of research on NATO burden-sharing supports the view that allies free-ride on each other's defense contributions. It hinges on the important idea that, absent the alliance, the members would spend more. We test directly and causally one key mechanism underlying this notion: does joining NATO lead countries to reduce military spending relative to otherwise comparable non-members? We restrict the analysis ex ante to post-1991 entrants and geopolitically comparable non-members exposed to broadly similar Russian security pressure, and employ modern panel difference-in-differences methodology for staggered adoption and heterogeneous treatment effects. To investigate anticipatory adjustment, we also analyze the NATO Membership Action Plan (MAP) as an earlier potential treatment. Across specifications, we find no evidence that NATO accession or MAP participation induces systematic cutbacks. One-sided bounds exclude medium- and long-term average spending reductions larger than about 0.20–0.30 p.p. of GDP, ruling out effects of the magnitude that would constitute substantively meaningful free-riding. These findings suggest that NATO's accession process has not encouraged moral hazard-driven cutbacks, at least in the post-1991 era.
By Ringailė Kuokštytė; Vilnius University    Denis Ivanov; Vilnius University    Vainius Indilas; Vilnius University    Vytautas Kuokštis; Vilnius University
Presented by: Ringailė Kuokštytė, Vilnius University
Session 28: Climate IV: Industrial Policy July 15, 2026 9:00 to 11:00 Location: H GE 33.3
1. Market Efficiency and Geopolitical Policies: An Event Study of the Semiconductor Industry Abstract The semiconductor industry, a cornerstone of modern technology, is vital for advancements across various sectors. In response to intensifying global competition, the United States has implemented key regulatory measures to strengthen its semiconductor capabilities, including the Advanced Computing/Supercomputing Interim Final Rule. Using an event study methodology, this article examines the impact of these export controls on the stock prices of publicly-traded semiconductor companies. The findings reveal that the Advanced Computing/Supercomputing Interim Final Rule negatively impacted stock prices in the short term, highlighting the market’s sensitivity to geopolitical policies. Understanding these market reactions is crucial for gauging investor confidence, informing policymakers, and guiding future research on the broader economic and strategic impacts of such regulations.
By Fatjon Kaja; University of Amsterdam
Presented by: Fatjon Kaja, Goethe University Frankfurt
2. Global Patterns of Energy Demand under Climate Change Abstract This paper investigates how climate change influences global energy demand by estimating the effects of temperature and income on electricity and fossil fuel use in the residential and commercial sectors. Unlike previous studies that adopt piecewise-linear frameworks to capture nonlinear global patterns, this study applies fixed-effects and dynamic OLS estimators within a unified quadratic framework using panel data for 48 countries from 1976 to 2019 to identify the marginal effects of temperature and income. In the residential sector, electricity demand is U-shaped in temperature — declining with warming in cold regions and rising in warm regions—whereas fossil fuel use decreases linearly with warming. Both electricity and fossil fuel demands are inverted U-shaped in income, with a much higher turning point for electricity. In the commercial sector, temperature effects mirror those in the residential sector but are less pronounced: electricity demand remains U-shaped, and fossil fuel use continues to decline linearly. However, electricity consumption increases linearly with income, whereas fossil fuel use retains its inverted U-shape, with a higher turning point than in the residential sector. Sub-sample analyses confirm these patterns, suggesting that low-income countries in warm climates will experience faster growth in energy demand as temperatures rise and incomes increase.
By Dukpa Kim; Korea University    Shijun Cao; Korea University
Presented by: Dukpa Kim, Korea University
3. Power to progress: Electricity Supply, Inequality and Development in Rural India Abstract Electricity access is widely viewed as essential for economic development, yet evidence on its causal effects remains mixed. This paper examines the impact of electricity reliability on education, health, and employment in rural India, focusing on marginalized Scheduled Caste communities in Bihar. I exploit the structure of electricity distribution networks, along with inherent caste biases, to construct an instrumental variable for electricity supply reliability, using the caste composition of electricity feeders as an instrument for supply hours. The first stage results show that supply hours are greater on feeders with a higher composition of upper-caste villages. The results suggest that more reliable electricity supply primarily affects agricultural production. Villages predicted to receive greater electricity supply exhibit higher shares of irrigated land and greater cropping intensity. Electricity reliability is also associated with increased adoption of clean energy and higher nightlight intensity, indicating greater economic activity. However, the results provide limited evidence of short-run effects on health, education, or non-farm employment. These findings highlight the importance of electricity reliability, rather than access alone, in shaping rural development outcomes.
By Hamza Syed; London School of Economics and Political Science
Presented by: Hamza Syed, London School of Economics and Political Science
4. When Does Industrial Policy Gain Traction? WILL and the Problem of Credible Trajectory Formation Abstract Industrial policy has returned to the centre of political economy, yet one question remains under-specified: when do policy sequences become believable enough to reorganise expectations and behaviour over time? Existing scholarship explains why states intervene, how they build capacity, and how production is structured by asymmetric interdependence. It says less about when public action becomes credible as a trajectory rather than a set of measures. This article introduces WILL — Words, Investment, Longevity, and Legitimacy — as a diagnostic framework for analysing trajectory credibility under uncertainty and contestation. It shifts the unit of analysis from isolated instruments to policy sequences, distinguishes non-equivalent profiles of credibility and erosion, and introduces ΔWILL to trace consolidation over time. Applied to the EU semiconductor trajectory, the framework reveals a pattern of strong Words, real but unevenly grounded Investment, emerging but unsettled Longevity, and broad yet materially thinner Legitimacy. Industrial policy gains traction when public action becomes intelligible, consequential, durable, and governable enough that others reorganise around it.
By Tiziana Sodano; Banca d'Italia
Presented by: Tiziana Sodano, Banca d'Italia
Session 29: Immigration II: Political Economy July 15, 2026 9:00 to 11:00 Location: H GE 22
1. United in Victory, Divided in Defeat? Football Performance, Team Diversity, and Immigration Attitudes in Europe Abstract We study how shared experiences that make immigration salient impact public attitudes toward immigration. Combining 11 waves of the European Social Survey (2002-2023) with data on European national football team performance in major international competitions and team diversity, we exploit quasi-random variation in match timing relative to survey interviews to identify shifts in immigration at- titudes. We develop two measures of diversity: a surname-based ancestry index and a racial classification based on visible markers using machine learning tools. We find that following defeats, respondents in countries with a more diverse national team perceive immigrants to have a worse impact on their country. Victories, in contrast, lead to higher desired levels of immigration. These effects are strongest following unexpected or close defeats and victories. In addition, defeats tend to boost support for far-right parties when team diversity is high. Our results are robust to alternative specifications in the case of defeats, suggesting a scapegoating mechanism that is translated from (perceived) out-group players onto the out-group as a whole. Our findings showcase that shared experiences such as international sporting competitions that make diversity salient generate strong emotional responses that may translate into temporary important attitude and preference shifts towards diversity.
By Gauthier Fontanive; University of Luxembourg
Presented by: Gauthier Fontanive, University of Luxembourg
2. Labor-Market Conditions and Endogenous Attitudes Towards Immigration: Theory and Evidence From Europe Abstract This paper examines how labor‑market conditions shape attitudes toward immigrants in Europe. Using repeated cross‑sections from the European Social Survey (2002–2023), we study three distinct dimensions of attitudes toward immigration: its perceived impact on the economy, on the country as a whole, and on national culture. We show that tolerance is highly cyclical and strongly negatively correlated with self‑reported unemployment at the country level. Unemployed individuals, as well as those whose partners are unemployed, express systematically more negative views, especially regarding the economic consequences of immigration. Differences across occupations and income deciles are large and monotonic: low‑skill workers and low‑income households are markedly less tolerant than high‑skill and high‑income respondents, even after conditioning on education, religion, and other socio‑demographic characteristics. Motivated by these patterns, we develop a model with high‑ and low‑skill labor in a frictional labor market, where attitudes reflect wages, unemployment risk, and perceived non‑economic costs and benefits of immigration. The model generates skill‑ and state‑dependent responses to labor‑market and immigration shocks that align with the empirical evidence. Together, our results highlight economic insecurity and labor‑market competition as central drivers of public attitudes toward immigration and underscore the role of labor‑market stability in sustaining social cohesion.
By Salem Abo-Zaid; University of Maryland-Baltimore County    Christelle Viauroux; University of Maryland Baltimore County
Presented by: Salem Abo-Zaid, University of Maryland-Baltimore County
3. Foreign Aid and Migration Abstract Policymakers advocate for foreign aid to reduce the ‘root causes’ of migration at origin despite a lack of scientific evidence on the effectiveness of such policies. We examine the global effects of aid on migration by combining georeferenced data on World Bank project announcements and disbursements from 2008–2019 with survey data on migration preferences of one million individuals worldwide and bilateral migration flows. Employing event studies and instrumental variable regressions, we find that in the short term, aid improves expectations of the future and trust in institutions, reducing individual migration preferences and asylum seeker flows. In the longer term, aid increases incomes, leading to more regular migration, consistent with the ‘mobility transition’ theory.
By Lukas Wellner; Monash University
Presented by: Lukas Wellner, Monash University
Session 30: International IV: AI and Globalization July 15, 2026 9:00 to 11:00 Location: H GE 23
1. Reshoring Policies in the Intangible Economy Abstract Incorporating intangible scalability into a two-country general equilibrium model with firm heterogeneity and endogenous entry, this paper analyzes the macroeconomic effects of reshoring policies—lump-sum subsidies, tax credits, and tariffs—on intangible-intensive offshoring firms. Reshoring subsidies stimulate the domestic economy as repatriated intangible investments raise firm profits and wages. Specifically, tax credits maximize reshored value-added by attracting high-productivity firms, whereas lump-sum subsidies draw lower-productivity firms. Conversely, tariffs persistently suppress output by contracting foreign demand and eroding the domestic export base. Ultimately, when policies target intangible-intensive offshore firms, the scalability of intangible capital induces transitional welfare gains.
By Jiyoung Lee; University of Washington, Bank of Korea
Presented by: Jiyoung Lee, University of Washington, Bank of Korea
2. Schumpeter meets Marx: AI, Robots and the Political Economy of Jobless Recoveries Abstract This paper investigates the ramifications of technology adoption on the European labor force during the Great Recession by employing a difference-in-difference methodology on a highly granular dataset linking European Social Surveys to AI and robot data. In response to crisis-induced fluctuations in aggregate demand, firms adjusted their workforce, subsequently facing a choice between re-hiring employees or adopting new technologies during the recovery phase. Our theoretical framework posits that a firm’s decision to adopt a technology and the subsequent impact on their workers depend on the inter-play between technology type and workers’ skills. Our analysis reveals that technology adoption is more pronounced in sectors experiencing a jobless recovery, where firms use technology to substitute labor during economic downturns. However, in the post-crisis period, AI uniquely complements high-skilled workers who benefit from this adoption, while the adoption of robots does not confer analogous benefits to low-skilled workers in sectors facing greater routinization.
By Tommaso Crescioli; Bocconi University    Angelo Martelli; LSE    Tim Vlandas; University of Oxford
Presented by: Angelo Martelli, LSE
3. Data, Power and Emissions: The Environmental Cost of AI Abstract We study the environmental impact of artificial intelligence (AI) using a novel dataset that links measures of AI penetration, the location of data centers and power plants, and CO2 emissions across US commuting zones between 2002 and 2022. Our analysis yields four main findings. First, exploiting a shift–share identification strategy, we show that localities more exposed to AI experience relatively faster emissions growth. Second, decomposition results indicate that scale effects dominate, while changes in industrial composition exert at most a weak mitigating effect; at the same time, electricity generation becomes more carbon intensive. Third, AI penetration raises dependence on non-renewable electricity. Fourth, proximity to data centers is a key driver of this effect, as nearby power plants shift toward greater fossil fuel use. These findings suggest that, absent a rapid decarbonization of power generation, the diffusion of AI is likely to exacerbate environmental externalities through the energy demand of data centers.
By Alessandra Bonfiglioli; University of Bergamo    Rosario Crinò; Università degli Studi di Bergamo    Mattia Filomena; University of Bergamo    Gino Gancia; University of Milan, Bicocca
Presented by: Gino Gancia, University of Milan, Bicocca
Session 31: Macro IV: Monetary Policy July 15, 2026 9:00 to 11:00 Location: H GE 33.1
1. International Transmission of Monetary Shocks: Firm Level Evidence Abstract We examine the international transmission of US monetary policy shocks to European firms using high-frequency identification and granular firm-level panel data. Exploiting monetary policy surprises around FOMC announcements combined with firm-level data across eight European economies over 2004–2024, we document a sharp divergence in spillover effects. A contractionary US monetary shock significantly reduces investment rates and sales growth among UK firms, with investment declining by approximately 4% and sales growth by around 0.7–0.8% at peak, with effects persisting for two to four years. By contrast, Continental European firms, whether members of the euro area or independent- currency economies such as Sweden and Switzerland, do not exhibit a significant response. Heterogeneity analysis reveals that large and small UK firms bear broadly similar average burdens, with large firms showing more precisely estimated responses, while leverage does not systematically differentiate transmission. The UK–EU divergence is not explained by the exchange rate regime: the null result for Continental Europe extends to non-euro countries, pointing instead to the exceptional depth of UK–US financial integration, and the centrality of London in global dollar funding markets.
By Kerim Peren ARIN; Zayed University
Presented by: Kerim Peren ARIN, Zayed University
2. Import Tariffs and the Systematic Response of Monetary Policy Abstract We estimate the macroeconomic effects of U.S. import tariff shocks using several tariff measurement and identification approaches. Tariff shocks reduce output but increase consumer prices. Monetary policy partially accommodates these shocks with a policy easing. To quantify the dependence on systematic monetary policy, we use empirically identified monetary policy shocks to construct counterfactuals that are robust against model misspecification and the Lucas critique. When monetary policy strictly stabilizes inflation, the output contraction at the trough is 36% larger than in the baseline. In contrast, strict output stabilization implies a peak inflation effect that almost doubles compared to the baseline.
By Alessandro Franconi; Banque de France    Lukas Hack; ETH Zürich / University of Mannheim
Presented by: Alessandro Franconi, Banque de France
3. When Did the Balance Sheet Become a Monetary Policy Tool? Evidence from the Bank of Italy across the 20th Century Abstract This paper contributes to the ongoing debate on central bank balance sheet (CB-BS) policies by examining the evolution of the Bank of Italy’s balance sheet (BS) over the entire 20th century. Using a range of VAR models and identification schemes, the analysis investigates both the CB-BS reaction function to macroeconomic conditions and the macroeconomic effects of BS expansions. The results show that in Italy, throughout the century, both BS responses and impulses closely resemble those traditionally attributed to conventional monetary policy instruments as well as those observed during the recent episodes of unconventional BS expansions. The paper therefore concludes that the CB-BS has consistently functioned as a monetary policy instrument. Specifically, on the reaction side, the BS contracted in response to positive inflation shocks and exchange rate depreciations, and it expanded following positive shocks to real output and government debt. On the effects side, exogenous BS expansions were followed by significant growth in output and trade, increase in inflation, and exchange rate depreciation. The role of the BS as a monetary policy tool evolved from the early 1980s onward, when policy interest rates became internationally the primary instrument for controlling inflation. Even in the latter part of the century, however, the BS did not cease to function as a monetary policy instrument. Rather, it operated alongside the policy rate, with the two instruments exhibiting increased mutual responsiveness and contemporaneous but opposing effects on inflation, thereby allowing the BS to pursue specific policy objectives without undermining the anti-inflationary role of the policy rate.
By Massimiliano Affinito
Presented by: Massimiliano Affinito, Banca d'Italia
4. Ample Reserves and Deposit Pass-Through Abstract This paper studies how the euro area transition from a scarce-reserves operating framework to an ample-reserves regime with fixed-rate full allotment changed the pass-through from policy rates to household current account rates. Using IV local projections identified with high-frequency monetary policy surprises, I show that deposit-rate pass-through is low, substantially weaker in the ample-reserves era than in the pre-2008 scarce-reserves regime, and decreasing in country-level reserve abundance. To interpret these facts, I first develop a simple bank model in which deposit and lending rates are priced off the expected marginal cost of non-deposit funding, and reserve scarcity lowers the probability of obtaining policy-rate liquidity. I then embed the mechanism in a dynamic two-household New Keynesian model with bank intermediation. Patient savers hold both bonds and deposits; deposits provide utility services and feature deep habits, giving banks dynamic market power in deposit pricing. Impatient households borrow from banks. Banks set administered deposit and lending rates and adjust them gradually in Calvo fashion. Banks also face an expected marginal cost of non-deposit funding that depends on reserve abundance and the operating framework. The model provides a tractable bridge from the empirical evidence to richer HANK-with-banks environments and motivates future work with bank-level data.
By Guido Spano; University College London (UCL)
Presented by: Guido Spano, University College London (UCL)
Session 32: Coffee break July 15, 2026 11:00 to 11:30 Location: Foyer Audimax
Session 33: Keynote Lecture II: “Is There a Peace Formula?” — Dominic Rohner (Geneva Graduate Institute and CEPR) July 15, 2026 11:30 to 12:30 Location: Audi Max (HG F 30)
Session 34: Lunch July 15, 2026 12:30 to 13:30 Location: Foyer Audimax
Session 35: Development III: Foreign Aid July 15, 2026 14:00 to 16:00 Location: H GE 23
1. FISCAL RESPONSE IN THE PRESENCE OF AID HETEROGENEITY UNDER POLITICAL REGIME CHANGE: NEW EVIDENCE FROM PAKISTAN Abstract This paper explores the effects of temporary and permanent components of foreign aid grants and loans on fiscal decisions amid changes in Pakistan's political regime over the period 1973-2020. The results show that political regimes change leads to higher government current expenditures driven by political polarization, resulting in increased foreign loans. In contrast, foreign grants are mainly influenced by donor interests and intentions in aid recipient countries, but political regimes change are irrelevant. The response of fiscal variables to political regimes change reflect conditionalities linked to foreign aid inflows, particularly via the IMF, such as increased revenue and debt service to reduce average debt maturity, thereby reducing domestic borrowing. However, current expenditures increase, thereby reducing capital expenditures due to political polarization for foreign loans and, vice versa, for foreign grants. Moreover, it affects only temporary aid components as temporary loans do not significantly affect fiscal decisions; conversely, temporary grants support revenue-based fiscal adjustments by boosting revenue and domestic borrowing to cover increased debt service payments and current expenditures, thereby reducing public investment. Permanent loans promote investment and domestic borrowing but reduce current spending, without affecting tax revenues and debt service payments. Permanent grants, on the other hand, increase government borrowing, revenue, and overall government size. The findings suggest that aid donors should focus on grants rather than loans for heavily indebted countries and implement debt relief initiatives to prevent aid from being used solely for debt service repayment. Conditional aid should be provided to strengthen political institutions in order to reduce government size through expenditure-based fiscal adjustments. Additionally, temporary aid grants should be used for revenue-led fiscal adjustments, and permanent aid should target investment in countries with low GDP growth.
By Imran Farooq; University of Antwerp
Presented by: Imran Farooq, University of Antwerp
2. The Local Impact of Global Assistance: Sub-national Evidence linking Aid and FDI Abstract This study analyzes the empirical link between development finance projects and Foreign Direct Investment (FDI) at the sub-national level. Specifically, a unique dataset is constructed by merging geo-referenced development aid projects for the time period 2003 - 2022 with FDI project data to investigate three research hypothe- ses, finding that: (i) development finance project activity displays a statistically significant positive effect at FDI inflows at the sub-national level; (ii) this positive link between aid and FDI is of larger magnitude for infrastructure sectors; and (iii) the positive link is more pronounced in more developed countries. We find no robust relationship when pooling all donors. However, ODA from Germany and the United States is positively associated with higher FDI inflows. We examine German ODA in greater detail. An instrumental variable approach provides suggestive causal evidence, particularly for FDI originating from Eu- rope. The results further suggest that the presence and intensity of German ODA projects matterwith stronger effects observed in regions such as South Asia and Sub-Saharan Africa. Overall, these findings highlight the importance of donor- specific dynamics and a sub-national approach in understanding the aid–FDI rela- tionship.
By Lennart Kaplan; Georg-August University of Göttingen    Laura Wedemeyer; Georg-August-Universität Göttingen
Presented by: Laura Wedemeyer, Georg-August-Universität Göttingen
3. Localized Disparities in Climate Finance: The Sub-National Allocation of World Bank Mitigation and Adaptation Aid in Least Developed Countries Abstract Least developed countries (LDCs) contribute minimally to global greenhouse gas emissions yet face disproportionate risks from climate change. To address this inequity, high-income countries have pledged substantial climate finance to support LDCs in both mitigation and adaptation efforts. While existing research provides important insights on climate finance, two important gaps remain: most studies examine adaptation and mitigation finance separately, and few assess allocation patterns below the national level. This limits understanding of whether funds reach the areas where they are most needed or have the biggest impact. This article addresses these gaps by analyzing the sub-national allocation of World Bank–funded climate finance projects in 14 LDCs in Asia and Oceania between 2000 and 2019. We coded 780 projects according to their adaptation and/or mitigation objectives and mapped them to their specific geographic locations. Using two-way fixed effects regression, we test whether adaptation finance is directed toward more climate-vulnerable regions and whether mitigation finance targets areas with higher emission reduction potential. Our results provide a nuanced picture. Consistent with our theoretical expectations, adaptation projects are more likely to be allocated to poorer, more vulnerable sub-national regions. In contrast, the allocation of mitigation projects does not consistently favor more economically developed areas with higher emissions reduction potential. These findings highlight the value of analyzing adaptation and mitigation finance jointly and at the sub-national scale. By doing so, the study advances understanding of how multilateral climate finance is distributed and contributes to broader debates on climate justice and aid allocation.
By Niklas Haenze; University of Konstanz    Viktoria Jansesberger    Gabriele Spilker; University of Konstanz
Presented by: Viktoria Jansesberger,
Session 36: Political Economy VI: Incentives and Information July 15, 2026 14:00 to 16:00 Location: H GE 33.3
1. Tax me if you can: Philanthropy, Tax Incentives and Inefficiency Abstract Whether philanthropy is an e effective way to correct market (as well as political) failures has been under scrutiny. Yet, governments provide generous tax incentives to philanthropists; and when the wealthiest citizens create foundations with their names and donate millions in order to provide public goods, society welcomes their behavior with enthusiasm. In this paper, we investigate the conditions under which philanthropists improve social welfare by providing alternative public goods, when philanthropy is rewarded with tax credits, as in many European countries and US states. Our results indicate that when the technology of provision of public goods exhibits increasing returns to scale, a philanthropist can create inefficiencies through two channels: inefficiencies in the production of public goods, but also through changes in the behavior of the median voter. More specifically, we  find that when the median voter is of intermediate income, she may prefer a lower tax rate in the presence of a philanthropist; this will decrease or increase total welfare, depending on the relative difference between the average and median incomes. In our setting, any increase of total welfare with philanthropy is due to rich individuals' welfare increases at the cost of poor individuals' welfare decreases.
By Agustin Casas; CUNEF Universidad    Chara Papioti; Universitat Pompeu Fabra
Presented by: Chara Papioti, Universitat Pompeu Fabra
2. Neutral News as a Bridge to Broader Opinion Exposure Abstract This paper examines how individuals with limited attention choose between neutral and biased news sources. I develop a model in which agents choose a portfolio of media outlets to learn about an uncertain state of the world. While confirmation bias arises when only biased sources are available, the presence of a sufficiently precise neutral source fundamentally alters optimal information acquisition. For illustration, consider an agent evaluating a policy such as the European Green Deal. In addition to a neutral outlet, she can consult newspapers biased in favor of or against the policy. A pro-policy source tends to confirm her prior, while an opposing source generates ambiguity when reporting negatively. However, when combined with a reliable neutral source, the opposing outlet offers a chance of decisive positive signals, while the neutral source allows her to interpret negative reports. This creates an asymmetric complementarity between neutral and opposing sources. As a result, agents with weak prior beliefs may optimally combine neutral sources with outlets opposing their views, leading to sharper posterior beliefs without any intrinsic preference for disagreement. The findings provide a benchmark for understanding media consumption, polarization, and the role of independent media in European policy debates.
By Tereza Buryskova; CERGE-EI
Presented by: Tereza Buryskova, CERGE-EI
3. Removing the Toll Barrier Abstract We study how the rent-seeker (Lord) who controls the road to a market would relax the trade barriers under the threat of a conflict with this central authority (the King). We explore a theoretical model in which the Lord reduces trade to a monopoly by imposing a high toll when there is no threat of conflict. We show that the Lord decreases the toll and allows several merchants to cross his land under the threat of conflict with a King, but does not remove it completely. In equilibrium, this decrease of the toll at pre-conflict stage increases the Social Welfare generated on the market by at least 56% of what is theoretically possible. We also discuss the extensions with several Lords on the road and several roads to the central market. Only competition among multiple routes can lead to significantly lower trade barriers.
By Artyom Jelnov; Ariel University    Artem Razumovskii; ERUNI, QSMS BME
Presented by: Artem Razumovskii, ERUNI, QSMS BME
Session 37: Political Economy V: Inequality and Redistribution July 15, 2026 14:00 to 16:00 Location: H GE 21
1. Drivers of Cross-Country GDP Inequality in Europe: A Two-Stage Factor Decomposition, 1990–2024 Abstract Between-country GDP inequality in Europe fell markedly from the early 1990s to the eve of the global financial crisis, but convergence later stalled and partly reversed. This paper studies the macroeconomic sources of this shift by decomposing cross-country GDP inequality into expenditure-side, income-side, demographic, and productivity-related channels. Using annual OECD National Accounts data for 17 European countries over 1990–2024, we develop a non-parametric two-stage decomposition that combines a counterfactual Shapley procedure with a Shorrocks factor decomposition. The approach yields an exact and interpretable accounting of inequality while separating demographic effects from per-capita GDP dynamics. We find that the pre-crisis decline in inequality was mainly driven by wage- and consumption-led convergence, supported by narrowing productivity gaps. Since the 2000s, however, export dispersion has become the main source of divergence, while profits have increasingly replaced wages as the income-side channel through which productivity differences translate into cross-country inequality.
By Giuseppina Autiero; University of Salerno    Antonio Abatemarco; University of Salerno    Claudia Avossa; University of Salerno
Presented by: Giuseppina Autiero, Università di Salerno
2. Nowcasting the Income Distribution Abstract This paper proposes a transparent and operational framework to nowcast the income distribution in real time. We combine decile means of the annual household income distribution with a broad panel of quarterly macroeconomic indicators in a mixed-frequency dynamic factor model (DFM) and implement a disciplined pseudo-real-time evaluation from 1990 to 2024. Factor models that exploit high-frequency macro information systematically improve nowcast accuracy relative to univariate ARIMA benchmarks across the distribution, with the largest gains in the middle. Cross-decile dependence is informative but not the dominant source of gains. Combining variable selection and distribution-structured factors delivers additional benefits at the tails, where predictability is intrinsically weaker. The framework is intentionally portable: it relies on off-the-shelf state- pace tools, handles ragged edges and mixed frequencies, and produces updatable signals suitable for institutional monitoring. It complements microsimulation and functional approaches by supplying evaluable decile-level priors when microdata are delayed, and it can be embedded in broader pipelines that require timely distributional inputs.
By Nina Brehl; DIW Berlin    Geraldine Dany-Knedlik; DIW Berlin    Laura Pagenhardt
Presented by: Nina Brehl, DIW Berlin
3. How does income inequality affect financial returns? A historical perspective Abstract This paper examines the relationship between income inequality and financial market outcomes in 16 developed countries over a long historical period. Using the top 10% and 1% income shares as a proxy for inequality, the results show that greater income concentration is associated with lower future equity and bond returns, as well as decreased volatility in both asset classes over a five-year period. These findings emphasise the importance of inequality as a pivotal macro-financial factor that influences both expected returns and risk dynamics. Our results are consistent with existing literature on potential distortions that income inequality could bring to asset demand. They could be explained by factors such as heterogeneous agents, limited market participation, and other global imbalances, including savings and demographics.
By Anjeza Kadilli; University of Applied Sciences of Western Switzerland, Geneva    Benoit Mojon; Bank of International Settlements
Presented by: Anjeza Kadilli, University of Applied Sciences of Western Switzerland, Geneva
4. Inequality and Redistribution in Switzerland: Evidence from Distributional National Accounts (DINA) Abstract This paper presents the first Distributional National Accounts (DINA) for Switzerland. Combining detailed individual-level income and wealth tax data with survey and national accounts information, we provide a comprehensive and internally consistent view of the distribution of income, wealth, and taxation across the entire population. Our analysis sheds new light on how economic and wealth growth has been shared across the distribution, how the burden of income, wealth, corporate, and consumption taxes is borne, and how progressive the Swiss tax system is overall. Exploiting Switzerland’s strong fiscal federalism, we further examine how local tax competition shapes inequality and redistributive outcomes, and assess the role of different types of taxes.
By Enea Baselgia; ETH Zurich    Remo Gurtner; KOF, ETHZ    Julian Koller; ETH Zürich    Isabel Martinez; ETH Zurich
Presented by: Remo Gurtner, KOF, ETHZ
Session 38: Immigration III: Integration July 15, 2026 14:00 to 16:00 Location: H GE 22
1. From Sponsorship to Right-to-Work: Immigration Screening Signals, AI Exposure and Salary Setting in UK Online Job Advertisements. Abstract (1)Purpose - This paper examines how the end of EU free movement, or so-called Brexit-related policy change, reshaped salary-setting and recruitment behaviour in the UK vacancy market, focusing on whether post-Brexit immigration reform changed the relative pay of vacancies containing immigration-related screening signals, and whether these effects varied by AI-related hiring and by an occupation’s baseline AI exposure. It contributes to debates on whether immigration tightening raises salaries uniformly through labour-supply contraction, or instead generates segmented adjustments driven by firms’ eligibility constraints and technology–task composition. (2)Design/methodology/approach - Using near-universe UK online job advertisements from Adzuna (2020–2023), the paper constructs a transparent, auditable text-based measure of Negative Screening Signals (NSS) capturing (i) right-to-work/no-sponsorship clauses, (ii) nationality/citizenship restrictions, (iii) UK security clearance/residency requirements, and (iv) high English-language barriers. Vacancies are also classified by AI status using an AI-skill indicator and are linked to a Felten-style AI Occupational Exposure (AIOE) gradient. The empirical strategy combines (1) descriptive time-series evidence on screening intensity; (2) vacancy-level OLS models of log posted wages with rich controls and fixed effects; (3) distributional difference-in-differences using unconditional quantile (RIF) regressions; and (4) a within-firm DiD/DDD design around 1 January 2021, exploiting the policy discontinuity associated with the implementation of the post-Brexit migration system. (3)Empirical Findings - Screening language expands sharply after 2021, but predominantly outside AI hiring indicating a broad-based post-policy shift in stated eligibility requirements. AI vacancies and screened vacancies both post higher salaries on average. However, screening compresses the AI salary premium. The key causal result is that, within AI vacancies, screened postings become relatively less well paid after the end of EU free movement than comparable non-screened AI postings. This negative post-2021 screening effect is substantially weaker in jobs with higher AIOE, suggesting that more technology-intensive roles were better able to absorb part of the pay reduction associated with tighter screening constraints (consistent with heterogeneity by task composition and recruiting margins). Distributionally, the post-2021 divergence is weakest at the lower tail and strongest at the upper tail, implying that the interaction between screening and AI is most consequential for high-paid vacancies. Spatial evidence further shows that the repricing of screened vacancies is geographically uneven across UK ITL2 areas and London boroughs, pointing to a fragmented adjustment rather than a uniform national wage response. (4) Contribution - The paper contributes to European labour and political economy research in four ways: (i) it provides new evidence on how a major institutional change in mobility rights alters firm screening and wage-posting in real time; (ii) it connects immigration-policy tightening to the emerging literature on AI exposure and labour-market adjustment, showing that technology-intensive jobs weaken the post-policy screening penalty; (iii) it highlights that post-Brexit adjustment is segmented across vacancy types (screened vs non-screened; AI vs non-AI) and concentrated in the upper tail of posted wages; and (iv) it documents regional fragmentation, informing policy debates on place-based inequality and the uneven consequences of immigration reform. (5) Originality - First, the paper introduces a scalable text-based measure of immigration-related screening from vacancy descriptions that captures firms’ ex-ante eligibility constraints rather than relying on realised migrant outcomes. Second, it links post-Brexit screening behaviour to AI-related hiring and occupational AI exposure, showing that the wage incidence of immigration tightening depends on technology–task composition. Third, it demonstrates that the adjustment is distributionally and spatially heterogeneous, which would be missed by average wage comparisons alone.
By Cagri Yuksel; Queen Mary University of London
Presented by: Cagri Yuksel, Queen Mary University of London
2. Making immigration work: The role of productivity Abstract Whether immigration benefits host countries depends on the extent of the human capital transferred at destination and the associated productivity gains. In this paper we extend Burstein et al. (2020) to analyze how immigrants from origin countries with heterogeneous sector-specific productivity differentials affect aggregate productivity and wages in the host economy. The model highlights the role of sectoral allocation. Counterfactual simulations suggest that re-allocating the existing immigrant workforce across sectors according to their origin-specific productivity, would raise average productivity of the US by 21 percent.
By Matteo Neri--Lainé; CEPII    Gianluca Orefice; University Paris-Dauphine, PSL    Hillel Rapoport; Paris School of Economics    Gianluca Santoni; Paris School of Economics
Presented by: Gianluca Orefice, University Paris-Dauphine, PSL
3. Do Immigrants Impact Local Public Finances? Evidence from Belgium Simona Abstract This paper estimates the causal impact of immigration on municipal public finances in Belgium. Using administrative data on local revenues and expenditures, we study how immigration affects tax collection and public spending. To address endogeneity, we use an instrumental-variable strategy exploiting historical settlement patterns. We uncover substantial heterogeneity in fiscal effects by immigrants’ skill composition. While, on average, immigration is associated with lower municipal expenditures and neutral to slightly negative revenues, these aggregate effects conceal sharp differences: Immigrants from EU countries slighlty increase municipal revenues without significantly affecting expenditures. In contrast, immigration from non-EU countries leads to reductions in both revenues and spending, largely due to a narrower tax base that results in lower allocations for security and social assistance. This decline in social spending is accompanied by a redistribution of benefits away from non-European immigrants and toward Belgian residents, indicating that municipalities tend to cope with immigration-induced fiscal pressure by rationing welfare benefits rather than expanding their budgets.
By Simona Fiore; Università di Verona    Jérôme Gonnot; Université Catholique de Lille (ESPOL)    Anna Maria Mayda; Georgetown University
Presented by: Jérôme Gonnot, Université Catholique de Lille (ESPOL)
4. EU asylum politics: The strategic dimension of the Dublin Regulation Abstract The Dublin Regulation is the cornerstone of the EU asylum system. It stipulates that an asylum application made within the EU must, by default, be processed by the first member state that the applicant entered. Non-compliance with this first-entry rule turns the Dublin Regulation into a strategic environment between border and interior states. We develop a game-theoretic model that yields novel insights about EU asylum politics. Although the Dublin Regulation appears to be weakly enforced in practice, we show that it still skews the distribution of asylum applicants toward the border states. It also gives the border states strategic incentives to provide poor reception conditions. Finally, we compare the Dublin Regulation with two prominent reform proposals. A quota mechanism yields a more efficient outcome, whereas a free-choice system need not.
By Martin Hagen; CUNEF Universidad    Marco Serena; Max Planck Institute for Tax Law and Pub
Presented by: Martin Hagen, CUNEF Universidad
Session 39: Macro V: Frictions July 15, 2026 14:00 to 16:00 Location: H GE 33.1
1. Financial imbalances and macroeconomic tail risks: A structural regime-switching investigation Abstract We first empirically document that excessive credit growth and asset price overvaluations raise the likelihood of financial crises and deepen the severity of associated economic downturns in advanced economies using linear probability models and local projections. We then rationalize these empirical findings in a Markov regime-switching version of a canonical New Keynesian DSGE model with the banking and housing sectors estimated for the euro area, which explicitly accounts for prolonged financial cycles based on hybrid house-price expectations and the nonlinearities arising from financial imbalances. The model offers a framework in which low-probability financial crashes are nested within typical business cycles. We then present several policy applications to show how this framework can be used to conduct structural macro-financial risk analysis depending on the evolution of financial conditions and to assess monetary and macroprudential policies, uncovering key policy trade-offs.
By Yasin Mimir; European Stability Mechanism    Lorenzo Ricci; European Stability Mechanism
Presented by: Yasin Mimir, European Stability Mechanism
2. Recourse versus Non-Recourse Mortgage Debt and Costly State Verification Abstract This paper studies how mortgage recourse — the ability of lenders to pursue borrowers for residual debt after foreclosure — shapes housing and macroeconomic dynamics. I develop a DSGE model with savers, borrowers, strategic default, and an endogenous loan-to-value (LTV) ratio. Stronger recourse compresses steady state spreads whereas house prices, leverage, mortgage debt and, hence, default rates rise. Furthermore, recourse amplifies financial-sector volatility and redistributes welfare, benefiting savers through an insurance-like channel. The analysis highlights the trade-offs inherent in deficiency judgments and their implications for housing-market stability and the broader economy.
By Peter Mihaylovski; University of Hamburg
Presented by: Peter Mihaylovski, University of Hamburg
3. A Heterogeneous Agent New Keynesian Model of Search Frictions and Public Sector Employment Abstract I study how public sector employment affects aggregate output and employment. Although accounting for approximately 25% of the labour force in modern economies, the macroeconomic effects of public sector employment remain largely underexplored. I build a Heterogeneous Agent New Keynesian (HANK) model with unemployment risk, endogenous job destruction, sluggish vacancy creation, and public sector employment. This is the first HANK model that studies this fiscal tool, allowing me to capture key labour dynamics and assess their joint role with unemployment risk in shaping the effectiveness of policy shocks. Calibrated to France, the model shows that public sector employment lowers unemployment and increases aggregate output with multipliers above unity, driven by (i) stronger demand, (ii) labour frictions limiting crowding out, and (iii) reduced unemployment risk–effects that decline in the absence of labour and nominal frictions, and disappear in a representative agent setup. Finally, compared to an increase in benefits, public sector employment is more effective in stimulating economic activity.
By Pavlos Balamatsias; Central Bank of Malta
Presented by: Pavlos Balamatsias, Central Bank of Malta
4. Market Power and Network Structure Abstract This paper studies how market power arises in general production networks with imperfect competition, CES technologies, and endogenous markups. Equilibrium markups depend on the strength of substitution taking place at all downstream stages of production and on the responsiveness of relative prices in the economy. These forces can be expressed analytically as the interaction between two novel indicators: product substitutability, a summary statistic of competitive conditions, and firm criticality, a measure of centrality in production. Both can be quantified using commonly available data without requiring full knowledge of the underlying technological structure. The competitive effects of structural change, originating from technology adoption or policy interventions and reflected in observable market outcomes, can be assessed within this framework. Overall, the results highlight the importance of economy-wide interactions for firm behavior and provide a convenient way to summarize them for practical applications.
By Luca Scotti; Ca' Foscari University of Venice
Presented by: Luca Scotti, Ca' Foscari University of Venice

 

This program was last updated on 2026-06-10 11:27:45 EDT