School of Business and Economics

Recent Publications

Distributional differences in the time horizon of executive compensation (Michael Haylock)

The aim of executive compensation plans is to incentivize executives to maximize long-term firm value. Past research shows that executives’ pay is determined by short-term stock performance to a substantial degree. This paper tests for distributional differences in the time horizon of the performance–pay relation, controlling for executive-firm fixed effects in a quantile regression framework. I find the right tail of the conditional total compensation distribution has a more long-term-oriented performance–pay relation than the left tail. By contrast, the right tail of the conditional accumulated wealth distribution has more short-term-oriented performance–pay relation than the left tail. This shows that regulators ought to pay more attention to the timing of stock-related pay, since higher (conditional) wealth is more strongly associated with short term changes in firm value.

Greening Monetary Policy: Climate Change Expectations and the Natural Rate Alexander (M. Dietrich, G. J. Müller, R. S. Schönle)

Using a representative consumer survey in the U.S., we elicit beliefs about the economic impact of climate change. Respondents perceive a high probability of costly, rare disasters due to climate change, but not much of an impact on GDP growth. Salience of rare disasters through media coverage increases the probability by up to 10 percentage points. Expectations about climate-change related disasters matter for monetary policy because they impact the natural rate of interest. We quantify this effect in a standard New Keynesian model and find that climate-change related disaster expectations cause a decline of the natural rate by about 70 basis points. If monetary policy fails to accommodate this effect, inflation and output decline by about 0.3 percent. Read the whole paper.

Numeracy Development in Africa: New Evidence from a Long-Term Perspective (1730-1970) (Gabriele Cappelli, Jörg Baten)

Historical events are fundamental determinants of economic performance. However, until recently, research in quantitative economic history has mainly focused on today’s high- and middle-income economies. This lack of research is particularly evident for the African continent. However, some aspects of Africa’s long-term development can be reconstructed using new proxy indicators. Although these might capture dimensions of social and economic change with a certain degree of measurement error, they are crucial to understand the economic history of the continent. In our paper we construct a panel dataset of numeracy that includes several African countries from the beginning of the 18th century until the end of the colonial period (1970) in 10-year intervals.

Logical pictures in secondary economic education: textbook analysis and teacher perception (Malte Ring und Taiga Brahm)

New publication on visual representations in economics education

An article by Malte Ring and Taiga Brahm has been published in RISTAL:

Logical pictures, such as graphs and charts are an important part of instruction, not only in economic education. Learning with these logical pictures might be beneficial under appropriate conditions, however, domain-specific and visualization-specific challenges might impede learning. In this paper, we study the use of logical pictures in secondary economic education learning material and in economics teaching. In a mixed-method approach, we first analyze 450 logical pictures and propose a category system which distinguishes between the form of a logical picture as well as its domain-specificity. In a second step, we conducted teacher interviews with economic teachers. Results show that logical pictures are used frequently in textbooks, with graphs occurring more often than charts. The interview findings support the relevance of graphs and charts for instruction and provide information about the necessary student abilities and their challenges when working with different logical pictures in economic education from the teacher’s perspective.

The Spread of COVID-19 in Germany - An Application of the SIRDH Model (by Lukas Landsgesell, Manfred Stadler)

Landsgesell, Lukas; Stadler, Manfred


The paper studies the current COVID-19 pandemic by applying an adapted epidemiologic model, where each individual is in one of the five states “susceptible”, “infected”, “removed”, “immune healthy” or “dead”. We extend the basic model with time-invariant transition rates between these states by allowing for time-dependent infection rates as a consequence of lockdowns and social distancing policies as well as for time-dependent mortality rates as a result of changing infection patterns. Our model proves to be appropriate to calibrate and simulate the dynamics of COVID-19 pandemic in Germany between January and October 2020. We provide deeper insights about some key indicators such as the reproduction number, the effectiveness of non-pharmaceutical interventions, and the development of the infection and mortality rates.

Hedge Accounting and its Consequences on Portfolio Earnings – A Simulation Study (by Victoria Müller)

Viktoria Müller im Journal Accounting in Europe

Der Artikel ist erschienen in: Accounting in Europe, 17. Jg., S. 204 - 237.

Die Autorin Viktoria Müller ist wissenschaftliche Mitarbeiterin am Lehrstuhl für Internationale Rechnungslegung und Wirtschaftsprüfung, Fachbereich Wirtschaftswissenschaft der Universität Tübingen.


In this paper, Müller analyzes the consequences of cash flow hedge accounting on portfolio earnings of firms focusing on main changes between IFRS 9 and IAS 39. For this purpose, she develops a simulation study which illustrates the quantitative effects on the accounting entries according to the currently applicable hedge accounting methods. It is especially addressed what accounting differences arise and how these distinctions may affect a firm’s earnings. Furthermore, I examine to which firms early switching becomes especially desirable or burdensome. This information is particularly useful to managers and investors. The paper shows that portfolio earnings are affected differently. In the model, IAS 39 may lead to higher or lower earnings for increasing deviations between foreign and domestic interest rates. Additionally, sensitivity to volatility changes varies among the methods. Moreover, a partly ineffective hedging relationship does not necessarily decrease earnings compared to its fully effective counterpart.

Read more

Empirical Asset Pricing with Rare Disaster Risk: A Simulation-Based Approach (by Jantje Soenksen, Joachim Grammig)

Dr Jantje Soenksen, Professor Dr Joachim Grammig

In den WiWi NEWS Sommer 2020 berichteten wir über das Forschungsprojekt am Lehrstuhl "Seltene Disaster - Wo sie zu finden sind" und in der Ringvorlesung zur Corona-Pandemie an der WiSo-Fakultät wurde eine Vorlesung zu diesem Projekt am Lehrstuhl Statistik, Ökonometrie und Empirische Wirtschaftsforschung auf You Tube übertragen.

Das Paper “Empirical Asset Pricing with Rare Disaster Risk: A Simulation-Based Approach” von Jantje Sönksen und Joachim Grammig wurde im Journal of Econometrics zur Publikation angenommen. Das Paper ist Open-Access und damit schon jetzt online frei verfügbar. Das Journal of Econometrics ist die führende internationale Fachzeitschrift der Ökonometrie.


We propose a simulation-based strategy to estimate and empirically assess a class of asset pricing models that account for rare but severe consumption contractions that can extend over multiple periods. Our approach expands the scope of prevalent calibration studies and tackles the inherent sample selection problem associated with measuring the effect of rare disaster risk on asset prices. An analysis based on postwar U.S. and historical multi-country panel data yields estimates of investor preference parameters that are economically plausible and robust with respect to alternative specifications. The estimated model withstands tests of validity; the model-implied key financial indicators and timing premium all have reasonable magnitudes. These findings suggest that the rare disaster hypothesis can help restore the nexus between the real economy and financial markets when allowing for multi-period disaster events. Our methodological contribution is a new econometric framework for empirical asset pricing with rare disaster risk.

Read more

Free Shipping and Product Returns (by Edlira Shehu, Dominik Papies, and Scott Neslin)

Edlira Shehu, Dominik Papies, Scott Neslin/Journal of Marketing Research

The paper "Free Shipping and Product Returns" has been published in the Journal of Marketing Research. The article is joint work by Edlira Shehu, Dominik Papies, and Scott Neslin. The Journal of Marketing Research is one of the field's top journals, rated A+ in the German Jourqual ranking and part of the Financial Times journal list.


Free shipping promotions have become popular among online retailers. However, little is known about their influence on consumers’ purchases, return behavior, and, ultimately, firm profit. The authors propose that free shipping promotions encourage customers to make riskier purchases, leading to more product returns. They estimate the impact of these promotions on purchase incidence, high-risk and low-risk spend, and return share. The results show that free shipping promotions increase expenditure for high-risk products, expanding their share of the consumer’s market basket and thus increasing the overall return rate. This is validated in a field experiment. A field test and an online lab experiment analyze the mechanism linking free shipping and returns. The results suggest that the free shipping effect occurs through consumers’ perceptions that free shipping serves as a risk premium compensating them for potential returns and through positive affect generated by the promotion. A simulation shows that for the focal firm, free shipping promotions increase net sales volume, but higher product returns and lost shipping revenue render these promotions unprofitable.

A pdf is available here.

The Backbone of Europe - Health, Diet, Work and Violence over Two Millennia (Editors: Richard H. Steckel, Clark Spencer Larsen, Charlotte A. Roberts, Joerg Baten)

Editors: Richard H. Steckel, Clark Spencer Larsen, Charlotte A. Roberts, Joerg Baten

Part of Cambridge Studies in Biological and Evolutionary Anthropology     


Using human skeletal remains, this volume traces health, workload and violence in the European population over the past 2,000 years. Health was surprisingly good for people who lived during the early Medieval Period. The Plague of Justinian of the sixth century was ultimately beneficial for health because the smaller population had relatively more resources that contributed to better living conditions. Increasing population density and inequality in the following centuries imposed an unhealthy diet - poor in protein - on the European population. With the onset of the Little Ice Age in the late Middle Ages, a further health decline ensued, which was not reversed until the nineteenth century. While some aspects of health declined, other attributes improved. During the early modern period, interpersonal violence (outside of warfare) declined possibly because stronger states and institutions were able to enforce compromise and cooperation. European health over the past two millennia was hence multifaceted in nature.