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Working Paper Series

The Working Paper series publishes original research related to IREF’s mission.
Every article also provides a non-technical Executive Summary.

Working Paper Series

Is temperature adversely related to economic growth? Evidence on the short-run and the long-run links from sub-national data

by David Stadelmann
written by David Stadelmann

WP 2021-07.

We investigate the effect of rising temperatures on economic development, using sub-national data for approximately 1,500 sub-national regions in 81 countries from the 1950s to the 2010s. Accounting for region- and time-fixed factors by means of a two-way fixed effects panel approach, we find no evidence that rising temperatures are adversely related to regional growth measured as changes in regional per capita gross domestic product (GDP). In addition to a panel setting, we also consider the long-run analogue of the panel model, exploring the relationship between regional temperature and growth over longer time periods. Applying this long-difference approach, we find evidence of a statistically significant negative association between temperature and regional economic activity. This suggests that intensification effects matter, meaning that the adverse relationship between temperature increases and growth may compound and materialize only in the longer run. What is more, we find that these adverse long-run effects of regional warming matter only to regions located in countries with relatively unfavorable economic and institutional conditions, that is, in countries with high levels of poverty, a lack of democracy, and a weak rule of law. This strongly points to the role of sound (country-specific) economic and institutional conditions in reducing vulnerability to higher temperatures. In line with this interpretation, we find no evidence for an adverse long-run relationship between temperature and growth for regions located in richer and democratic countries or those with an established rule of law. To download the paper, please click on the icon below. temperaturincome_21.10.06_kopie.pdf

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temperaturincome_21.10.06_kopie.pdf
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Working Paper Series

Transport infrastructure expenditure in Czechia: law compliance in the public procurement

by Peter Bolcha
written by Peter Bolcha

WP 2021-06.

This paper intends to contribute to the discussion on public procurement by searching for patterns in information published on official portals connected to procurement projects in the Czech Republic. This article creates and uses a unique match of two datasets related to (1) procurement projects announcements and (2) the publication of public contracts, both compulsory by law in pre-defined sets of cases. To check the compliance and patterns in missing data, we focus on the spread of the estimated and final prices for individual procurement awards. In order to control for characteristics of the awards, we employ regression analysis to explain the spread more precisely. Our preliminary results are: we observe high compliance of publishing the contracts, we observe high censorship that may turn publishing contracts into a formal exercise, we find a high volume of legal exceptions (both not to announce and not to publish a contract, interestingly the latter without a monetary limit). The regression results confirm the expectations set by prior research (the number of bidders and open regimes lead to more savings of public resources), as well as bring new insights on the relation of spread to mistakes and publishing compliance (missing contract in a case when the contracting authority is legally bound to publish it is correlated with worse economic outcome of the procurement process; missing information signals worse outcomes as well). To download the paper, please click on the icon below. bolcha_vazarova_text_sept_10_2021.pdf

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bolcha_vazarova_text_sept_10_2021.pdf
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Working Paper Series

THE CONTRACTUAL APPROACH TO WELFARE STATE REFORM: AN EMPTY PROMISE?

by IREF
written by IREF

WP 2021-05.

In the last three decades, the mainstream perspective to welfare policy design has emphasised the role of personal responsibility, and justified obligations to stay active in the labour market. Benefit claimants are entitled to support only if they register for job action plans or provide evidence that they are actively looking for a job. Since publication of the OECD Jobs Study (1994), behavioural requirements and sanctions have become the standard tool to enforce claimants’ responsibility. Within this context, this paper considers whether the mainstream perspective based on personal responsibility eliminated traditional differences in welfare regimes; and whether country specific elements played a role in shaping policies affecting unemployment protection and labour market performance. By resorting to regression and cluster analyses, we show that inertia has prevailed. The emphasis on personal responsibility followed public-finance and labour market conditions, rather than a deliberate attempt to design welfare policies in accord with a responsibility framework. To download the paper, please click on the icon below. beraldo_colombatto_202105.pdf

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beraldo_colombatto_202105.pdf
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Working Paper Series

Offers they can’t refuse: a (negative) assessment of the impact on business and society at-large of the recent fortune of anti-discrimination laws and policies

by IREF
written by IREF

WP 2021-04.

The article considers the relationship and balance between freedom of economic initiative and obligations deriving from anti-discrimination laws. After providing a theoretical framework of the problem of the limits to contractual autonomy arising from the horizontal application of fundamental rights (Drittwirkung), the work focuses on its most recent developments, especially in case law, from a comparative perspective. It identifies the paradoxes and logical inconsistencies that characterise the traditional approaches, and puts forward an alternative conceptual framework.  

Executive summary

• Anti-discrimination laws do not only expand the scope of rights. When applied to the relationships between private individuals or businesses, they also restrict other rights and freedoms. • In the past, some studies considered the theoretical shortcomings and practical drawbacks of the compulsory application of anti-discrimination laws to private relations. Given the current remarkable expansion of the scope of such laws, however, scholars and policy-makers need to examine even more carefully how the prohibition to discriminate against their customers, suppliers, and workers affects businesses. • As a result of this new wave of anti-discrimination prohibitions, some important court cases have tried to balance equality rights and the economic rights of companies and entrepreneurs. • The most important cases concern businesses that provide services for wedding ceremonies and refused to perform their activity for gay marriages; on the other hand. Another significant set of cases arise in the context of new technologies, particularly with regard to the sharing economy, online speech, and artificial intelligence. • Both in the US and in the EU, courts seem to have had a hard time when searching for a satisfactory balance. As a result, the resulting picture is not particularly clear. • However, the analysis of the most important cases and of the public policy debate surrounding them reveals the existence of some remarkable paradoxes and contradictions on the opposite sides of the ideological spectrum. Progressives tend to prioritise freedom of expression and association over economic freedoms. Of course, this view has encouraged some courts to conclude that the social media cannot discriminate against pro-fascist groups. Conservatives tend to stand for the rights of businesses to choose with whom they want to interact. • This paper suggests that it would be preferable to adopt a different, hands-off approach, and let businesses free to choose and possibly discriminate against whomever they want. To download the paper, please click on the icon below. de_caria_202104.pdf

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de_caria_202104.pdf
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Working Paper Series

The Italian Financial Novel. Finance as Told by Financial Professionals

by IREF
written by IREF

WP 2021-02.

The global financial crisis of 2008 and the sovereign debt crisis of 2011 have raised the salience of finance as a subject of public interest among the Italian public. Banking and financial affairs have become a recurring theme in Italian cultural productions, such as novels and films in the last decade. Stories that revolve around banking or the financial rise and fall of characters have received remarkable critical attention and media coverage. This paper presents a review of four recent Italian novels that constitute a mini-canon of their own for two reasons: they have addressed the theme of finance with critical or commercial success, and they are written by authors who are or who have been banking professionals. The texts in question are I diavoli, by Guido Maria Brera (The Devils, 2014); La pesca dello spada, by Eugenio Tornaghi (Fishing for Swordfish, 2015); Sabbie mobili, by Fabio Innocenzi (Quicksand, 2016) and Lealtà, by Letizia Pezzali (Loyalty, 2018). The study does not aim to explore the artistic merits of these texts, but rather to show how they depict finance and what ideas they propagate about it. For this reason, literary interpretation was combined with a series of interviews with the authors aimed at gaining a deeper insight into the genesis of the novels and the ideas that emerge from them. To download the paper, please click on the icon below. adamo_-_financial_novel_-_revised_draft_feb_2021_kopie.pdf

Attached documents

adamo_-_financial_novel_-_revised_draft_feb_2021_kopie.pdf
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Working Paper Series

Behavioral Biases: How Markets Can Outperform Paternalism

by IREF
written by IREF

WP 2020-07.

Decisions in laboratory experiments often reveal departures from the rational decision maker framework. These findings have been employed to legitimize a paternalistic approach for the government calling for policies that protect citizens from their own behavioral biases. This paper argues against such an approach. First, we review experimental evidence showing that, if they are given the chance, subjects delegate some complicated decisions to other agents. Second, we develop a framework in which individuals who suffer from a behavioral bias may delegate some decisions to other individuals who have the ability/technology to help them solving this bias. We show that introducing a market for solutions to behavioral biases reduces the likelihood of biased behavior. Finally, we explore more standard government remedies (i.e., taxes) and show that market solutions can dominate such government interventions. To download the paper, please click on the icon below. stadelmanntorrens_delegation_final_11_11_2020.pdf

Attached documents

stadelmanntorrens_delegation_final_11_11_2020.pdf
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Working Paper Series

Libertarian paternalism in policy making: empirical,methodological and philosophical problems

by IREF
written by IREF

WP 2020-06.

Nudge theory, according to its founders Richard Thaler and Cass Sunstein, is a kind of libertarian paternalism that helps people towards making choices that can improve their health, wealth and lives. The theory relies on the insights of the Heuristics & Biases research program, and the assumption that people are systematically irrational. Nudge theory has been used in several cases by both government and private administrations, in an attempt to guide individuals towards making preferable decisions, always on the basis that these decisions would be better for them. The aim of this paper is to review the relative literature of the theory’s applications in both the private and the public sector, and also examine the effectiveness of its applications. Specifically, we examine examples where nudge theory has been broadly used as a policy making tool, such as in the UK, as well as in other countries around the globe. In addition to that, we present the implementations of the theory in the private sector and in particular, we discuss the concept of nudge management, that is now applied by many big organizations. Moreover, we also present applications related to the controversial field of using nudges for commercial purposes. Finally, since nudging is con-sidered by many a controversial practice, we also investigate the ethical concerns that often arise from the interventions related to the behavioral insights and we attempt to present a critique of the theory’s basic assumptions. To download the paper, please click on the icon below. foka-kavalieraki_sotiriou_final.pdf

Attached documents

foka-kavalieraki_sotiriou_final.pdf
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Working Paper Series

Establishing a revolutionary newspaper: transplanting liberalism in a pre-modern society

by IREF
written by IREF

WP 2020-05.

In late 1823 two representatives of the London Philhellenic Committee (a Philhellenic group established to support the Greek War of Independence from Ottoman rule) arrived in Missolonghi in Western Greece to administer a loan to the revolutionary Greek government and help the Greek cause. The visit of Lord Byron and Col. Leicester Stanhope was short. Lord Byron died in early April of 1824 and Col. Stanhope was recalled to Britain one month later. During this short period, they managed to establish three newspapers in liberated Greece but also to antagonize each other on the ideology and content of these newspapers. The objective of Stanhope was to disseminate Bentham’s liberal ideas in Greece and the objective of Byron was the international recognition of the Greek War of Independence. Their never-ending fights led to the first major episode of newspaper cen-sorship in the history of modern Greece: Byron confiscated an issue of a newspaper because he thought it was damaging to the revolutionaries’ international standing and he tried to undermine Stanhope’s position by dis-crediting him to the London Committee. Stanhope did the same by accusing Byron of illiberalism. Byron and Stanhope were also involved in the civil war that erupted during the revolution. Their brief stay in Greece brought out major antinomies in their conceptions of liberty, liberalism, democracy and radicalism but also of national interest and revolution. In this paper I am presenting the establishment of three newspapers by Byron and Stanhope, their inevitable conflict and the different ways they perceived the ideas of liberty by drawing on their extensive correspondence and on the memoirs of Byron’s companions to the Greek adventure. To download the paper, please click on the icon below. hatzis_final-3.pdf

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hatzis_final-3.pdf
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Working Paper Series

The contractual approach to welfare state reform

by IREF
written by IREF

WP 2020-04.

In the last three decades, the mainstream perspective to welfare policy design has emphasized the role of personal responsibility. The stress on personal responsibility has materialized through an obligation to stay active in the labour market. Benefit claimants are entitled to support only if they register for job action plans or provide evidence that they are actively looking for a job, and since the OECD Jobs study (1994), behavioural requirements and sanctions have become the standard tool to enforce responsibility of claimants. In this paper, I examine two issues. First, I try to identify country specific factors that might have played a role in stressing the role of personal responsibility. Second, I investigate whether the mainstream perspective based on personal responsibility has wiped off traditional differences between welfare models. By resorting to a dataset built from different sources, I use regression and cluster analyses to address these issues. The results suggest that path dependency has governed the adaptation of national welfare systems to changes in the social and economic conditions in the last three decades. However, the traditional models continue to prevail. Moreover, the evidence suggests that the emphasis on personal responsibility was mainly driven by public-finance conditions, rather than by a deliberate attempt to design welfare policies in accord with a responsibility framework. To download the paper, please click on the icon below. beraldo_final.pdf

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beraldo_final.pdf
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Working Paper Series

How much of today’s inequality is unfair?

by IREF
written by IREF

WP 2020-03.

From a procedural perspective, an economic process is fair or unfair depending on the rules of the game and the shape of the income distribution is irrelevant. As a component of the Rule of Law, equality before the law is a necessary condition for fairness. Recognizing a higher level of equality before the law as a normative criterion, I examine to which extent the observed income and wealth inequality in a sample of 87 countries can be traced back to inequality before the law and be therefore qualified as unfair from a procedural justice perspective. Using data from the World Justice Project and the Standardized World Income Inequality Database, I find that the relationship between equality before the law and income inequality before redistribution is conditional on the level of development. Additionally, an increase in equality before the law is found to be related to less redistribution and more strongly so in poorer countries. The model largely predicts lower levels of income inequality after redistribution in a scenario of complete fairness compared to the de facto level of income inequality. To download the paper, please click on the icon below. duarte_final.pdf

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duarte_final.pdf
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