Economic Policy in Complex Environments

Project Information

EPOC

Grant agreement ID: 956107

DOI

10.3030/956107

Project closed

EC signature date 18 August 2020

Start date 1 March 2021

End date 28 February 2025

Funded under

• EXCELLENT SCIENCE - Marie Skłodowska-Curie Actions

Total cost

€ 3 982 061,52

EU contribution

€ 3 982 061,52

Coordinated by

UNIVERSITAET BIELEFELD
Germany

Periodic Reporting for period 2 - EPOC (Economic Policy in Complex Environments)

Reporting period: 2023-03-01 to 2025-02-28

Summary of the context and overall objectives of the project

Many of the main current economic and societal challenges in Europe are characterised by complex dynamic patterns stemming from path dependency, irreversibility, systemic risk and (local) interaction of heterogeneous agents. Examples in this respect are the search for appropriate policies to mitigate climate change, to foster a transition to a low-carbon economy, or to govern the development, diffusion and economic implications of new technologies. Designing sound economic policy in such domains is challenging and should be informed by empirical analyses and modelling frameworks that are suitable for capturing the complexity of the (economic) environment. The Innovative Training Network EPOC aims at advancing the state-of-the-art and the applicability of computationally intensive methods for decision and policy analysis and at using these methods in the domains of climate change and innovation. This agenda has been pursued by combining an interdisciplinary research agenda with an innovative European joint doctoral training programme. Early Stage Researchers have gained expertise and skills in data science, network theory, agent-based simulation, and economic modelling, with focus on climate change and innovation, and applied these skills in their individual research projects. The academic training has been complemented by Transferable Skills Training Measures, Inter-Sectoral Training Measures, provided by non-academic partners, and Career Development Training. Interaction with stakeholders, policy makers and the general public played an important role in pursuing the EPOC agenda and disseminating the results. The EPOC consortium consists of seven leading European universities and ten partner organisations. Each Early Stage Researcher was hosted by two universities, had a secondment with a non-academic partner organisation, and either has already graduated or will graduate with a double degree.

The collaboration in EPOC strengthened the higher education system in Europe and generated the largest network of European universities pursuing a joint structured doctoral program in Economics with a common research and training agenda delivering joint respectively double degrees. Work in EPOC generated methodological breakthroughs that allowed for substantial new insights on climate change dynamics and model-based analyses of the role of social networks for belief formation and dynamics of behavior with particular focus on climate change. Furthermore, the project generated new insights on optimal ways to combine policy measures in order to facilitate low carbon transitions and the role of technological change therein and also provides policy guidance for managing digital innovations such as central bank digital currencies.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

All objectives of the EPCO research agenda were achieved during the project. New methods for the estimation of multi-variate stochastic differential equations and general time series processes have been developed and techniques from machine learning and data science have been used to make progress with respect to the modelling of expectation formation and decision making processes in the framework of heterogeneous agent models as well as with respect to the calibration of agent-based simulation models. Innovative agent-based models have been designed, implemented and analyzed which capture the boundedly rational search of firms in complex technology landscapes, deal with dynamic coordination problems and react to different policy measures. Models allowing to study the role of social learning and cultural change for the effectiveness of climate policy have been developed and substantial empirical as well as theory-based and simulation-based work has been carried out to study how value chains respectively production networks influence the allocation of economic activity and emissions as well as the propagation volatility and shocks between sectors and countries. From a policy perspective, both empirical and simulation-based studies have investigated the effects and interactions of various policy instruments—including fiscal measures, carbon pricing, and mission-oriented policies—on emission reduction strategies and technological innovation within the green transition. Complementary to this work, also the role of mitigation for dealing with climate change as well as the challenges arising in coordinating measures have been addressed. Additionally, also policy design issues related to digitization have been addressed both with respect to product and financial markets. Overall 31 Working Papers and 23 papers in international journals were published during the EPOC project.

Each of the 15 Early Stage Researchers has finished or is close to finishing at least three research papers and presented them at the EPOC jamborees in September 2022 and August 2023. EPOC-based work was presented to international audiences at the EPOC international conference in July 2024 and overall the ESRs made 71 presentations of EPOC results at international conferences and workshops.

With respect to the training program, all planned Training Measures have been completed as scheduled involving a large number of accomplished scientists both form within EPOC and outside EPOC as instructors. In addition, all ESRs have completed additional training attending local doctoral courses or summer schools. EPOC ESRs have organized a very successful international doctoral workshop in Venice in March 2024 and also the EPOC international conference in Milan in July 2024 attracted a lot of attention in the scientific community. All ESRs have also completed a non-academic secondment.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

The research carried out by the EPOC Early Stage Researchers and supervisors has made substantial contributions to the methodological literature dealing with multi-variate time series and the foundation and calibration of complex interaction models and also has led to development of models addressing issues related to technological innovation and climate change, which so far have hardly been treated in the literature. The publication of 31 Working Papers reporting on these results give evidence of the research productivity during the period. Furthermore, new computational models (in particular agent-based simulation models), which address issues of high societal relevance have been developed during the project. Apart from being used for own research of the ESRs these models have been published in accessible data publications, such that they can be the basis for future work in these areas.

Many insights generated in EPOC, in particular with respect to policy design, climate change, low-carbon transition and technological progess have wide societal implcations. Apart from usual academic channels they have been disseminated through two policy maker meetings, the EPOC international conference, social media and interaction with the non-academic partners in EPOC, in particular also during extensive secondments of the doctoral fellows at these partners. A project video explaining the societal challenges addressed by EPOC and the need for developing suitable tools to deal with these challenges has been produced and put online, as well as short videos for the individual research projects of all EPOC Early Stage Researchers. Also, research results related to EPOC have been covered by high impact international media outlets, such as the Guardian and the Economist.

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