Work Package 1
"Network formation and heterogeneous risks" Joint with Piero Gottardi.
We study a new model to study the effect of contract externalities due to climate change that arise through shock transmission. We model a financial network where financial intermediaries enjoy direct and indirect benefits from linking with one another. Brown firms benefit from having a connection with a bank, but they are a cost to both direct and indirect connections. In efficient networks the intermediaries should form large, connected components with very few brown firms attached. The equilibrium networks, on the other hand, have many more brown firms attached, they are core-periphery structures, and components are also smaller than the efficient ones. We also study extensions with heterogenous "brown" risks," with diversity in the costs to intermediaries firms of linking with brown firms, and with incomplete information.
“Central Banks and Climate Change. Fit, Opportunity and Suitability in the Law and Beyond.” Joint with David Ramos and Ángel Sánchez.
The recent shift in attitudes of central banks to climate change has resulted in an often-confusing mix of views for and against central banks’ active role in climate change, which paint such role as (un)desirable or (i)legal, raising daunting legal (and non-legal) questions. In this paper we propose a methodology to analyse the problem, by dividing the arguments in three different types: arguments of “fit” that analyse whether central banks can tackle climate change, in light of their mandates; arguments of “opportunity” that analyse when central banks may, or should, act; and arguments of “suitability” that analyse how central banks may (and may not) intervene. A large part of the discussion is clarified by distinguishing between these three aspects.
Work Package 2
"The effect of ambiguity in strategic environments: an experiment." Joint with Pablo Brañas-Garza, María Paz Espinosa y Diego Jorrat.
We experimentally study a game in which success requires a sufficient total contribution by members of a group, as in climate change. There are significant uncertainties surrounding the chance and the total effort required for success A theoretical model predicts higher contributions under ambiguity than under risk. However, in a large representative sample of the Spanish population (1,500 participants) we find that the average treatment effect of ambiguity on contributions is zero. The main significant interaction with the personal characteristics of the participants is with risk attitudes, and it increases contributions. This suggests that policymakers concerned with ambiguous problems (like climate change) do not need to worry excessively about ambiguous uncertainty.
Work package 3
"The Interactions of Social Norms about Climate Change: Science, Institutions and Economics". Joint with Manu García, David Ramos Muñoz, Angel Sánchez
We study the evolution of interest about climate change between different actors of the population, and how the interests of those actors affect one another. We find large swings over time of said interest for the general public by creating a Climate Change Index for Europe and the US (CCI) using news media mentions. The general interest science journals and policymakers have a steadier interest, although policymakers get interested much later. Central bankers’ interest was low until recently, but in the last three years, it has increased massively.
"Norms and the evolution of leaders’ followership". Joint with Esther Hauk
In this paper we model the interaction between leaders, their followers and crowd followers in a coordination game with local interaction, a strategic structure reminiscent of the incentives for climate abatement. The existence of leaders and their charisma for followers, plus the local interaction, which leads to clustering, is crucial for the survival of the Pareto dominant actions (think of them as intense climate abatement).
Measures to exploit and disseminate the project results
In line with what I wrote in the grant proposal, I will submit the working papers to top Economics and interdisciplinary journals. In addition, all the research has been presented extensively in department seminars and workshops around Europe.
Proposed measures to communicate the project activities to different target audiences
During the last two years, I have written extensively in the blog Nada es Gratis (one of the most read ones in Spanish) about the topics of the project (climate change and regulation).
I was awarded the King Jaume I prize in Economics last year. This is perhaps the most prestigious academic prize one can get in Spain, and as a consequence there is a lot of media attention on the awardees. I profited from it to talk about my research.
