Third-party funded projects

Project title

Inflation expectations and gender roles

Funded by

German Research Foundation (external link, opens in a new window)

Project volume

205 900 Euro

Project team members

• Prof. Dr Fabian Kindermann
• Nicole Berr, M.Sc.
• Catharina Klüter, M.Sc.

Co-operation partners

• Prof Dr Michael Weber (University of Chicago)
• Dr Julia Le Blanc (European Commission)

Project description

Understanding inflation expectations is essential for understanding economic behaviour at both the macro and micro levels. This project aims to shed light on the extent to which gender roles influence the process of inflation expectation formation among women and men. To this end, a team of experienced researchers from the fields of Family Macroeconomics (Prof Fabian Kindermann, University of Regensburg), Household Finance (Dr Julia Le Blanc, JRC of the European Commission) and Inflation Expectations and Finance (Prof Michael Weber, University of Chicago) is working together. The team is investigating whether gender role models influence individual perceptions of inflation and how they contribute to gender differences in inflation expectations.

An initial sub-project utilises data from the EU Consumer Survey, a survey conducted monthly by the EU Commission in all EU countries. With the help of this study, the development process of inflation expectations in the EU is to be analysed. To this end, the exogenous variation created by the introduction of the euro is to be utilised to determine causal estimation results for the determinants of individual inflation forecasts. The detailed micro-structure of the data set also makes it possible to analyse the reaction of the expectations of different demographic groups to the arrival of new information. Furthermore, the data from the EU Consumer Survey will be supplemented with data on gender roles. In addition, it will be investigated whether the recent appointment of two women to the Executive Board of the ECB has improved the effectiveness of monetary policy communication and thus led to a better anchoring of inflation expectations among women.

In the second sub-project, a cross-national survey study on inflation expectations and the importance of gender roles will be conducted. To this end, we are planning to conduct an online survey in at least 26 countries at different stages of development. The study will assess individual inflation expectations, sources of information, perceptions of prevailing gender role models, individual agreement with such models and socio-demographic background, as well as preferences, financial and economics knowledge and cognitive skills. In order to measure the significance of different inflation expectations for individuals, it is also planned to survey individual consumption and savings behaviour, behaviour in wage negotiations and financial assets. Based on this new data set, the project will make a significant contribution to understanding the significance of gender roles for the formation of expectations with regard to key macro-financial variables and provide crucial facts on gender differences in financial decision-making.

Project title

Inequality, Taxation, and Redistribution: Insights from a German-French Perspective

Funded by

German Research Foundation (external link, opens in a new window) and Agence Nationale de la Recherche (external link, opens in a new window)

Project volume

667,392 euros

Project team members

• Prof Dr Fabian Kindermann

Co-operation partners

• Dr Charlotte Bartels (DIW Berlin)
• Dr Gedeao Locks (DIW Berlin)
• Prof Dr Laurent Simula (ENS Lyon)
• Prof Dr Jonathan Goupille-Lebret (ENS Lyon)
• Prof. Dr Bertrand Garbinti (CREST)

Project description

While wealth and income inequality has increased in many countries in recent decades, European welfare states have come under pressure in the face of economic difficulties and increasing globalization. EQUITAX identifies the most effective tax and transfer instruments to reduce economic inequality. To this end, EQUITAX comprehensively analyses taxation and inequality using the latest methods and data from a Franco-German perspective, combining macroeconomic, theoretical and applied microeconometric approaches.

The first work package compares the dynamics of income and wealth inequality in France and Germany. We will construct new long-run series of pre- and post-tax income inequality for Germany, combine them with existing French series, and analyse the inequality-reducing effect of the respective tax and transfer systems. Here we distinguish between general and country-specific institutions.

The second work package examines the behavioural response of rich households to tax reforms. We will use "natural experiments" in wealth taxation in France and inheritance taxation in Germany, which have generated drastic behavioural changes recorded in excellent administrative data sources. This will allow us to identify the key parameters for researchers and policy makers: How does wealth taxation affect savings, labour and migration decisions? And on minimising taxable capital income through tax planning? To what extent do high net worth individuals adjust the timing of gifts to avoid taxation of their bequests?

The third work package will uncover the major inefficiencies of current tax policy in order to design an "optimal" system by combining the parameters of the previous work packages with tax theory - both from a micro and macro perspective. We will first calculate the marginal deadweight loss of taxation along the income distribution of each country to show where in the income distribution the current tax systems are inefficient. Using a macro-simulation model, we identify the welfare effects of different tax reforms in Germany and France. This analysis serves as a guideline for the tax policy reforms.
We expect that the mechanisms of inequality, taxation and redistribution identified by EQUITAX will help to improve government policies. Our new findings can provide a robust source of information for public debate and help policy makers to develop evidence-based policies for a fair, united and peaceful Europe.

Project title

^MIR3: Models of bounded rationality and redistribution in the context of pensions

Funded by

German Research Foundation (external link, opens in a new window) and Narodowe Centrum Nauki (external link, opens in a new window)

Project volume

479 888 Euro

Project staff

• Prof Dr Fabian Kindermann
• Dr Johannes Huber
• Sebastian Kunz, M.Sc.

Co-operation partners

• Prof Krzysztof Makarski (Warsaw School of Economics and GRAPE)
• Prof Joanna Tyrowicz (University of Warsaw and GRAPE)
• Prof Piotr Zoch (University of Warsaw and GRAPE)

Project description

Can individuals prepare well enough for their retirement? Does the state sufficiently support saving for old age? Are annuity contracts the optimal financial product for retirement? These are fundamental and pressing questions in times when publicly financed pension systems are under enormous demographic pressure.

The standard macroeconomic model of household lifecycle savings would answer all these questions with a resounding "YES!". However, two key empirical facts stand in contrast to these model predictions. Firstly, the majority of individuals lag behind their optimal retirement savings plan. And secondly, annuity contracts are rarely observed. The aim of this project is to better understand these phenomena and thereby contribute to the macroeconomic literature on household saving behaviour for retirement.

We will focus on behavioural patterns that are referred to as "bounded rationality". This term stands for a variety of behavioural economic phenomena that lead us to behave against or not fully understand our own interests. We will also address the empirical fact that individuals with higher education and higher incomes face a much higher life expectancy than those without a university degree and with lower lifetime incomes.

At the heart of this project is the development of a simulation model that explicitly takes into account boundedly rational behavioural patterns. This model will then be used to analyse the effects of the so-called 401(k) accounts in the USA. This major government programme to promote retirement savings was launched back in the 1970s, which is why longer data series are already available. There is also a large amount of detailed data on individual savings behaviour in the USA. Finally, there is also a large empirical literature on the effects of 401(k) accounts, although the results are not very clear. We hope to clarify this with the help of a structural model.

In addition, we will investigate whether the 401(k) programme has influenced wealth inequality in the USA and whether it can successfully combat poverty in old age. In a further step, the conflicting goals of mandatory annuisation of retirement savings with heterogeneous life expectancies will be examined with regard to individual welfare and economic inequality. Finally, the political origins of the 401(k) programme will be explored in a political economy framework. Currently, almost all OECD countries have one or more 401(k) tax-incentivised pension programmes. The political economy literature, however, has focussed primarily on the mechanisms behind the existence of public pension schemes.

Project title

The Future of Pensions between Demography and Old-Age Poverty - A Dynamic Equilibrium Analysis with Differential Mortality and Heterogeneous Households

Funded by

Fritz Thyssen Foundation (external link, opens in a new window)

Project volume

150,000 euros

Project team members

• Prof Dr Fabian Kindermann
• Dr Veronika Püschel

Co-operation partners

• Prof Dr Hans Fehr (University of Würzburg)

Project description

Rising life expectancy and low birth rates are increasingly threatening the financing of the pay-as-you-go pension system in Germany. Politicians have therefore introduced reforms that are intended to reduce the pension level and increase the retirement age in the medium term. However, there is concern in the current debate that these reforms could lead to a drastic increase in poverty in old age. The proposed project is therefore dedicated to the topic of old-age poverty in Germany and in particular the question of whether and how this can be curbed in an economically sensible way.

To this end, the determinants of rising poverty in old age will first be documented. In particular, the extent to which demographic trends, such as the unequal development in life expectancy and the shift towards less stable family structures, together with the institutional framework conditions of the pension insurance system, are exacerbating the problem of poverty in old age will be analysed. New administrative data from the German pension insurance scheme allows us to document the pension receipt behaviour and income situation in old age of people with different demographic characteristics, to identify special risk groups and to clarify the question of whether, under the current demographic conditions, the officially postulated equivalence of participation is not being broken and a regressive distribution is actually taking place.

The empirical findings obtained will then be interpreted with the aid of a structural economics decision model under uncertainty. This model enables a realistic depiction of income risks during working life and a differentiated calculation of the pension payment due on retirement. Compared to previous studies of a similar type, it contains various methodological innovations. On the one hand, heterogeneity within a cohort is modelled in a previously unknown differentiation by distinguishing between men, women and married couples separately according to income class and number of children. On the other hand, the model extends the common life cycle approach to include extensive labour supply decisions, the modelling of health and disability as well as differences in life expectancy. On the one hand, the structural model is intended to help make statements about married couples who cannot be directly identified in the pension insurance data sample. On the other hand, it serves as a basis for a detailed policy analysis. To this end, the life cycle model is ultimately embedded in a general equilibrium framework that allows the assessment of the distributional and efficiency effects of different pension reforms, such as increasing the progressivity of the pension formula and/or making retirement more flexible.