Research

Abstract:  We analyze the effects of a large place-based policy, subsidizing up to 50% of the investment costs of manufacturing plants in East Germany. We show that a one-percentage-point decrease in the subsidy rate leads to a 1% decrease in manufacturing employment. We document important local spillovers for untreated construction and retail sectors, counties connected via trade, and local tax rates. There is no evidence for regional reallocation, within-firm spillover, or changes in commuting and residential decisions. The cost per job amounts to about $19,000. We show that local subsidies are substantially more effective in curbing regional inequality than place-blind policies.

Abstract: The mobility of high-income individuals across borders puts pressure on governments to lower taxes. A central tenet of the corresponding textbook argument is that mobile individuals react to tax differentials through migration and immobile individuals vote for lower taxes. We investigate to which extent this argument is complete. In particular, political ideology may influence voting on taxes. We vary mobility and foreign taxes in a survey experiment within the German Internet Panel (GIP), with more than 3000 individuals participating. We find that while the treatment effects qualitatively confirm model predictions of how voters take the mobility of high-income earners into account when choosing domestic taxes, ideology matters: left-leaning high-income individuals choose higher taxes and emigrate less frequently than right-leaning ones. These findings are in line with the comparative-static predictions of a simple model of inequality aversion when the aversion parameters vary with ideology. 

Abstract: How does fiscal austerity affect redistributive policies? We document that during austerity episodes, countries tend to increase marginal income tax rates on top earners, but not on average earners. We then show that, in response to an exogenously imposed fiscal rule, Italian municipalities increase local non-linear income taxes progressively. They do not adjust other fiscal policies. College-educated mayors are more likely than less-educated mayors to implement progressive reforms, and they perform better in the upcoming election. Survey evidence suggests that the differential policy response can be explained by college-educated mayors being more informed about the available policy options.

Abstract: We investigate the effect of social capital on health outcomes during the Covid-19 pandemic in independent analyses for Austria, Germany, Great Britain, Italy, the Netherlands, Sweden and Switzerland. Exploiting detailed geographical variation within countries, we show that a one-standard-deviation increase in social capital leads to between 14% and 34% fewer Covid-19 cases per capita accumulated from mid-March until end of June 2020, as well as between 6% and 35% fewer excess deaths per capita. Our results highlight the positive health returns of strengthening social capital. 

Abstract: This paper provides insights into the determinants of euro area reform preferences by means of a randomized survey experiment in Germany. Respondents are confronted with a pro and a contra argument to reform proposals on a European Unemployment Benefit Scheme and a Sovereign Insolvency Procedure, respectively, with the contra argument being varied across respondents. Our results for the control group suggest that there is a low willingness to accept fiscal risk-sharing through common unemployment insurance, while a sovereign insolvency procedure aimed at strengthening market discipline is supported by a majority of the survey participants. Our randomized treatments highlighting specific potential adverse effects of the reforms lead to significant downward shifts in approval rates. Altruism, EU support, nationalism, political preferences and income are important predictors of support for the reform proposals. We also show that there is a striking contrast between the low level of support for transfers to other euro area member states and a broad acceptance of inner German transfers. 

Abstract: I investigate how households and firms adjust their inflation expectations when they are exposed to an energy price increase. Using monthly panel survey data and a difference-in-difference approach, I show that exposed households increase their inflation expectations when electricity prices increase. This result is consistent with households extrapolating the price changes they face. Also, households' inflation forecasts become less accurate and diverge more from professional forecasts. Exposed firms exhibit significant pass-through to output prices but do not update their inflation expectations differentially. I find evidence consistent with information frictions playing a role in explaining the differences between households and firms.

Abstract: Public disclosure laws on politicians' outside income aim to enhance electoral accountability, but their effects remain unclear and may backfire. Using a German disclosure reform, administrative tax data, and a difference-in-difference design, we show that MPs increased their outside income after public disclosure. We find suggestive evidence that the effect is driven by right-leaning MPs. A survey among voters shows that perceptions of outside income differ by party alignment: right-leaning voters view it as a sign of competence, while left-leaning voters associate it with weaker voter representation. These findings highlight the complex interplay between transparency, voter perception, and political behavior.

Abstract: Are cash transfers to households an effective policy for stimulating demand in a pandemic? We analyze three payments that German parents received as part of the Covid-19 stimulus program. We exploit randomization in the payment dates and daily home scanner data to evaluate the spending response to the transfers. The first transfer had a significant effect on spending, but only in counties with low infection rates. The second and third transfers, which coincided with much higher infection rates, failed to increase spending. Moreover, the transfers increased the number of shop visits, possibly contributing to the spread of the virus.