EU regulation is increasingly expected to deliver climate and public-health objectives while preserving competitiveness, investment, and efficient adjustment. This paper examines whether the uniform application of harmonised EU rules delivers efficient outcomes under conditions of structural heterogeneity. It compares two EU frameworks, the Emissions Trading System (ETS) and the Tobacco Products Directive (TPD), using Poland as a high-exposure stress-test case. The analysis combines ex-post evidence on ETS exposure, forward-looking scenario modelling, and comparative assessment of alternative tobacco-regulation pathways. Under the stated scenario assumptions, the arithmetic sum of the ETS baseline and TPD3 Restrictive estimates yields a model-implied 2030 reduction of €14.8 billion in Polish GDP, 209,943 jobs, and €2.63 billion in investment. For the ETS alone, a uniform carbon-price pathway is associated with a €4.79 billion GDP loss, 70,059 fewer jobs, and a €0.85 billion investment loss, while the PPP-scaled differentiated-incidence counterfactual yields a smaller model-implied effect. For tobacco regulation, a TPD3 Restrictive / Equalisation scenario implies a €10.0 billion GDP loss, 139,884 fewer jobs, and a €1.78 billion investment loss. In the comparator-based prevalence exercise, the Restrictive / Equalisation trajectory reaches 25.0% in 2030, compared with 19.0% under the product-differentiated trajectory. The scenario comparisons motivate examining whether common EU objectives can be paired with implementation discretion where national, sectoral, or product conditions shape adjustment costs and behavioural responses. In this paper, differentiated implementation is evaluated as a possible, subsidiarity-consistent approach to pursuing common objectives under heterogeneous conditions.
This paper examines the interaction between corporate social responsibility (CSR), network externalities, and vertical organization in a bilateral monopoly. We develop a fulfilled-expectations model in which an upstream manufacturer and a downstream retailer endogenously choose their CSR levels and the timing of their commitments. Positive network externalities induce CSR engagement and, in most organizational configurations, directly determine equilibrium CSR levels. CSR mitigates double marginalization and generates Pareto improvements relative to the no-CSR benchmark by lowering prices and increasing output, firms’ profits, consumer surplus, and social welfare. Among decentralized structures, manufacturer leadership yields the highest CSR engagement and welfare gains and emerges endogenously when the manufacturer unilaterally sets the wholesale price. A vertically integrated benchmark confirms that network effects remain the primary driver of CSR incentives. Finally, allowing bilateral Nash bargaining shows that upstream bargaining power determines CSR adoption, its allocation within the vertical chain, and the endogenous timing of CSR commitments.
Italy faces the next wave of EU regulation from a position of structural weakness. Low trend growth, an economy dominated by small and medium-sized enterprises (SMEs), and tight fiscal constraints leave it less able than most member states to absorb compliance costs. This paper shows what four major EU regulatory files are already costing Italy or are set to cost it next. The Farm to Fork Strategy (F2F) has cost the Italian economy €18.1 billion in GDP and 286,000 jobs in the four years after its introduction. The Packaging and Packaging Waste Regulation (PPWR) is projected to reduce 2030 GDP by €10.6 billion and eliminate 127,000 jobs. The Tobacco Products Directive revision (TPD3) risks a further €7.9 billion and 55,800 jobs. The Artificial Intelligence (AI) Act is projected to cost €9.3 billion in GDP and 112,250 jobs. Taken together, these four regulations cut Italian GDP by €45.96 billion and nearly 582,000 jobs. Italy suffers more than most member states for two reasons: each regulatory file targets a sector of outsized national importance, and fixed compliance costs fall disproportionately on an economy dominated by SMEs. No other large EU economy faces this combination of sectoral exposure and structural vulnerability. These outcomes are not inherent to regulatory ambition but are caused by instrument choice. Risk-proportionate, incentive-based, and technology-open rules can pursue the same goals at far lower economic cost. Better regulatory designs could recover €3.2 billion under PPWR, turn the GDP impact into a net positive at €5.7 billion under TPD3, and save €2.43 billion under the AI Act. Furthermore, in the realm of tobacco control, the analysis shows that further tightening under the Tobacco Product Directive (TPD) risks raising Italian smoking prevalence by almost 3 percentage points, with rates remaining above the 2025 baseline (26.3%) until at least 2035. A risk-differentiated approach could reduce prevalence to around 12.7% over the same period. Penalizing non-combustibles raises smoking prevalence under the modelled scenario, while preserving risk differentiation lowers prevalence and turns economic losses into gains. Instrument choice, rather than regulatory ambition, drives the size of Italy’s adjustment cost. The result of this work provocatively asks a relevant EU-wide question: do we need this sort of regulation? Or leaving the system without excessive overstructure can actually produce better outcomes?
After describing the inconsistency at the heart of the successive Cournot oligopoly model introduced by Salinger (1988), I show that plugging the competitive allocation rule of Cho and Tang (2014) into the model restores its consistency, while leading to equilibrium values identical to the values obtained in Salinger (1988).
In the theoretical part of the paper, we analyze the convergence of the trajectories of the growth rate and the unemployment rate toward global equilibrium in four distinct paradigms: Neoclassical analysis, Keynesian theory, the Schumpeterian framework, and Goodwin’s cyclical growth model. From the point of view of pure theory, the only case of global instability is that of Harrodian instability. From an empirical point of view, in 12 OECD countries, the distance between real economic performance and dynamic equilibrium follows a cyclical rhythm. No case of Harrodian instability seems to appear over the period studied. Neither is the cyclical dynamics of Goodwin's model validated. After a divergence from the dynamic equilibrium, the economies of all the countries studied converge again towards this equilibrium regardless of their differences in economic policy. For this reason, the optimistic conclusions of the neoclassical growth model seem empirically credible.
This paper contributes to the growing literature on trade and uncertainty by examining the effect of trade policy uncertainty at the global level, as well as from the United States and China, on both intra-African trade and African trade with the rest of the world. Using a sample of all 54 African countries over the period 2003-2024, we employ a gravity-model framework estimated via Poisson Pseudo-Maximum Likelihood (PPML) for intra-African trade and a dynamic Generalized Method of Moments (GMM) approach for extra-continental trade. The results consistently indicate that trade policy uncertainty at the global level exerts a statistically significant negative effect on both trade dimensions. Notably, China’s trade policy uncertainty has a more pronounced adverse effect on African trade that that of the U.S., reflecting African deepening economic integration with Chinese markets. Furthermore, the results highlight significant regional heterogeneity, with Northern Africa exhibiting greater vulnerability to uncertainty shocks, while Southern Africa appears relatively more resilient. Critically, the evidence does not support the assumption that African economies offset declines in extra-continental trade through increased intra-African exchanges. Instead, we find a generalized contraction of African trade in response to heightened global trade policy uncertainty. These findings underscore Africa’s systemic vulnerability to external shock and emphasize the urgent need for robust policy measures aimed at enhancing the resilience of African trade.
This paper investigates the effects of privatization in the U.S. space industry, with a particular focus on SpaceX's Starbase facility in Cameron County, Texas. It explores how the shift from government-led to private-sector-driven space exploration—initiated by the Commercial Space Launch Act of 1984—has influenced public spending, industry efficiency, and regional labor markets. Using synthetic control methods (SCM), the study compares actual labor market outcomes in Cameron County with a counterfactual scenario to assess the impact of Starbase on employment and payroll. The findings reveal that privatization has led to significant reductions in public expenditure and increased launch efficiency, yet no measurable labor market effects have emerged in Cameron County since Starbase’s establishment. The paper contributes to the literature by offering a novel regional analysis of private space industry investments and their economic implications.
This paper investigates the effect of democratization on government agriculture expenditure in 32 Selected African Economies (SAE) over the period 1996-2018. Using multi-faceted conceptualization of democracy drawn from political science, I employ five high-level democracy measures such as electoral, liberal, participatory, deliberative, and egalitarian to examine their respective effects on government agriculture expenditure allocation. I further examine whether agricultural ai is fungible and whether democratic institutions mitigate the fungibility. Applying dynamic systemGMM and Lewbel two-stage least squares technique to control endogeneity, I find that all five dimensions of democracy significantly foster government agriculture expenditure. I also find that higher levels of democracy reinforce the substitution of agricultural aid for domestic agricultural expenditure. Subregional shows that democracy increases government agriculture expenditure West Africa while reducing it in Central-Eastern Africa; results for Southern Africa are mixed and preclude a definitive conclusion. Among all three subregions, democracy reinforces the fungibility of agricultural aid. The interactions between democratic measures and GDP per capita, first, and trade openness, second, are positive and significant, indicating that democracy amplifies the promotional effect of national wealth and commercial integration on government agricultural expenditure. This dynamic is fully confirmed in Southern and Western Africa but remains largely insignificant in Central-Eastern Africa, showing marked heterogeneity in the effectiveness of democratic institutions in shaping agricultural budget allocations. Findings are robust to alternative democracy measures. Policy implications are formulated.
This paper presents an analysis of long-term effects of intergenerational transmission of fertility behavior as a proxy of culture in an overlapping generations setting. For this analysis, the fertility norm faced by a generation is assumed to derive from the preceding generation’s fertility behavior, as reflected in the number of siblings. The norm costs are represented as the disutility incurred from deviating from the norms. Starting from a high fertility rate, such a norm displays a monotonic downward fertility transition. The fertility rate converges to a long-term equilibrium fertility rate, whereas the norms only affect fertility transitions. Regarding fertility transition, although a child policy such as a childcare-cost subsidy might increase the fertility rate temporarily, it cannot reverse a downward (or upward) time trend of the fertility rate. Because the long-term fertility rate coincides with the non-norm equilibrium, the child policy must be such that it can affect the non-norm fertility rate. The Japanese experience implies that fertility norms are important gradients in evaluating fertility transitions.
The article analyses the evolution of the Net Interest Margin (NIM) in the Italian banking system between 2013 and 2025, examining the transition from negative rates to the ECB's recent tightening cycle and the subsequent normalisation phase. Using econometric analysis of a sample of over 400 intermediaries, the study investigates how monetary policy transmission is influenced by institutional heterogeneity and the persistent North-South territorial dualism. The results highlight an asymmetric pass-through mechanism: in the South, structurally higher NIMs reflect less competitive pressure and greater stickiness of deposit rates, manifesting as a "social cost" that slows regional convergence. In contrast, cooperative credit banks (CCBs) emerge as crucial actors for financial inclusion, mitigating local inequalities through relationship lending models. This study links the stability of margins to collective well-being outcomes, integrating insights from the best doctrine on the nexus among economic uncertainty, public health, and demographic dynamics. Evidence suggests the need for "spatially aware" policy interventions to ensure that bank profitability contributes to sustainable and equitable social development, especially in the context of PNRR implementation.
Damaged ecosystems may put the profitability of some investments at risk, emphasizing the imperative need for integrating biodiversity into policies and development processes within and across all sectors. This study aims to address how publicly announced commitments of finance for nature affect corporate preferences for biodiversity investment. An event study methodology is used to evaluate differences in abnormal returns of large companies in Asia Pacific, Europe, emerging economies and the United States, controlling for overall market movements and crossdependence in event studies. Only companies in the top 80 % rank of potentially disappeared fraction of species over enterprise value are considered. Our findings suggest that all companies react positively to the announcement of biodiversity funding initiatives, with varying degrees of intensity. It is shown that the average cumulative abnormal returns (CAR) slowly go up in days 0 (the announcement date) to 10, except for Japan, Australia, and South Africa where we note a marked increase in the CAR in days 5 through 10. Investors trading in European exchanges also display a positive perception regarding the profitability of nature restoration funds. The main results remain robust to the choice of event window and to the use of non-parametric tests. Despite stronger impact of nature funding initiatives on investor perceptions regarding biodiversity-related investments in Brazil, China, New Zealand and U.S., their effectiveness as policy signals appears to be sensitive to institutional contexts and regulatory frameworks.
Empirical evidence suggests that euro area unemployment is highly persistent. Motivated by this, we develop a euro-area-calibrated monetary DSGE model that uniquely integrates financial frictions and employment hysteresis. Impulse response analysis shows that the model generates deep and persistent recessions that are not accompanied by significant deflation, questioning the effectiveness of standard inflation-focused monetary policy. This leads us to explore alternative “simple” (un)conventional monetary policy rules. We show that welfare-optimized policies that stabilize labor or financial markets outperform standard price inflation targeting. The welfare gains from adopting these alternative policies increase with hysteresis and the severity of the financial shock. Our findings underscore the importance of monitoring labor or financial market variables during financial crises and call for a re-evaluation of central bank policies in economies with persistent unemployment fluctuations.
This study utilizes a newly constructed index for financial stress to examine its predictive value for exchange rate volatility in sub-Saharan Africa (SSA). Using a methodology that accounts for the key features of the predictive model, we find that financial stress significantly and positively affects exchange rate volatility in SSA. This indicates that increased financial stress is linked to higher levels of exchange rate volatility in the region. Robustness checks conducted on Latin America and OECD countries show that financial stress generally elevates exchange rate volatility in developing countries, while the effect is less pronounced in emerging economies. Also, additional analysis conducted to examine the influence of exogenous shocks, such as oil shocks, shows that oil price changes amplify exchange-rate volatility in SSA, while the contrast holds for the emerging and other developing economies outside the SSA. These findings support the theory of financial contagion and purchasing power parity (PPP) in SSA. In light of these findings, policymakers in sub-Saharan Africa should prioritize enhancing financial system stability and shockabsorption mechanisms to better protect against external shocks.
We study a connections model where the strength of a link depends on the amounts invested in it by the two nodes and is determined by a concave function non decreasing in both arguments, which is specific for each pair of nodes and possibly non-symmetric. The revenue from investments in links is the value (information, contacts, friendship) that the nodes receive through the network. First, assuming that links are the result of investments by the node-players involved, we characterize a notion of marginal equilibrium, where all nodes play locally best responses, and identify different marginally stable structures. This notion is based on weak assumptions about node-players’ information, but is necessary for Nash equilibrium and for a notion of pairwise stability suitable in this setting. Based on this, different sufficient conditions for Nash or pairwise stability of certain structures are established. Second, efficient networks are characterized for homogeneous technological profiles.
Complementarities among auctioned items can lead to the exposure problem in which winners acquire fewer items than necessary to get positive utility. We model the exposure problem by means of a discriminatory auction format and we discuss the equilibrium and efficiency when multiple complementary items are auctioned in bundles, assuming that the seller has no value for the objects. We compute the Bayesian Nash equilibrium of the auction and we show that the risk of acquiring a bundle with insufficient number items forces auction participants to bid less aggressively. However, the auction remains efficient and total surplus is unaffected by the presence of the exposure problem. We show that there is a redistribution of utility from the “exposed bidder” to the rest of the winners in the sense that the former gets negative utility while the “real” winners get higher utility due to bidding less aggressively.
Structural transformation is the changes in the composition of sectoral output, employment and consumption in a country. This paper studies the 'r - g' rule to assess dynamic efficiency and sustainability of public debt under rapid structural transformation observed in developing economies (DE) like India. Since DEs have large share of agriculture, we construct a two-sector economy comprising an agricultural and a non-agricultural sector. The model incorporates non-homothetic preference, heterogeneous sectoral production functions with heterogeneous and exogenous total factor productivity growth to reflect heterogenous nature of growth in DEs. We show that the steady state real interest rate (the 'r' in 'r - g' rule) depends on (i) the way the inter-sectoral relative price changes, (ii) whether aggregate consumption is intertemporally substitutes or complements, (iii) capital intensities in two sectors, (iv) relative preference for agricultural goods, and (v) relative total factor productivity growth rates. Using India-KLEMS data we estimate that r < g for India and therefore the Indian economy is not dynamically efficient implying that the current level of public debt may be sustainable.
This research investigates the effects of economic freedom on youth unemployment in sub-Saharan Africa. It covers a panel of 34 countries and the period 2003-2019. It employs the of two stage least squares (2SLS) and structural equation modeling (SEM). The results show that economic freedom reduces youth unemployment through the size of government, the legal system, freedom to trade and regulation. In addition, the analysis of indirect effects shows that economic freedom reduces youth unemployment through economic development, political stability, democracy, natural resource rents and financial development. These results imply that countries in the region should improve these three dimensions of economic freedom, make the most of the exploitation of natural resources, improve financial development, the quality of political institutions and economic development to reduce youth unemployment.
This study examines the impact of trade and financial openness on economic growth across developed, emerging, and least developed countries (LDCs) from 1980 to 2018, using panel Autoregressive Distributed Lag (ARDL) models complemented by standardized coefficients and forecast error variance decomposition (FEVD). The results show that long-term de facto openness benefits DCs the most, followed by EEs, while remaining detrimental to LDCs. Financial openness follows a similar pattern, favoring EEs but harming LDCs. De jure measures display more mixed effects, and short-term effects are largely negative - suggesting transitional costs before longterm gains. Hybrid openness indices, by contrast, yield positive long-term effects across all country groups, with LDCs benefiting the most, reflecting the growth payoff of policy and structural dimensions (partner diversification, regional agreements, FDI regulation) rather than higher flows per se. The FEVD substantially refines these conclusions: openness indicators explain only a marginal share of GDP variance across all panels, whereas factor accumulation dominates growth variability, labor in DCs, capital in EEs, and a balanced labor/capital contribution combined with very high GDP persistence in LDCs. The negative coefficient of institutional quality in EEs is not evidence against the institutional view of growth, but reflects limitations of the Fraser index, the historical co-occurrence of institutional and liberalization reforms, and transitional adjustment costs consistent with a J-curve dynamic. Convergence analysis indicates faster adjustment in LDCs, followed by EEs and DCs. Policy recommendations emphasize that domestic factor accumulation and structural investments, not openness liberalization or institutional reforms alone, should remain the primary focus for sustaining long-term growth, with openness strategies tailored to development levels: DCs should sustain trade liberalization while preserving financial stability, EEs should strengthen financial regulation, and LDCs should pursue gradual liberalization combined with institutional reform.
Geopolitical tensions have become increasingly important for global financial stability and sustainable investment. As these pressures intensify, it becomes necessary to understand how they shape environmentally oriented financing decisions. Against this background, this paper examines how geopolitical risk relates to green bond issuance across 61 countries over the period 2000-2018. To do so, we use country-year observations with reported green bond issuance. We employ high-dimensional fixed effects (HD-FE), instrumental variable generalized method of moments (IV-GMM), system generalized method of moments (SYS-GMM), and quantile regressions (QR) to address unobserved heterogeneity, endogeneity, and differences across the issuance distribution. We find a positive average association between geopolitical risk and green bond issuance, although this pattern is not uniform across country groups. In low- and lowermiddle-income countries, the association is negative, whereas in upper-middle- and highincome countries it becomes positive. We also find that sovereign credit ratings and foreign technology transfer strengthen this relationship, while inflation weakens it. These results suggest that geopolitical risk is more likely to be associated with stronger green bond issuance where institutional and market conditions are more supportive.
Reducing carbon emissions in the context of digital transformation is of significant theoretical and practical importance. However, the development of technologies to reduce carbon emissions is still in the exploratory stage. This paper examines the mechanisms and effects of digitalization and abatement policies by exploring two regulatory approaches to taxing emissions: ex-ante tax based on commitment and ex-post tax without commitment. Using the Stackelberg game analysis method, this study examines the optimal strategies for reducing carbon emissions and implementing digital transformation within firm. The environmental performance of these policies is analyzed and compared. The results show that, (1) the choice between an ex-ante or ex-post tax by the regulator does not impact the overall level of carbon abatement in the long run, but it does determine how a firm chooses to invest in abatement during the current period. Specifically, under an ex-ante tax, firms invest more in abatement during the first phase, whereas under an ex-post tax, firm abate less in the first phase. (2) Ex-post tax can lead to better outcomes in terms of digital transformation, firm profits, sales prices, and social welfare. (3) The cross-fertilisation of carbon reduction and digital technologies is mutually reinforcing.
