EARIE Exclusive: Young Economist Essay Award 2026

00:00:00: How do economic policies shape markets?

00:00:02: And what unintended effects can they have?

00:00:05: from environmental regulation and agricultural subsidies to a competition in the automotive industry, an allocation of airport slots.

00:00:14: These questions are at heart for this year's winning papers on the Young Economic Essay Award.

00:00:19: The award recognizes outstanding research by young economists presented with the EUI conference at ZDW Mannheim.

00:00:27: In this episode, ZDW economist Bernhard Gangelmayer is joined by this year's three award winners.

00:00:34: Emma Dupree, Alejandro Sabal and Sebastian Bauer.

00:00:38: Together they take a closer look at their research.

00:00:40: Welcome to the ZDw podcast Wirklich Wirtschaft.

00:01:01: I have the three winners of this year's Young Economist Essay Award with me today.

00:01:06: The award is the best paper award at the Erie Conference for researchers under the age of thirty-five and less than five years after their PhD defense.

00:01:14: Alejandro Zabal, assistant professor at the University of Chicago.

00:01:17: Sebastian Bauer as a system professor at Universitat Caradolstecero in Madrid.

00:01:22: And Emma Dupuis is an assistant Professor at Sciences Po in Paris.

00:01:26: Alejandro, Sebastian, Emma welcome!

00:01:29: Thank you very much.

00:01:31: I want to use this time and the setting, just talk a little bit about your papers.

00:01:36: First of all congratulations on the price!

00:01:38: Alejandro in you paper product entry into global automobile industry.

00:01:43: You study dynamics in automotive industry.

00:01:46: Tell us more about it.

00:01:47: Yeah

00:01:47: so i started this paper because i was interested understanding spillovers across countries.

00:01:53: In multinational industries Like the car industry, it's natural that policies implemented in one country have global repercussions.

00:02:01: Of course through how firms respond to a policy and what are.

00:02:04: the most important decisions that car makers have make is which products do develop?

00:02:09: And in which markets to sell each of the products they developed.

00:02:13: but when I wanted this question realized if you want study product entry with differentiated products and firm facing consumers with heterogeneous preferences things become tricky very quickly And there's primarily two reasons why that's the case.

00:02:28: One of them is that entry games like these can have multiple equilibria, and this multiple equilibrium are intrinsic to entry game.

00:02:34: so it could be an equilibrium in which I enter and Sebastian doesn't or vice versa right?

00:02:39: This really part of economics of entry-game.

00:02:41: So we clearly want to do policy counterfactuals in a way that accounts for this feature.

00:02:45: The other key challenge is that even if we wanted to solve for all the entry equilibria, it quickly becomes computationally infeasible because of all possible combinations at a rise.

00:02:58: One of the key contributions are papers to develop method and estimate product-entry games in which there's many heterogeneous firms facing consumers with heterogeneous preferences.

00:03:09: I take this method then study what happens when United States implements policies their local brands with subsidies, like by American subsidies.

00:03:19: And

00:03:19: I assess the impact of those subsidies implemented in the United States car market on the global car industry and i find importance below us particularly when these subsidies are implemented under production rather than the consumer side.

00:03:31: Fascinating timely topic.

00:03:32: Emma your paper is entitled unintended environmental policies The Impact Of European Agricultural Subsidies On Pollution.

00:03:40: Now, with a public debate over the next EU budget just getting off of ground that is an ever-timely topic.

00:03:46: Tell us more!

00:03:47: Yeah sure so.

00:03:48: when we think about environmental industrial policy We usually think about designing regulations that are aimed at curbing emissions or other forms of harmful pollution coming from Industrial Pollution like carbon taxes.

00:04:00: but When we design industrial policies for industries With large environmental externalities it's actually pretty easy For them to also end up having environmental consequences even though it's not in the mind of policy makers when they design these policies.

00:04:12: And so here an example is like trade tariffs that tend to be higher for more upstream industries, that are more carbon intensive and this leads to a negative carbon tax as harmful or climate change mitigation?

00:04:24: In his paper my question was what can different forms production subsidies do with environments where producers are heterogeneous both in terms of profitability but also their propensity.

00:04:38: And I applied this question to the context of EU Common Agricultural Policy, which is the EU's largest industrial policy.

00:04:44: Which has accounted for about forty-five percent of the entire EU budget since nineteen eighty.

00:04:49: and here The stakes are that you agriculture Is maybe the most polluting industry in the EU?

00:04:54: It also an industry which had a very hard time To become greener.

00:04:57: over time it like really hard to regulate pollution In agriculture.

00:05:01: there was a lot resistance from suppliers as well Here.

00:05:04: so my questions What do these large subsidies, which are mostly not designed to impact the environments end up doing it?

00:05:12: Here I focus on chemical use, fertilizers and pesticides in the grain markets as a main source of environmental pollution coming out of agriculture.

00:05:21: And I show that producers differ a lot from their propensity to pollute in a way correlated with their overall profitability.

00:05:28: specifically here larger more profitable farms tend to pollutes more.

00:05:32: so given all this Cap subsidies actually end up having surprising positive effects on the environment.

00:05:38: and there's two main reasons for that.

00:05:41: The first is most of current cap subsidies to farms are a subsidy to land use, and that incentivizes farm to use relatively more lands and less chemicals in production which makes production relatively greener.

00:05:53: but then on top of this cap subsidies can also favor the market participation of small farms by making agriculture sufficiently profitable.

00:06:02: They can also engineer a reallocation of production towards producers that are maybe less efficient, but also greener.

00:06:09: And that's going to end up having positive effects for the

00:06:10: environments.".

00:06:12: That really is good news.

00:06:13: at some point regulation has had an effect on the environment.

00:06:17: Thank you!

00:06:18: This paper has enormous policy relevance and it was awarded the Paul Jaroski Prize for mostly public policy relevant papers by a young researcher Moving from environmental, environmentally friendly policy to an industry that's not always seen as very environmentally-friendly.

00:06:36: Sebastian your paper Competition and Welfare in Airport Slot Allocation is another mobility related paper similar to Alejandro's.

00:06:44: so what is the state of competition in the aviation industry?

00:06:47: What do you show on your paper?

00:06:48: yeah

00:06:49: So my papers study a problem of airport congestion In particular with focus on Europe where this is a very acute problems.

00:06:56: we all know The way we currently deal with that is, if we allocate the available capacity in the form of slots landing and take off slots.

00:07:05: And as long as an airline uses their slots at least eighty percent of a time during given year they get to automatically keep them for next year.

00:07:12: If they don't then lose them.

00:07:14: those get reallocated by independent coordinator.

00:07:17: There have been calls.

00:07:18: this system may lead airlines to fly unnecessary flights both keeping competition out but also making sure it has option value.

00:07:26: And as a result, there have been calls for changing this non-market system into market based systems like an auction.

00:07:35: Auctioning off these slots is regular intervals.

00:07:37: So in my paper what I study?

00:07:39: What would happen if we replace the current system with its eighty percent usage requirement With an auction base system and do this through dynamic model of airline competition and consumer welfare calibrated to the European Union?

00:07:51: And what I find is while the current system leads to misallocation, that there are some slots in the hands of airlines who aren't the best users for those slots.

00:08:05: There's also a second effect which is this is an industry with market power and if they left their own devices it would be constricted output to raise prices.

00:08:16: And these usage requirements, what they do is essentially induce airlines to fly more than otherwise would.

00:08:23: To sell those extra seats have lower fares and as a result if we replace the current system with its eighty percent usage rule With auctions at regular intervals We eliminate that dynamic incentive.

00:08:34: Therefore airlines will respond by reducing output.

00:08:37: The second effect so strong it actually trumps first one.

00:08:40: As a result of replacing the current systems with an auction completely unintended the current system is actually delivering a benefit to consumers.

00:08:49: Oh, that's fascinating.

00:08:51: another paper with unintended consequences this year's conference This years award papers were those unintended award papers.

00:08:58: Thanks a lot.

00:08:59: I hope you all have the chance to attend more e-reconference in the future.

00:09:03: Is it?

00:09:04: The first time your here y'all.

00:09:05: First offender so or already repeat offenders first time i see nodding for me.

00:09:11: So I hope See Y'all again next Year.

00:09:14: we're In Italy.

00:09:15: It'll be a little warmer than this year in Mannheim.

00:09:17: Alejandro, Emma and Sebastian thanks for chatting with me today.

00:09:22: Enjoy the rest of your conference!

00:09:27: Thank you very much!

00:09:44: as well in the show notes and our social media channels.

00:09:48: Thank you for listening, see ya next time!