Kiel Institute for the World Economy

About: Kiel Institute for the World Economy is a facility organization based out in Kiel, Germany. It is known for research contribution in the topics: Foreign direct investment & Productivity. The organization has 318 authors who have published 1909 publications receiving 42832 citations. The organization is also known as: Institut für Weltwirtschaft an der Universität Kiel.

Financial Crisis, Creditor-Debtor Conflict, and Populism

Abstract: We study the impact of debtor distress on support for a populist far-right political party during a financial crisis. Our empirical approach exploits variation in exposure to foreign currency household loans during a currency crisis in Hungary. Foreign currency debt exposure leads to a large and persistent increase in support for the populist far right. We present evidence that the far right advocated for foreign currency debtors' interests by proposing aggressive debt relief and was rewarded with support from these voters. Our findings are consistent with theories emphasizing that conflict between creditors and debtors can shape political outcomes after financial crises.

Resolving sovereign debt crises: the role of political risk

Abstract: Sovereign defaults are bad news for investors and debtor countries, in particular if a default becomes messy and protracted. Why are some debt crises resolved quickly, in a matter of months, while others take many years to settle? This paper studies the duration of sovereign debt crises based on a new data set and case study archive on debt renegotiations between governments and foreign banks and bondholders. Using Cox proportional hazard models, I find that domestic political instability (‘political risk’) is a significant predictor of negotiation delays, after controlling for macroeconomic conditions. Government crises, resignations, and street protests are particularly disruptive for a quick settlement process. Overall, the evidence suggests that debtor countries often lack the political ability to resolve a debt crisis. Governments in turmoil are unlikely to exit a default quickly.

Migration and educational aspirations – Another channel of brain gain?

Abstract: International migration not only enables individuals to earn higher wages but also exposes them to new environments. The norms and values experienced in destination countries can change the behavior of migrants and also of family members left behind. This paper suggests that brain gain can take place due to a change in the educational aspirations of caregivers in migrant households. Estimates for Moldova show that international migration raises parental aspirations in households located at the lower end of the human capital distribution. The identification of these effects relies on GDP growth shocks in the destination countries and migration networks. These results imply that aspirations are a highly relevant determinant of intergenerational human capital transfer and that even temporary international migration can shift human capital formation to a higher steady state by inducing higher educational aspirations among caregivers. JEL classification: D03, O12, I21, J61.