International Economics and Economic Policy (Electives)

The field of economics, in particular applied microeconomics, has undergone a credibility revolution in recent years that is characterised by a surge of research papers focused on answering specific, causal questions which are more often than not policy relevant. In this context, the objectives of this course are threefold. First, it aims to familiarise students with modern empirical research designs on which much of the contemporary political economy literature is based. Second, it is intended to introduce to students a number of topics from the empirical political economy scholarship. These topics, by and large, examine how various political and social institutions---voter enfranchisement, immigration and the media to name but a few---shape public policy and economic outcomes. Third, the course provides an opportunity for students to develop their capacity to present contemporary papers in a seminar format.

This course provides an introduction to numerical tools for the evaluation of economic models and the analysis of economic policy. The main emphasis is on learning the methods and their practical implementation. The course will require students to use Matlab -- one standard computer programming language. We study a variety of topics, including projection methods, approximation of functions and stochastic processes, numerical quadrature, root-finding, homotopy methods, and numerical optimization. Moreover, we explore a number of applications in consumption, labor, economic policy, public finance, and international trade to illustrate the practical use of the methods presented in the course.

There is ample empirical evidence that some countries are richer than others and that some countries tend to grow faster than others. This course assesses the question why this is so by studying macroeconomic growth models. The course covers growth models in the spirit of Solow with an exogenous savings rate and intertemporal growth models with an endogenous savings rate, both real and monetary versions. Models of endogenous growth such as the Romer Model (1990) will also be discussed. Theoretical results will be contrasted with empirical findings. Particular emphasis is placed on the building blocks of the growth models so that students can learn to understand both the policy implications resulting from the respective growth models as well as their limitations for public policy makers. From a methodological perspective the course will introduce the students to dynamic optimization via Pontryagin’s Maximum principle.

The aim of this course is to familiarize students with the most relevant topics in the field of development economics, and in particular with its microeconomic aspects. An integral part of the course is to combine economic theory with empirical methodology.

This course introduces students to the study of the role of firms and industries in the process of economic development, focusing on the specific institutional environment of developing countries. The focus of this course is primarily methodological, and we will use recent empirical literature to study selected aspects of the microeconomics of industrial sector development, including the role of financial markets, labor markets, and international trade in explaining individual firm behavior, productivity, market structure, and industry dynamics.

This course focuses on the macroeconomic effects of automation in general and robotization in particular. The increased automation of production which has begun with the industrial revolution has raised concerns about potential negative welfare effects. Workers fear to be replaced by machines. Interestingly, this has not happened so far. While technological change may have rendered some occupations obsolete it has also created new professions. However, this time it may be different. Traditional machines and also ICT (information and communication technologies) such as computers always need a human to operate them. In contrast, industrial robots do not require a human but can produce autonomously. This can adversely affect labor markets, factor shares, income equality and even saving rates leading to long term stagnation. We will explore these effects of robots in neoclassical growth models and study recent empirical studies in paper discussions.

The course gives an overview of areas, strategies and instruments of economic integration within the European Union. It will also deals with current debates such as the effect of Brexit or the future of the monetary union.

This course discusses current topics in environmental economics with a microeconometric focus. We will study recent empirical research on climate change, emissions trading, air quality, biodiversity, and energy conservation. For example, we will learn how air quality affects infant health, how emission trading affects carbon leakage, and how the value of biodiversity can be quantified.

This course presents topics on the new area of Household Finance, on the interface between Macroeconomics and Finance. This is not only an active area of frontier academic research, but also interesting and useful to people working in the financial sector, including central banks. The broad overall theme of the topics presented is household wealth management, namely analysis of household demand for assets and for loans.

The course should appeal to a wide range of students, from those interested in understanding household preferences for financial products useful for financial sector jobs, to those who are more academically oriented and who want to study intertemporal portfolio selection in the face of labor income risk for which one cannot buy insurance.

An explicit aim of the course is to stress the intuition behind the results and to provide students with basic understanding of key findings in recent, mostly empirical but also computational, research on household portfolios. The formal lectures will be supplemented by sections (two hours every two weeks), which will stress useful techniques and hands-on-practice in data analysis using the STATA econometric package, as well as ways to interpret empirical findings in portfolio research.

Building on methodologies and instruments acquired in compulsory courses in earlier semesters, the lecture series entitled ”International Financial Architecture” takes a practical view on the realities of today’s global financial markets. Starting with an overview of the most important capital and banking markets, the series continues to review major industry and product trends. A further key topic will be the degree of integration of global and regional financial markets in selected market segments and infrastructure. Particular attention will be devoted to financial crises and market failures and the possible remedies. Finally, regulation and supervision as potential mitigants for financial market failure will be reviewed.

The course will consist of three parts.

In the first part we introduce basic concepts and theories of modern international macroeconomics, like the determination of the current account, international prices, and the role of international financial markets. The main framework of the analysis is the inter-temporal approach to the current account. We will start by deriving the current account equation for a small open economy with one good, one internationally traded asset in the deterministic case. We will therefore add uncertainty, investment, durable goods, government expenditure, endogenous labor supply. For each of those cases we also discuss the testable implications of the theory. At last we move to the two good model and discuss the Harrod-Balassa Samuelson effect.

In the second part we will move to the international real business cycle literature. The goal of this research is to understand and explain business fluctuations and their international transmission. We will first introduce the basic model of international real business cycle (Backus, Kehoe and Kydland JPE 1985) which is a stochastic dynamic general equilibrium model with endogenous labor supply and two goods aggregated via an Armington aggregator. After discussing the implications of this model, we will overview the major puzzles in international macroeconomics: Feldstein-Orioka, the home bias in consumption and home bias in investment, Mussa puzzle, disconnect puzzle, Backus-Smith puzzle, output/investment/employment correlation puzzle.

Finally we will briefly introduce the most recent new open economy literature whose models depart from the international RBC literature because of the addition of nominal frictions.

The course surveys various topics at the intersection of labor economics and macroeconomics, using both empirical and theoretical approaches. We cover human capital and earnings inequality, structural and frictional unemployment, search and matching models of the labor market, frictional wage dispersion, business-cycle theories of the labor market, as well as labor market policy such as unemployment insurance, job protection legislation and minimum wages. Prerequisites are microeconomic and macroeconomic theory and econometrics.

We will study variants of one of the ”workhorse” models of modern dynamic macroeconomics in general equilibrium, the overlapping generations model, which is a tool in general equilibrium to study questions related to social insurance through government policies such as pension systems, health care systems but also a progressive tax and transfer scheme and education policies. To prepare ourselves for the analysis of such schemes in partial equilibrium, we will study first models in partial equilibrium. We will do so by considering deterministic environments in order to illustrate how tax instruments affect decisions and then move to stochastic environments to show how households self-insure themselves against shocks and how the government may provide insurance. We will next turn to general equilibrium models, first again ignoring any shocks and then extending the models accordingly. In general equilibrium, we will first study the efficiency properties of the model, and ask how a social planner that has access to lump-sum redistributive instruments may improve allocations. Once we understood this, we will move on to policy questions related to the optimal reform of social security, health care reform policies, education policies and the effects of progressive income taxes.

A large part of modern macroeconomic research relies on the analysis of micro data; for example to understand how aggregate outcomes are the result of individual decisions (at the person-, household-, or firm-level), or to discipline models - via estimation or calibration. Very often, it is cumbersome to start working with a specific micro data set as it involves a substantial initial effort to learn the structure and the idiosyncrasies of the data. In this course, students will gain experience in working with micro data and how to apply the data to studying macroeconomic questions. We will explore a number of the most commonly used datasets and we will focus on understanding the structure of the data, how to avoid common pitfalls, use sample selection criteria, how to extract information and use it as an input to economic analysis. The datasets we cover include the U.S. Consumer Expenditure Survey (CEX), Current Population Survey (CPS), Panel Study of Income Dynamics (PSID), Einkommens- und Verbrauchsstichprobe for Germany, NY-Fed Survey of Consumer Expectations, U.S. National Longitudinal Survey of Youth (NLSY), Multinational Time Use Study (MTUS), and German Socio-Economic Panel (GSOEP). We will use these datasets to study macro questions related to individual time allocation, occupational choices, labor market transitions, consumer expenditure decisions, and individual expectation formation.

The objective of this course is to equip students with the requisite skills to numerically solve and calibrate (or estimate) economic models, and to utilize these models for quantitative analysis. The course will cover a variety of models, including labor market models, models with heterogeneous agents, trade models, and models of firm dynamics. An essential input to quantitative work is data. In this course, we will study some commonly used micro data sets and learn how to extract the relevant information for use in the calibration and estimation of models.

“Inequality is rising” or “the wedge between the Rich and the Poor has become larger”. We hear that assertion almost every day in the news or may read it in the newspapers.

This lecture course will shed light on that assertion:

• By distinguishing between wealth and income
• By explaining the different distributive measurement methods
• By looking at empirical results of measured inequality in different countries of the world
• By presenting different macro- and microeconomic theories of wealth and income distribution
• By discussing questions of justice and equality
• And by looking for policies that reduce or increase inequality

1. Wealth- and Income Distribution: Measuring (In-) Equality
2. Theories of Functional Income Distribution
   • The Model of David Ricardo
   • Marx’ theory of income distribution
   • Marginal productivity theory of distribution
   • Keynesian theory of income distribution (Kaldor, Pasinetti)
3. Personal Income Distribution
4. Human Capital and Income Distribution
5. Structure and Relation between Functional and Personal Income Distribution
6. Inequality, Justice and Re-Distribution