We evaluate alternative indicators of global economic activity and other market funda-mentals in terms of their usefulness for forecasting real oil prices and global petroleum consumption. World industrial production is one of the most useful indicators. However, by combining measures from several different sources we can do even better. Our analysis results in a new index of global economic conditions and measures for assessing future energy demand and oil price pressures. We illustrate their usefulness for quantifying the main factors behind the severe contraction of the global economy and the price risks faced by shale oil producers in early 2020.

In economic theory, entrepreneurship is perceived as a driving force behind the process of creative destruction by introducing innovation to the market, crowding out inefficient businesses, and paving the way for economic growth. One central channel through which entrepreneurial activity can be realized is the founding a new firm (Carree & Thurik, 2003). Numerous empirical studies have investigated the causes of firm entry, the subsequent fate of these young businesses, and their impact on the economy (Geroski, 1995; Wagner, 2006). When assessing the importance of start-ups for economic development, their role in the creation and destruction of jobs is a key component. This thesis argues that start-ups’ role as employers should be evaluated not only by the quantity of jobs they create, but also by the quality of these jobs. If new firms differ from incumbents in terms of hiring patterns or employment conditions, this could have serious and long-lasting implications for the careers and personal lives of their employees. Against this background, the four essays of this thesis present new evidence on the hiring behavior of newly founded establishments, as well as on remuneration and employment prospects of workers joining a start-up.

Housing is an essential durable consumption good and oftentimes the largest and most important investment a household makes. The way households finance their housing is important not only for expenditure patterns but also for asset accumulation. As Chambers et al. (2009) explain, housing investment, for both residential and nonresidential structures comprises about half of all private investments and the liabilities from home mortgages are approximately equal to two-thirds of gross domestic product. It is very closely linked with the financial market via the housing backed mortgages taken by the majority of home-owners and it is intrinsic to real economic activity.

The Covid epidemic had a large impact on economic activity. In contrast, the dramatic decline in mortality from infectious diseases over the past 120 years had a small economic impact. We argue that people's response to successive Covid waves helps reconcile these two findings. Our analysis uses a unique administrative data set with anonymized monthly expenditures at the individual level that covers the first three Covid waves. Consumer expenditures fell by about the same amount in the first and third waves, even though the risk of getting infected was larger in the third wave. We find that people had pessimistic prior beliefs about the case-fatality rates that converged over time to the true case-fatality rates. Using a model where Covid is endemic, we show that the impact of Covid is small when people know the true case-fatality rate but large when people have empirically-plausible pessimistic prior beliefs about the case-fatality rate. These results reconcile the large economic impact of Covid with the small effect of the secular decline in mortality from infectious diseases estimated in the literature.

We study whether government subsidies can stimulate bank funding of marginal investment projects and the associated effect on financial stability. We do so by exploiting granular project-level information for the largest regional economic development programme in Germany since 1997: the Improvement of Regional Economic Structures programme (GRW). By combining the universe of subsidised firms to virtually all German local banks over the period 1998-2019, we test whether this large-scale transfer programme destabilised regional credit markets. Because GRW subsidies to firms are destabilised at the EU level, we can use it as an exogenous shock to identify bank responses. On average, firm subsidies do not affect bank lending, but reduce banks’ distance to default. Average effects conflate important bank-level heterogeneity though. Conditional on various bank traits, we show that well capitalised banks with more industry experience expand lending when being exposed to subsidised firms without exhibiting more risky financial profiles. Our results thus indicate that stable banks can act as an important facilitator of regional economic development policies. Against the backdrop of pervasive transfer payments to mitigate Covid-19 losses and in light of far-reaching transformation policies required to green the economy, our study bears important implications as to whether and which banks to incorporate into the design of transfer Programmes.

Most European Union countries have made good progress with vaccinating their populations against COVID-19 and are now seeing a rebound in economic activity. While the scarring effects of the crisis and the long-term implications of the pandemic are only partially understood, the effects of support given to firms can be evaluated in order to help plan the removal of crisis support. An analysis of France, Germany and Italy shows the potential for ‘cleansing effects’ in that it was the least-productive firms that have been affected most by the crisis. While support was generally not targeted at protecting good firms only, financial support went by and large to those with the capacity to survive and succeed. Labour schemes have been effective in protecting employment.