Ethiopia is one of the most vulnerable countries to climate change. This is because its important economic sector, agriculture, is virtually rain-fed. The role of the sector in the current economic structure and the potency of the anticipated biophysical impacts of climate change necessitates proactive adaptation in agriculture. This, however, breeds questions of adaptation costs and adaptation finance. This study attempts to derive plausible range of planned adaptation costs in agriculture along with their economy-wide and regional effects in Ethiopia. It also assess the economy-wide and regional effects of the likely options available to a government of a least-developed country to finance adaptation in agriculture. The results show that planned public adaptation in agriculture puts pressure on government surplus, impedes on manufacturing and private services, and GDP of urbanized regions. As such, it may strain the current macroeconomic endeavors of the country which puts government driven structural transformation and reducing fiscal deficit relative to GDP at the center. Government of Ethiopia may reconcile this by laying out incentives to urban agriculture and private investment in agriculture. Besides, foreign support in the form of biotechnology transfer and debt-relief may help to control the side effects of grants on foreign exchange market and trade balance.

We examine the economic behavior of the regret-averse firm under price uncertainty. We show that the global and marginal effects of price uncertainty on production are both positive (negative) when regret aversion prevails if the random output price is positively (negatively) skewed. In this case, high (low) output prices are much more likely to be seen than low (high) output prices. To minimize regret, the firm is induced to raise (lower) its output optimal level. The skewness of the price distribution as such plays a pivotal role in determining the regret-averse firm\'s production decision.

In many federal countries, local governments run large deficits, even when fiscal supervision by state authorities is tight. I investigate to which extent party alignment of governments and fiscal supervisors influences budget deficits. The dataset includes 427 German local governments for the period 2000–2004. I exploit a period after a far-reaching institutional reform that entirely re-distributed political powers on both the government level and the fiscal supervisor level. Results do not show that party alignments of governments and supervisors (co-partisanship) drive short-term deficits. Instead, I find that the ideology of partisan governments and supervisors matters: left-wing local governments run higher deficits than their right-wing counterparts; left-wing supervisors tolerate higher deficits than right-wing supervisors. These findings imply that political independence for fiscal supervisors is recommended.

This paper analyzes the utilization of repression and democratic institutions by a non-democratic government striving for political power and private rents. We find that economic development has different impacts on policy choices, depending on whether it appears in the form of rises in income or in education: A higher income level reduces democracy, whereas more education leads to both more democracy and more repression. These theoretical findings are corroborated by panel data regressions.

In this companion paper to Broll and Mukherjee (2017), we empirically analyse how exchange rate volatilities affect firms optimal production and exporting decisions. The firms elasticity of risk aversion determines the direction of the impact of exchange rate risk on exports. Based on a flexible utility function that incorporates all possible risk preferences, a unique structurally estimable equation is used to estimate the risk aversion elasticities for a panel of Indian service sector (non-financial) firms over 2004-2015, using the quantile regression method.

In the course of eurozone exit, the underlying stocks of American Depositary Receipts (ADRs) would be redenominated from euros into the new national currency. We exploit ADR investors’ exposure to currency redenomination losses to derive a novel measure of eurozone exit risk. We find that while domestic bank stocks are not significantly affected by domestic exit risk, there is a negative exposure to exit risk of other countries that is channeled through bilateral credit risk. For the real sector, exposure to eurozone exit risk is heterogeneous among industries and is less negative for more indebted companies.

To many economists the public's support for the minimum wage (MW) institution is puzzling, since the MW is considered a "blunt instrument'' for redistribution. To delve deeper in this issue we build models in which workers are heterogeneous in ability. In the first model, the government does not engage in any type of redistributive policies - except for the payment of unemployment benefits; we find that the MW is preferred by the majority of workers (even when the unemployed receive very generous unemployment benefits). In the second model, the government engages in redistribution through the public provision of private goods. We show that (i) the introduction of a MW can be preferred by a majority of workers only if the unemployed receive benefits which are substantially below the after-tax earnings they would have had in the perfectly competitive case, (ii) for a given generosity of the unemployment benefit scheme, the maximum, politically viable, MW is lower than in the absence of in-kind redistribution, and (iii) the MW institution is politically viable only when there is a limited degree of in-kind redistribution. These findings can possibly explain why a well-developed social safety net in Scandinavia tends to co-exist with the absence of a national MW, whereas in Southern Europe the MW institution "complements'' the absence of a well-developed social safety net.

The resource curse hypothesis suggests that resource-rich countries show lower economic growth rates compared to resource-poor countries. We add to this literature by providing empirical evidence on a new transmission channel of the resource curse, namely, the negative effect of rents on the quality of education. The cross-country analysis for more than 70 countries shows a significantly positive effect of oil rents on the quantity of education measured by government spending on primary and secondary education. Hence, the underspending hypothesis championed by Gylfason (2001) no longer holds with newer data. However, we find a robust and negative effect of oil rents dependency on the current objective and subjective indicators of quality of education, controlling for a set of other drivers of education quality and regional dummies. Despite spending significant shares of GDP on education, oil-rich countries still suffer from an insufficient quality of primary and secondary education, which may hamper their growth potentials. The significant negative effect of oil rents dependency on education quality can be explained by both the demand (e.g., skill acquisition) and supply (e.g., teacher quality) side channels.

Ausgehend von der Forderung einer 'Großen Transformation' der Weltgesellschaft hin zu einer nachhaltigen Lebens- und Wirtschaftsweise wird hier gefragt, mit welchen mentalen Infrastrukturen und Ideologien die Transformationsresistenz insbesondere westlich-kapitalistischer Gesellschaften erklärt werden kann. Wir schlagen das neoklassische Paradigma der Wirtschaftswissenschaft ('Lehrbuchökonomie') vor, das auf der Produktionsseite für Nachhaltigkeitsfragen blind macht, und den Romantischen Konsumismus, der Konsumptionssteigerungen in der breiten Bevölkerung begünstigt. Beide Überzeugungssysteme werden beschrieben und kritisiert, anschließend werden diesbezügliche Aufgaben einer transformativen Kommunikationswissenschaft skizziert.

We investigate the effect of general-purpose transfers on different expenditure categories and tax rates in the municipalities of Saxony (eastern Germany) and North Rhine-Westphalia (western Germany). Findings from the panel data analysis suggest the existence of the “flypaper effect” – municipalities use transfers to increase expenditures but do not reduce taxes. For most expenditure subcategories the estimated coefficients are alike, suggesting similarity of spending priorities in the two federal states despite the differences in the transfer dependency. Targeted support of eastern municipalities could potentially explain few identified differences in the spending behavior.