Research Profiles of the IWH Departments
All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets – Macroeconomics – Structural Change and Productivity) and work closely with leading senior researchers in their field from day one of the programme. Information on possible topics that prospective students can specialise in each of the four departments can be found on this page.
Research Profile of the Department of Financial Markets
Researchers at the Financial Markets Department study economic mechanisms by which financial systems, institutions, and markets route savings to investors. By using microeconometric methods that are grounded in financial economic theory, our research is focused on three main areas: First, the analysis of how banks and other financial institutions overcome information frictions in conducting their intermediation function. Second, how households and firms optimize savings, investment, and capital structure decisions conditional on the governance environment they face. Third, the determinants of financial system regulation and its effects on agents’ choices in both financial markets and the real economy, such as the inception of the European Banking Union or “Green” stress tests. Examples of questions that we seek to answer jointly with fellow academics and policy makers, central bankers from across the globe, and other NGO staff are these:
Financial institutions, information frictions, and savings
- How do banks incorporate sustainability ratings into their lending choices?
- Do so-called ESG ratings reflect fundamental risk or is it window dressing?
- Can FinTechs help to alleviate financial constraints or do they fool lay(wo)men?
- Are their limits to value maximization as an objective in financial markets?
Household debt, corporate finance, and governance mechanisms
- Do corporates comply with green regulation by upgrading existing technology or do they divest non-sustainable activities that keep polluting?
- Do firms owned by multinationals innovate more at home, abroad, or not at all?
- Households, firms, and natural disaster: seeking higher ground vs. abandon ship?
- Do consumers punish corporate misconduct, or do they go with the flow?
Regulation, supervision, and policy making
- Did the European Banking Union reduce financial stability?
- Do firms and banks take excessive risks when monetary policy is ultra-loose?
- Can regulation tame greed in the financial system by capping bonus pay?
- Can green politicians credibly commit to sustainable financial policies?
Research Profile of the Department of Laws, Regulations and Factor Markets
The Department of Laws, Regulations and Factor Markets conducts research on the interaction of labour and capital factor markets and on how laws and regulations affect labour and capital markets. Research topics studied include startup creation and growth, gender-based gaps in entrepreneurship, gender diversity on corporate boards and its impact on employee satisfaction, productivity and turnover, effects of financial constraints and financial regulation on the allocation of capital and labour. The list below contains a sample of current research projects studied in the department.
Projects on how Labour and Capital Markets interact
- capital misallocation and innovation
- impact of real innovation on firm and labour outcomes; how patents affect worker level outcomes, including wages and career progression of workers
- relation between intangible investment, wage distribution and wage inequality
- effects of loan guarantees on the efficiency of capital and labour reallocation across firms
- welfare gains from trade under financial frictions
- interdependency between access to capital markets and access to labour markets (i.e., how going public expands the labour market access of a firm for skilled labour, and conversely, how skilled labour facilitates access to public capital markets)
- role of established firms in reallocating resources from capital markets to startups through corporate venture capital activity and acquisition of venture capital backed startups
- role of established firms in training and nurturing entrepreneurial human capital for creation of future startups
- how labour representation, voice and gender diversity on corporate boards affect employee satisfaction, productivity and turnover
- examining human capital diversity in firms with a focus on:
(i) how promoting gender diversity in established firms contributes to gender diversity in entrepreneurship and facilitates the creation of Femtech startups (startups addressing well-being and health needs of women)
(ii) how reducing gender-based gap in politics helps reduce gender-based gap in entrepreneurship
Projects on how Laws and Regulations affect Capital and Labour Markets
- impact of capital market regulation and financial innovation (i. e., CoCo bonds) on financial stability and capital provision
- impact of capital market regulation on household income, entrepreneurship and income inequality
- antitrust laws and regulations, and their impact on the liquidity of the market for corporate assets, and reallocation of capital and labour across firms
- corporate board gender quota laws and availability of startup financing for female entrepreneurs
- reallocation of R&D tax credits from established firms to financially constrained startups
- corporate taxes and established firm incentives to invest in startups
Research Profile of the Department of Macroeconomics
The Department of Macroeconomics analyses economic fluctuations and long-term economic growth. It focuses on three main research areas: first, we develop, implement and apply quantitative macroeconomic models for forecasting and scenario simulations. This includes both univariate and multivariate time-series models and theoretically founded dynamic general equilibrium models. Second, we investigate the consequences of climate change and decarbonization on the macroeconomic development. For example, we analyze the impact of climate change on productivity and how the green transition affects structural change, economic adjustment and the distribution of income and wealth. Third, we conduct research on the role of international financial markets for business cycles and long-run productivity.
Macroeconomic Forecasting and Simulation
- How to improve nowcasts and short-term forecasts for macroeconomic variables using large and innovative data sets and machine learning?
- Evaluation of current macroeconomic policies such as financial support for firms and households in times of increasing energy prices using estimated dynamic (stochastic) general equilibrium models.
- How does climate change affect long-run economic growth in advanced economies?
- What are the effects of climate protection policies on structural change and on the distribution of income and wealth?
- What are the business cycle implications of climate change and emission reduction policies?
Financial Integration, Economic Performance and Financial Stability
- How is the productivity of firms affected by the access to international capital, and do capital-intensive sectors benefit more from capital account liberalization than other sectors?
- How do cross-border capital flows alternate banks’ behavior and specifically, how are financing maturity, structure, systemic risk and economic fluctuations affected?
- Does the sequencing of capital account liberalization matter for financial stability?
- What are the roles of political factors, such as geopolitical fragmentation, in the global financial cycle? Do they alter the transmission of global financial conditions from the core economy?
- Do macroeconomic expectations affect credit supply and cross-border lending? What are the real effects on firm investment and labor productivity?
Research Profile of the Department of Structural Change and Productivity
The Department of Structural Change and Productivity analyses dynamics of structural change driven, for instance, by decarbonisation or technological progress. Structural change causes prosperity and demise of regions, industries, and firms, and we use microeconometric methods to empirically assess these effects. The department coordinates the Competitiveness Research Network (CompNet), which is a hub for research and policy analysis on competitiveness and productivity. Our focus is on productivity, business dynamism, and labour market outcomes such as employment and wages. Together with the winner of the Max Planck-Humboldt Research Award of 2019, Professor Ufuk Akcigit (Chicago), the department investigates the causes of the economic differences between East and West Germany.
Structural Change and the Labour Market
- How can we explain the persistent economic gap between East and West Germany more than 30 years after German reunification? How to think about the long shadow of socialism and planned economies?
- How do labour market institutions and the power balance between capital and labour impact wages and inequality?
- How does decarbonizing our economy as well as technological change broadly and automation technologies in particular influence firm and employment outcomes?
- What are the costs of structural change for those who lose their jobs? Who is affected and by how much? What can be done to help those workers and to mitigate social costs?
Formation and Effects of Skills
- What are the main factors that contribute to the formation of skills? Do these factors differ across countries? How do family background, educational systems, and on-the-job training affect skill development?
- How can we explain the strong persistence in skills and economic outcomes across generations, and which policies can support children and youths from disadvantaged families?
- How are advancements in technology – such as automation and, more recently, AI – altering the demand for various types of skills in the labour market? Is there a role for policy to support individuals’ skill development when skill demand changes?
- How strongly are different skills (e.g., cognitive, social, and digital skills) valued in the labour market and how do these returns to skills differ over time and throughout workers’ careers?
Entrepreneurship, Innovation, and Productivity Growth
- What are the drivers of the observed decline in business dynamism and job reallocation? What is the role of dynamism and entrepreneurship in driving innovation and productivity growth?
- How do different types of business – e.g. young, small, large, respond to shocks? And what role do they play in economic recoveries and job creation?
- What explains the growth of superstar firms? Do superstar firms hinder competition and knowledge diffusion?
- How does product, labour, and financial market regulation, affect innovation, reallocation and productivity growth? What policies support and which hinder growth?