Many behaviours and actions of individual states have implications for the economic activity, prosperity, and growth of other states. The department analyses areas of action where such effects are of particular importance. |
Scientifically, the aim is to explain and predict observable actions and their outcomes at the international level from the logic of individual states' objectives, and to explore the relationship between institutional circumstances, the actions chosen and their outcomes. |
One area is the taxation of internationally mobile, private actors. Corporations, for example, can shift and change their tax burden between countries through their international location and production decisions and through many other design measures. Nation-states are aware of these possibilities. The choice of a national tax system is a national response to these possibilities. In the concert of nation-states and with the participation of international organisations, the international tax system thus emerges, which then has implications for firms and their decisions. In light of these interrelationships, an understanding of economic competition between households and companies on the one hand and competition between states on the other is an indispensable prerequisite for wise and appropriate tax and fiscal policy. |
Research examples from our Department:Thunecke, Georg, 2022, Are consumers paying the bill? How international tax competition affects consumption taxation, RSIT Working Paper No. 22/3, PDF Johannesen, Niels and Tim Stolper, 2021, The deterrence effect of whistleblowing, Journal of Law and Economics, 64(4), 821–855. DOI Konrad, Kai A., 2021, Dynamics of the market for corporate tax avoidance advice, Scandinavian Journal of Economics, 123(1), 267–294. DOI Elsayyad, May and Kai A. Konrad, 2012, Fighting multiple tax havens, Journal of International Economics, 86(2), 295–305. DOI Keen, Michael and Kai A. Konrad, 2013, The theory of international tax competition and coordination, in: Alan J. Auerbach, Raj Chetty, Martin Feldstein und Emmanuel Saez (eds.), Handbook of Public Economics, Volume 5, Elsevier, Amsterdam & Oxford, 257–328. DOI |
A second area of research is global climate change. The emissions of greenhouse gases that occur in one country contribute to the total emission of greenhouse gases in the world, this total emission has an impact on the global climate and climate change affects every single country. When it comes to avoiding such emissions, the central dilemma becomes apparent: avoiding emissions in one country entails economic costs, which typically must also be borne by that country. The advantages and disadvantages of avoidance for the global climate affect not only the individual emitting country, but all countries of the international community. Thus, the cost-benefit calculation of emission avoidance of the individual country and its cost and benefit effects on the community of states diverge. Attempts to overcome this problem of divergence have been addressed for over 25 years through an international climate agreement, without much success. Solving the problem is difficult. First, the interests of the individual states are quite different. Second, an intergovernmental distribution problem arises, and there are differing ideas about how to solve it. And third, it is difficult to write international treaties among sovereign states that have a binding effect. |
Other aspects are also relevant to the solution of the problem: for example, the control of the environmental behaviour of individual economic entities in the individual states, intertemporal considerations on the use of fossil fuels, market effects of an agreement on the behaviour of countries with large oil and gas reserves, etc. A great many research institutions around the world are dealing with these problems. Our department contributes to a better understanding of this overall proble |
Research examples from our Department:Sherif, Raisa and Sven A. Simon, Is there a trade-off between efficiency and visibility in pro-environmental behaviours?, forthcoming. Sherif, Raisa, Are pro-environment behaviours substitutes or complements? Evidence from the field. Working Paper. Latest Draft Konrad, Kai A. and Kjell Erik Lommerud, 2021, Effective climate policy needs non-combustion uses for hydrocarbons, Energy Policy, 157, Article No. 112446. DOI |
A third important area is the problem of international security policy. Defence alliances such as NATO are prominent examples of the interaction of multiple states on the international security situation. The international debates and controversies that have been going on for decades over the financial contributions of individual states to this security pact, as well as debates about the orientation of alliance policy towards specific goals. They arise from the same fundamental problem as in the area of climate policy: individual financing burdens and user benefits diverge. Moreover, there is not a complete congruence of interests in terms of alliance goals. Exploring these relationships requires a deeper understanding of how conflicts arise, or can be avoided, and how such issues relate to the institutional realities of the international security architecture. To this end, departmental research makes contributions to the area of basic research, particularly in the area of economic conflict research and in the analysis of the emergence and functioning of alliances in the area of security policy.
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Research examples from our Department:Konrad, Kai A., 2023, The collective security dilemma of preemptive strikes, European Journal of Operational Research, forthcoming. Journal Pre-proof DOI Serena, Marco and Stefano Barbieri, 2021, Repeated contests with commitment, Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2021–16. SSRN Mavridis, Christos and Marco Serena, 2021. Complete information pivotal-voter model with asymmetric group size and asymmetric benefits. European Journal of Political Economy, 67(4). DOI Barbieri, Stefano, Kai A. Konrad and David A. Malueg, 2020, Preemption contests between groups, RAND Journal of Economics, 51(3), 934–961. DOI Konrad, Kai A., 2020, Attacking and defending multiple valuable secrets in a big data world, European Journal of Operational Research, 280(3), 1122–1129. DOI |
A meeting of the NATO Ministers of Defense is convened at NATO Headquarters in Brussels, Belgium, 21 February 2013 (DoD Photo by Glenn Fawcett)
The guarantee of property rights and the possibility of legally enforcing contractual claims are among the most significant achievements of modern states. The advantages of such rule-of-law institutions are always evident where property rights are not defined or are insufficiently defined. Prominent examples are political or military domestic or international conflicts, individuals or corporations fighting for their interests in court, and, above all, the conflict of interest groups against each other. Underlying these and some other interactions in other contexts is a unifying pattern that is explored in abstract analytic terms, empirically, and in laboratory and field experiments in what is known as ‘contest theory’ (also ‘theory of all-pay auctions’). On the one hand, the game-theoretical structures underlying the individual situations have structural similarities, but they often differ in details, and this can have significant implications for what happens in the conflict situation. From the perspective of economic conflict research, it is important to better understand the course of such conflicts as a function of institutional circumstances. This also contributes to an overarching goal of understanding the emergence and internal stability of political systems and institutions. The results and analytical tools developed within economic conflict research make essential explanatory contributions to the understanding of competitive situations in very different areas already mentioned. |
A recent and important concrete object of research in this context is the interstate conflict between great powers. Insofar as this conflict is fought out by diplomatic and military means, there is a hardly manageable amount of scientific theories, empirical findings and other insights that extend into political science and, in particular, the subdisciplines of international relations and military strategy. When considering the conflict between the United States and China, which has been burgeoning for several years, however, economic contexts play an increasingly important role alongside these classic aspects. It has long been known that economic strength ultimately translates into military strength. It is less obvious, however, that economic policymaking in the form of trade policy, innovation policy, industrial policy, financial market policy, etc., can be used directly as instruments of these conflicts. The term "geo-economics" has been coined for this purpose, corresponding to the older term geopolitics. |
Research examples from our Department: Konrad, Kai A. and Marcel Thum, 2023, Elusive effects of export embargoes for fossil energy resources. Energy Economics, 117, Article No. 106441. DOI |
A central issue in public finance is the relationship between the individual and the state. In this context, methodological individualistic economics assumes that the action-bearing actors of the visual world are always single individuals, equipped with a set of options for action and choices with which they align their actions with their goals and preferences. In interaction with their fellow human beings, the actions of individuals often have consequences not only for the agent himself, but for other individuals and groups of individuals within a group or state structure. This individualistic concept of a community does not give the state and its institutions an identity or personality of their own. State institutions are merely institutional frameworks with no will or goals of action of their own. They are themselves a construct that results from the possibilities of action and interests of those who work in and for state institutions. Their actions thus give rise to "the state", which also has steering effects for private individual action. An essential element of such state institutions is that citizens delegate decision-making power to other agents – in a representative democracy, for example, to elected persons or persons indirectly legitimized by elected representatives. This delegation relationship is one of the most interesting and important objects of research in Public Economics. Positive research questions include understanding how possible institutional designs of this "delegation contract" affect delegates' incentives. They are extensively researched in Public Choice/Political Economy. This research also has normative elements: It assesses how delegates' decision-making behaviour feeds back to the welfare of citizens of the state. Economics is based on the principle that the outcome of action is evaluated on the basis of a scale that is determined by the citizen in question's own standard of judgement. |
Good government action is thus defined in such a way that the individual goals and preferences of the citizens of the state are achieved as far as possible through this action. The delegation context leads to one of the core questions of Public Economics: How far should the delegation of individual decision-making rights to political or bureaucratic bodies go? Among other things, this raises the tension between the decision-making autonomy of the citizen and the paternalistic behaviour of politics or bureaucracy vis-à-vis the citizen. This tension is one of the oldest questions of Public Economics and is also reflected in the most recent research questions of the department. In this context, the department first explores the different attitudes of individual citizens towards the desired role of the state in these decision-making issues. Since these attitudes are presumably not intrinsic in their ultimate causes, the question of the causes of these attitudes suggests itself: Why do which individuals desire to make important decisions themselves that affect their own well-being, and why do other individuals desire to delegate these decisions to a state government? |
Research examples from our Department: Konrad, Kai A., 2023, The Political Economy of Paternalism, Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2023–02. SSRN Simon, Sven und Konrad, Kai A., 2021, Paternalism Attitudes and the Happiness Value of Fundamental Freedoms, Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2021–04. SSRN Barbieri, Stefano, und Kai A. Konrad, 2021, Overzealous rule makers, Journal of Law and Economics, 64(2), 341–365. DOI |
