Contributions published at Department of Economics (Florian Scheuer)

In this Kühne Impact Series, we substantiate our claim that international trade should play a central role in the fight against climate change. The key message is that “buying green” does not necessarily mean “buying local” and that a smart combination of local and foreign sourcing yields the best results. To this end, we construct an exhaustive database on the greenhouse gas emissions related to international trade flows from and to the European Union. Our first main result is that 28% of European trade flows are already green in the sense of bringing about a net reduction in greenhouse gas emissions relative to domestic sourcing. Our second main result is that a simple green sourcing rule could reduce trade-related emissions by 35%. Hence, there is a substantial green sourcing potential remaining in European trade.

Talks of “deglobalization” or “slowbalization” have multiplied in the aftermath of the Great Trade Collapse of 2008/2009. The recent economic shock of the COVID-19 pandemic and the war in Ukraine have re-ignited fears of global value chain disruptions, and lead many in international trade to claim the end of globalization as we know it. In this Kühne Impact Series we examine these facts and find that while few statistics point towards a slowdown in global trade, looking at the broad picture we can still be cautiously optimistic. More concerns arise, instead, when looking at the policy landscape.

This Kühne Impact Series focuses on the EU Emissions Trading System, a cornerstone of the European Green Deal and Europe’s attempt to reach climate neutrality by 2050.1 We discuss how the system has been developed, creates a price on carbon, and the efficiency of the allocation of emissions allowances. Moreover, we analyze the evolution of the EU ETS prices and discuss the recent substantial volatility in the price of the carbon permits. The experience with the EU ETS has been mixed. However, we believe that recent and expected developments will make the system more resilient and reliable – and can ensure a credible and efficient path to carbon neutrality.

The article first gives an overview of how education has shaped economic theory regarding the concept of human capital, and its fruitful application in economic history studies on educational development in the past few years. It then outlines the methodology generally used in quantitative econometric and cliometric analyses, and the data usually used in them – as well as their respective pitfalls. Next, two current digitisation projects in economic history focusing on education – one from an editor’s and the other from a user’s perspective – are presented, before finishing with a “wish list” for the ideal digitised source and a short conclusion.

We build an endogenous growth model with automation (the replacement of low-skill workers with machines) and horizontal innovation (the creation of new products). Over time, the share of automation innovations endogenously increases through an increase in low-skill wages, leading to an increase in the skill premium and a decline in the labor share. We calibrate the model to the US economy and show that it quantitatively replicates the paths of the skill premium, the labor share, and labor productivity. Our model offers a new perspective on recent trends in the income distribution by showing that they can be explained endogenously.

In a model inspired by neuroscience, we show that constrained optimal perception encodes lottery rewards using an S-shaped encoding function and over-samples low-probability events. The implications of this perception strategy for behavior depend on the decision-maker’s understanding of the risk. The strategy does not distort choice in the limit as perception frictions vanish when the decision-maker fully understands the decision problem. If, however, the decision-maker underrates the complexity of the decision problem, then risk attitudes reflect properties of the perception strategy even for vanishing perception frictions. The model explains adaptive risk attitudes and probability weighting as in prospect theory and, additionally, predicts that risk attitudes are strengthened by time pressure and attenuated by anticipation of large risks.

The Chairman Paradox (Farquharson, 1969) is a classical observation in voting games showing that a Chairman endowed with tie-breaking power might end up with her worst outcome. The analysis posits three players whose preferences build a Condorcet cycle and invokes Iterated Elimination of Weakly Dominated Strategies (IEWDS) to select a unique equilibrium. However, IEWDS is a controversial procedure which exhibits well-known weaknesses. This work relies on non-controversial equilibrium refinements instead. For any cardinal payoffs representing the preferences, two pure-strategy equilibria are trembling-hand perfect, the paradoxical one and another one where the Chairman attains her best outcome. The original paradox is restored (and shown not to actually depend on IEWDS) if one considers the stronger concept of proper equilibrium. The analysis casts new light on a classical paradox and illustrates the difference between properness and trembling-hand perfection in a relevant example.

Background: Growing evidence points towards dysfunction of the ventral striatum as a neural substrate of motivational impairments in schizophrenia. Ventral striatal activity during reward anticipation is generally reduced in patients with schizophrenia and specifically correlates with apathy. However, little is known about the cortico-striatal functional connectivity in patients with schizophrenia during reward anticipation and its relation to negative symptoms. Objectives: The aim of this study was to identify categorical group differences in ventral striatal functional connectivity during reward anticipation between patients with schizophrenia and healthy controls, and dimensional associations between cortico-striatal functional connectivity and negative symptom severity. Method: A total of 40 patients with schizophrenia (10 females) and 33 healthy controls (8 females) were included from two previously published studies. All participants performed a variant of the Monetary Incentive Delay Task while undergoing event-related fMRI. Functional connectivity was assessed using psychophysical interactions (PPI) with the left and right ventral striatum as seeds and the contrast [High Reward Anticipation - No Reward Anticipation]. Negative symptoms were assessed using the Brief Negative Symptom Scale. Results: Compared to controls, patients with schizophrenia showed increased functional connectivity between the left ventral striatum and the left precuneus and right parahippocampal gyrus, two hubs of the default mode network (cluster-level threshold: FWE, p < .05). In addition, we found a negative association between apathy scores on the BNSS and increased functional connectivity between the left ventral striatum and the left ventral anterior insula / putamen and the left inferior frontal gyrus / dorsal anterior insula (cluster-level threshold: FWE, p < .05). Conclusions: Our results indicate that the patterns of increased functional connectivity between the ventral striatum and the dorsal default mode network during reward anticipation could act as a compensatory mechanism to regulate the activity of the ventral striatum. Our results also showed that functional connectivity patterns from the ventral striatum, much like its local activity, is specifically related to apathy, and not diminished expression.

I study the economic value of obesity - a seemingly inconsequential but unhealthy status symbol in poor countries. Randomizing decision-makers in Kampala, Uganda to view weight-manipulated portraits, I make four findings. First, obesity is perceived as a reliable signal of wealth rather than beauty and health. Second, being obese facilitates access to credit: in a real-stakes experiment involving loan officers, the obesity premium is comparable to raising borrower self-reported earnings by 60%. Third, asymmetric information drives this premium, which drops significantly when more financial information is provided. Fourth, obesity benefits and wealth-signaling value are commonly overestimated, raising the cost of healthy behaviors.