Professorship of the Cluster of Excellence – Macroeconomics and Development

Prof. Dr. Nicola Fuchs-Schündeln

Preferences (e.g. risk aversion, altruism and fairness) play a decisive role in explaining economic behavior. Common currents of some of these preferences can certainly be understood as normative orders. In economics, economic preferences are typically assumed to be constant. Only recently has research increasingly focused on the origin of these preferences, e.g. the question of whether they are innate or acquired (“nature” vs. “nurture”).

The research conducted by the Cluster Professorship of Macroeconomics and Development investigated the role that individual past experiences play in the formation of these preferences. It focused on preferences regarding state intervention in economic life and preferences regarding the political system. Are preferences for redistribution significantly influenced by experiences with the economic system in one’s own country? Does support for a market-based economic system increase the longer the system has been established?

In a recent research project, Fuchs-Schündeln examined the determinants of support for democracy using the example of sub-Saharan Africa. A central prerequisite for the successful implementation of development policy activities in the areas of market economy and democracy is the acceptance of these guiding principles. The question of the determinants of support for democracy is particularly important for Africa, as many African states are in transition from authoritarian to democratic systems. Authoritarian systems may have left a lasting imprint on the preferences of the population to favor such a style of governance, or they may have created a desire for democracy.

Fuchs-Schündeln’s research investigated the questions of whether support for democracy within a country increases the longer a democratic system has been established in the country, what role the quality of the political regime plays in this, and whether the individual’s age at regime change, and thus the length of individual experience with an autocratic system in the past, influences support for democracy (see project report: “Formation of preferences for democracy and market economy in sub-Saharan Africa”). This project was continued in the second term.

Fuchs-Schündeln also examined the development of inequality in Germany over the last two decades, labor mobility within the European Union, languages as barriers to labor mobility, and the reasons for low labor productivity in East Germany.

The most important publications of the Cluster Professorship resulting from the work of the first term include:
* Fuchs-Schündeln, Nicola/Schündeln, Matthias (2015): ‘On the Endogeneity of Political Preferences: Evidence from Individual Experience with Democracy’, Science 347(6226), 1145-1148.
* Fuchs-Schündeln, Nicola/Bartz, Kevin (2012): “The Role of Borders, Languages, and Currencies as Obstacles to Labor Market Integration, in: European Economic Review 56(6), 1148-1163.
* Fuchs-Schündeln, Nicola/Izem, Rima (2012): “Explaining the Low Labor Productivity in East Germany – A Spatial Analysis”, in: Journal of Comparative Economics 40(1), 1-21.
* Fuchs-Schündeln, Nicola/Krueger, Dirk/Sommer, Mathias (2010): “Inequality Trends for Germany in the Last Two Decades: A Tale of Two Countries”, in: Review of Economic Dynamics 13(1), 103-132.

Outside the context of the professorship’s research projects, Prof. Fuchs-Schündeln was also Program Chair of the Annual Conference of the Society of Economic Dynamics in 2012.