Dear all, we kindly invite you to our next ECON Theory and Policy Seminar talk on Monday, April 15, 2024 from 4:00-5:30 pm (Seminarroom DA green 04, Freihaus Buidling, green area, 4th floor) Timo Trimborn (Aarhus University) https://www.au.dk/en/tt@econ.au.dk "Economic Growth and Climate Change: Converging towards a Continuum of Steady States" (with Thomas Steger (University of Leipzig)) To gain insights into the mechanisms that shape the interaction between economic growth and climate change, we analyze the simplified DICE through the lens of growth theory. It is shown analytically that this model exhibits a continuum of steady states. This novel insight is important for two reasons. a) Initial conditions of stock variables, which are notoriously difficult to calibrate, matter for the ultimate steady state (temperature, damages). However, we also show that uncertainty about the stock of global capital is considerably less consequential than uncertainty about GHG in the atmosphere. b) Shocks that occur along the transition, e.g. volcanic eruptions or a pandemic drop of CO2 emissions, exert permanent effects. These properties have important implications for understanding the effect of delayed climate policy and the consequences of TFP growth for long-run temperature. It is shown how a postponement of climate policy implementation leads to a higher long-run temperature and why stronger future TFP growth may in fact be a good thing for the climate. We also investigate analytically the stability properties of the steady states by calculating the eigenvalues. We test whether firm-specific demand shocks impact wages, and disentangle predictions coming from wage bargaining and wage posting. We use a unique institutional feature of public procurement auctions in Brazil: the moment in which the auction ends is random. For close auctions, winner and runner-up are as good as randomly assigned. In addition, contract value is higher for auctions that (randomly) end earlier. Winning a contract increases wages. We disentangle the effect on wages that comes from changes in firm size (wage posting) and the part that comes from changes in contract value (bargaining). We find evidence consistent with bargaining. Further Events: https://www.tuwien.at/en/mg/econ/events Best, Julia Hutter for Alexia Fuernkranz-Prskawetz Julia Hutter TU Wien Institute of Statistics and Mathematical Methods in Economics Research Group Economics Phone: +43 1 58801 10531 Mail: :julia.hutter@tuwien.ac.at<mailto:julia.hutter@tuwien.ac.at> https://econ.tuwien.ac.at/