Kiel Institute for the World Economy

CO2 emissions from fossil-fuel burning and industrial processes have been accelerating at a global scale, with their growth rate increasing from 1.1% y(-1) for 1990-1999 to >3% y(-1) for 2000-2004. The emissions growth rate since 2000 was greater than for the most fossil-fuel intensive of the Intergovernmental Panel on Climate Change emissions scenarios developed in the late 1990s. Global emissions growth since 2000 was driven by a cessation or reversal of earlier declining trends in the energy intensity of gross domestic product (GDP) (energy/GDP) and the carbon intensity of energy (emissions/energy), coupled with continuing increases in population and per-capita GDP. Nearly constant or slightly increasing trends in the carbon intensity of energy have been recently observed in both developed and developing regions. No region is decarbonizing its energy supply. The growth rate in emissions is strongest in rapidly developing economies, particularly China. Together, the developing and least-developed economies (forming 80% of the world's population) accounted for 73% of global emissions growth in 2004 but only 41% of global emissions and only 23% of global cumulative emissions since the mid-18th century. The results have implications for global equity.

Oxygen-poor waters occupy large volumes of the intermediate-depth eastern tropical oceans. Oxygen-poor conditions have far-reaching impacts on ecosystems because important mobile macroorganisms avoid or cannot survive in hypoxic zones. Climate models predict declines in oceanic dissolved oxygen produced by global warming. We constructed 50-year time series of dissolved-oxygen concentration for select tropical oceanic regions by augmenting a historical database with recent measurements. These time series reveal vertical expansion of the intermediate-depth low-oxygen zones in the eastern tropical Atlantic and the equatorial Pacific during the past 50 years. The oxygen decrease in the 300- to 700-m layer is 0.09 to 0.34 micromoles per kilogram per year. Reduced oxygen levels may have dramatic consequences for ecosystems and coastal economies.

The challenges formulated within the Future Earth framework set the orientation for research programmes in sustainability science for the next ten years. Scientific disciplines from natural and social science will collaborate both among each other and with relevant societal groups in order to define the important integrated research questions, and to explore together successful pathways towards global sustainability. Such collaboration will be based on transdisciplinarity and integrated research concepts. This paper analyses the relationship between scientific integration and transdisciplinarity, discusses the dimensions of integration of different knowledge and proposes a platform and a paradigm for research towards global sustainability that will be both designed and conducted in partnership between science and society. We argue that integration is an iterative process that involves reflection among all stakeholders. It consists of three stages: co-design, co-production and co-dissemination.

This paper studies the major institutional changes at the root of the increase in the west European unemployment trade in the last quarter century from below 3 percent to 11 percent. The institutional characteristics of wage bargaining and the legal rules hamper the self-equilibrating function of the labor market. The reservation wage, raised by the welfare state's rise, has affected the bargaining process, the wage level and the wage structure. Econometric evidence is presented. Since the mid-1980s, differences emerge, and the Scandinavian, the French-Mediterranean, the German, and the British-Dutch approach to the labor market can be distinguished.

With rising demand for biomass, cropland expansion and intensification represent the main strategies to boost agricultural production, but are also major drivers of biodiversity decline. We investigate the consequences of attaining equal global production gains by 2030, either by cropland expansion or intensification, and analyse their impacts on agricultural markets and biodiversity. We find that both scenarios lead to lower crop prices across the world, even in regions where production decreases. Cropland expansion mostly affects biodiversity hotspots in Central and South America, while cropland intensification threatens biodiversity especially in Sub-Saharan Africa, India and China. Our results suggest that production gains will occur at the costs of biodiversity predominantly in developing tropical regions, while Europe and North America benefit from lower world market prices without putting their own biodiversity at risk. By identifying hotspots of potential future conflicts, we demonstrate where conservation prioritization is needed to balance agricultural production with conservation goals.

Economists not only failed to anticipate the financial crisis; they may have contributed to it—with risk and derivatives models that, through spurious precision and untested theoretical assumptions, encouraged policy makers and market participants to see more stability and risk sharing than was actually present. Moreover, once the crisis occurred, it was met with incomprehension by most economists because of models that, on the one hand, downplay the possibility that economic actors may exhibit highly interactive behavior; and, on the other, assume that any homogeneity will involve economic actors sharing the economist’s own putatively correct model of the economy, so that error can stem only from an exogenous shock. The financial crisis presents both an ethical and an intellectual challenge to economics, and an opportunity to reform its study by grounding it more solidly in reality.

This paper presents an empirical analysis of speculative attacks on pegged exchange rates in 22 countries between 1967 and 1992. We define speculative attacks or crises as large movements in exchange rates, interest rates, and international reserves. We develop stylized facts concerning the univariate behavior of a variety of macroeconomic variables, comparing crises with periods of tranquility. For ERM observations we cannot reject the null hypothesis that there are few significant differences in the behavior of key macroeconomic variables between crises and non-crisis periods. This null can be decisively rejected for non-ERM observations, however.

Positive trend inflation shrinks the determinacy region of a basic New Keynesian dynamic stochastic general equilibrium model when monetary policy is conducted by a contemporaneous interest rate rule. Neither the Taylor principle, which requires the inflation coefficient to be greater than one, nor the generalized Taylor principle, which requires that the nominal interest rate to be raised by more than the increase in inflation in the long run, is a sufficient condition for local determinacy of equilibrium. This finding holds for different types of Taylor rules, inertial policy rules, and price indexation schemes. Therefore, regardless of the theoretical setup, the monetary literature on interest rate rules cannot disregard average inflation in both theoretical and empirical analyses.

Kremer, P., Z. Hamstead, D. Haase, T. McPhearson, N. Frantzeskaki, E. Andersson, N. Kabisch, N. Larondelle, E. Lorance Rall, A. Voigt, F. Baró, C. Bertram, E. Gómez-Baggethun, R. Hansen, A. Kaczorowska, J.-H. Kain, J. Kronenberg, J. Langemeyer, S. Pauleit, K. Rehdanz, M. Schewenius, C. van Ham, D. Wurster, and T. Elmqvist. 2016. Key insights for the future of urban ecosystem services research. Ecology and Society 21(2):29.http://dx.doi.org/10.5751/ES-08445-210229

In a midoceanic region of the northeast Atlantic, patches of freshly deposited phytodetritus were discovered on the sea floor at a 4500 m depth in July/August 1986. The color of phytodetritus was variable and was obviously related to the degree of degradation. Microscopic analyses showed the presence of planktonic organisms from the euphotic zone, e.g., cyanobacteria, small chlorophytes, diatoms, coccolithophorids, silicoflagellates, dinoflagellates, tintinnids, radiolarians, and foraminifers. Additionally, crustacean exuviae and a great number of small fecal pellets, “minipellets,” were found. Although bacteria were abundant in phytodetritus, their number was not as high as in the sediment. Phytodetrital aggregates also contained a considerable number of benthic organisms such as nematodes and special assemblages of benthic foraminifers. Pigment analyses and the high content of particulate organic carbon indicated that the phytodetritus was relatively undegraded. Concentrations of proteins, carbohydrates, chloroplastic pigments, total adenylates, and bacteria were found to be significantly higher in sediment surface samples when phytodetritus was present than in equivalent samples collected at the same stations in early spring prior to phytodetritus deposition. Only the electron transport system activity showed no significant difference between the two sets of samples, which may be caused by physiological stress during sampling (decompression, warming). The chemical data of phytodetritus samples displayed a great variability indicative of the heterogeneous nature of the detrital material. The gut contents of various megafauna (holothurians, asteroids, sipunculids, and actiniarians) included phytodetritus showing that the detrital material is utilized as a food source by a wide range of benthic organisms. Our data suggest that the detrital material is partly rapidly consumed and remineralized at the sediment surface and partly incorporated into the sediment. Incubations of phytodetritus under simulated in situ conditions and determination of the biological oxygen demand under surface water conditions showed that part of its organic matter can be biologically utilized. Based on the measured standing stock of phytodetritus, it is estimated that 0.3–3% of spring primary production sedimented to the deep-sea floor. Modes of aggregate formation in the surface waters, their sedimentation, and distribution on the seabed are discussed.

This paper analyzes the effects on voting behavior of information disseminated over the Internet. We address endogeneity in Internet availability by exploiting regional and technological peculiarities of the preexisting voice telephony network that hindered the roll-out of fixed-line infrastructure for high-speed Internet. We find negative effects of Internet availability on voter turnout, which we relate to a crowding-out of TV consumption and increased entertainment consumption. We find no evidence that the Internet systematically benefits specific parties, suggesting ideological self-segregation in online information consumption. Robustness tests, including placebo estimations from the pre-Internet period, support a causal interpretation of our results. (JEL D12, D72, L82, L86)

Abstract. We investigate the impact of international outsourcing on productivity using plant‐level data for Irish manufacturing. Specifically, we distinguish the effect of outsourcing of materials from services inputs. Moreover, we examine whether the impact on productivity is different for plants being more embedded in international markets through exporting or being part of a multinational. Our results show robust evidence for positive effects from outsourcing of services inputs for exporters, either domestic or foreign owned. By contrast, we find no statistically significant evidence of an impact of international outsourcing of services on productivity for firms not operating on the export market.

Sea surface temperature (SST) observations in the North Atlantic indicate the existence of strong multidecadal variability with a unique spatial structure. It is shown by means of a new global climate model, which does not employ flux adjustments, that the multidecadal SST variability is closely related to variations in the North Atlantic thermohaline circulation (THC). The close correspondence between the North Atlantic SST and THC variabilities allows, in conjunction with the dynamical inertia of the THC, for the prediction of the slowly varying component of the North Atlantic climate system. It is shown additionally that past variations of the North Atlantic THC can be reconstructed from a simple North Atlantic SST index and that future, anthropogenically forced changes in the THC can be easily monitored by observing SSTs. The latter is confirmed by another state-of-the-art global climate model. Finally, the strong multidecadal variability may mask an anthropogenic signal in the North Atlantic for some decades.

In this paper, we investigate the determinants of entrepreneurial activity in a cross section of German regions for the period 1998–2005. Departing from the knowledge spillover theory of entrepreneurship, the focus of our analysis is on the role of the regional environment and, in particular, knowledge and cultural diversity. Our main hypothesis is that both, knowledge and diversity, have a positive impact on new firm formation. As the determinants of regional firm birth rates might differ considerably with respect to the necessary technology and knowledge input, we consider start-ups at different technology levels. The regression results indicate that regions with a high level of knowledge provide more opportunities for entrepreneurship than other regions. Moreover, while sectoral diversity tends to dampen new firm foundation, cultural diversity has a positive impact on technology oriented start-ups. This suggests that the diversity of people is more conducive to entrepreneurship than the diversity of firms. Thus, regions characterized by a high level of knowledge and cultural diversity form an ideal breeding ground for technology oriented start-ups.

In contrast to the atmosphere, knowledge about interdecadal variability of the North Atlantic circulation is relatively restricted. It is the objective of this study to contribute to understanding how the North Atlantic circulation responds to a forcing by the North Atlantic oscillation (NAO) on interdecadal timescales. For this purpose, the authors analyze observed atmospheric and sea surface temperature (SST) data along with the response of an ocean general circulation model to a realistic monthly surface flux forcing that is solely associated with the NAO for the period 1865–1997. In agreement with previous studies, it is shown that the relationship between the local forcing by the NAO and observed SST anomalies on interdecadal timescales points toward the importance of oceanic dynamics in generating SST anomalies. A comparison between observed and modeled SST anomalies reveals that the model results can be used to assess interdecadal variability of the North Atlantic circulation. The observed/modeled developments of interdecadal SST anomalies during the periods 1915–39 and 1960–84 against the local damping influence from the NAO can be traced back to the lagged response (10–20 yr) of the North Atlantic thermohaline circulation and the subpolar gyre strength to interdecadal variability of the NAO. Additional sensitivity experiments suggest that primarily interdecadal variability in the surface net heat flux forcing associated with the NAO governs interdecadal changes of the North Atlantic circulation.

ABSTRACT In this paper we examine the influence of foreign direct investment (FDI) inflows on energy intensities of developing countries empirically. We first replicate a simple ordinary least squares (OLS) estimation, as it is found in the literature, that suggests energy-intensity reductions from FDI inflows. However, the OLS estimation turns out to be spurious and only a starting point for further research. In our regressions we use macro-level panel data on 60 developing countries for the period 1975–2004, including other potential determinants of energy intensities, and carry out robustness checks with more specific data. The results do not confirm the hypothesis that aggregate FDI inflows reduce energy intensity of developing countries. Rather, foreign development aid seems to be related to energy efficiency gains.

Stefan Sinn; Saving-Investment Correlations and Capital Mobility: On the Evidence from Annual Data, The Economic Journal, Volume 102, Issue 414, 1 September 199

This article introduces a new dataset of official financing from China to 138 developing countries between 2000 and 2014. It investigates whether Chinese development finance affects economic growth in recipient countries. The results demonstrate that Chinese development finance boosts short-term economic growth. An additional project increases growth by between 0.41 and 1.49 percentage points 2 years after commitment, on average. While this study does not find that significant financial support from China impairs the overall effectiveness of aid from Western donors, aid from the United States tends to be more effective in countries that receive no substantial support from China. (JEL F35, O19, O47, P33, P34)

Many governments offer significant inducements to attract inward investment, motivated by the expectation of spillover benefits. This Paper begins by reviewing possible sources of spillovers. It then provides a comprehensive evaluation of the empirical evidence on productivity, wages and exports spillovers in developing, developed and transitional economies. Although theory can identify a range of possible spillover channels, robust empirical support for positive spillovers is hard to find. The reasons for this are explored and the Paper concludes with a review of policy aspects.

Global biomass demand is expected to roughly double between 2005 and 2050. Current studies suggest that agricultural intensification through optimally managed crops on today's cropland alone is insufficient to satisfy future demand. In practice though, improving crop growth management through better technology and knowledge almost inevitably goes along with (1) improving farm management with increased cropping intensity and more annual harvests where feasible and (2) an economically more efficient spatial allocation of crops which maximizes farmers' profit. By explicitly considering these two factors we show that, without expansion of cropland, today's global biomass potentials substantially exceed previous estimates and even 2050s' demands. We attribute 39% increase in estimated global production potentials to increasing cropping intensities and 30% to the spatial reallocation of crops to their profit-maximizing locations. The additional potentials would make cropland expansion redundant. Their geographic distribution points at possible hotspots for future intensification.