The creation of a common European currency has been scrutinized in the context of optimum currency area theory since its origin in Mundell (1961). The debate gained particular prominence in light of the ’endogeneity’ theorem (Frankel and Rose, 1998), which argues that, once two countries establish a common currency, their economic structures and cycles increasingly align due to strengthening intra-industry trade. By contrast, the ’specialization’ theorem (Eichengreen, 1992; Krugman, 2013) argues that the creation of a currency union will predominantly increase inter-industry trade, ultimately lowering business cycle correlation. To test these views, we establish several indices of bilateral trade intensity across EU members using input-output data, measuring gross and so-called ’value-added’ trade, which also considers the contribution of intermediary goods in the production of final exports. The results of the fixed effect panel framework indicate a strong and robust empirical relationship between growth correlations and intra-industry trade, much in line with both Mundell’s and Frankel and Rose’s theories. However, we cannot establish a similarly robust relationship between total trade intensity and growth correlations. We reconcile these results by identifying a statistically significant relationship between economic alignment and trade when only considering industrial production, highlighting the importance of pan-European industrial supply chains for European economic integration. In contrast to the EU-28, the Eurozone does not display properties of an Optimum Currency Area. We partially attribute this to the Eurozone periphery, which shows a high degree of misalignment within itself; excluding the Eurozone periphery from our initial regressions further improves the results.

The paper complements the few regional studies on the sustainability–competitiveness nexus by providing a novel composite index of sustainable competitiveness for 272 European regions in 28 European countries. Principal component factor analysis is combined with a variance-based structural equation model to create a statistically reliable index, which overcomes the methodological issues of previous studies. Especially, the use of the latter also allows estimation the cause–effect relationships between the different pillars of sustainable competitiveness, where empirical evidence is scarce. The paper shows that favorable ecological, social, and economic eironments can jointly contribute to facilitating long-term sustainable competitiveness outcomes. Thereby, the progress in one dimension is not necessarily at the expense of another dimension of sustainable competitiveness. The proposed index reveals important insights for policymakers into the sustainable competitiveness trajectory of European regions. Region-specific plans for action can be derived and new policy conclusion can be drawn from the index. Keywords: Sustainable regional competitiveness; composite index; Beyond-GDP; structural equation modeling; European studies

We examine how different renewable energy support policies affect innovation in solar and wind power technologies. The analysis is conducted using policy and patent data for a large sample of 194 countries and territories. The policy data allows distinguishing two dimensions of regulation, i.e. design and intensity, and their effects on innovation. The patent data is based on the new Y02E system and covers the period 1990 to 2016 with the more recent years of both strong increases and declines in patenting activity. The results show that, first, more intense portfolios of renewable energy support policies increase patenting in solar- and wind-power-related technologies. Second, this inducement effect is the strongest for public RD&D programs, targets, and fiscal incentives. In contrast to previous studies, this paper finds a consistently positive impact of feed-in tariffs and does not detect technology-specific differences in the effectiveness of this policy instrument. Third, the positive effect on patenting activity increases significantly over time with an increase in the duration of the implemented RD&D programs and targets.

To assess the effect of eironmental policy on production structures, trade structures, or foreign direct iestment, a measure for the stringency of policy is necessary. Measures typically used in empirical studies share several disadvantages: they are not available on a sectoral basis to reflect concerns of industry competitiveness; they are not available for a wide range of countries to allow for international comparisons; or they are not broad enough to reflect the multidimensionality of eironmental policy. This paper develops a thorough, internationally comparable, sector-specific measure of multidimensional climate policy stringency where a shadow price approach serves as a basis. The approach is applied to climate policy by determining sector-specific emission-relevant energy costs on the basis of the sectors’ usage of emission-relevant energy carriers and the carriers’ respective prices. The resulting shadow price estimates are heterogeneous and can be applied in future research to test for carbon leakage and pollution havens. Keywords: Eironmental policy stringency, climate policy stringency, shadow price, energy price, pollution haven effect, carbon leakage

We look at the debate on the equivalence of the Dixit-Pindyck (DP) and Arrow-Fisher-Hanemann-Henry (AFHH) option values. Casting the problem into a financial framework allows to disentangle the discussion without unnecessarily introducing new definitions. Instead, the option values can be easily translated to meaningful terms of financial option pricing. We find that the DP option value can easily be described as time-value of an American plain-vanilla option, while the AFHH option value is an exotic chooser option. Although the option values can be numerically equal, they differ for interesting, i.e. non-trivial iestment decisions and benefit-cost analyses. We find that for applied work, compared to the Dixit-Pindyck value, the AFHH concept has only limited use._x000D_

To assess the effect of eironmental policy on production structures, trade structures or foreign direct iestment, a measure for the stringency of policy is necessary. Measures typically used in empirical studies share several disadvantages: They are not available on a sectoral basis to reflect concerns of industry competitiveness; they are not available for a wide range of countries to allow for international comparisons; or they are not broad enough to reflect the multidimensionality of eironmental policy. This paper develops a thorough, internationally comparable, sector-specific measure of multidimensional climate policy stringency where a shadow price approach serves as a basis. The approach is applied to climate policy by determining sector-specific emission relevant energy costs on the basis of the sectors’ usage of emission relevant energy carriers and the carriers’ respective prices. The resulting shadow price estimates are heterogeneous and can be applied in future research to test for carbon leakage and pollution havens.

In recent years, conflicts between eironmental and trade policy have significantly increased in number. We analyse these conflicts in greater depth and discuss which reforms in the world trading regime are needed. In the first three sections, we describe those multilateral eironmental agreements which contain trade restrictions and classify the restrictions used. In the following two sections, we look at the rulings of WTO-Panels and Appellate Bodies which shed a new light on the problem of unilateral trade restrictions and on the requirements for WTO-compatible decision-making under uncertainty. When summarizing our findings, we briefly discuss the implications of the 4th WTO Ministerial Conference in Doha (2001) for the future of the trade-and-eironment debate.