Essays on Trade, Climate Change, and Household Finance

• Department of Economics

PhD thesis defence by Chloe Larkou

This thesis uses applied econometric methods to answer policy-relevant questions. Using unexploited big micro datasets, this thesis investigates the economic implications of shocks, such as trade policy shocks and climate change shocks.

The first chapter (joint with Alica Ida Bonk) investigates the effects of trade policy shocks on the US economy between 2007 and 2019. We identify unanticipated trade policy shocks by analysing the stock price reactions of trade-exposed and non-trade exposed firms around the release of official trade policy statements. Using local projections, we explore asymmetries and non-linearities in the effects of these shocks, including whether a policy is protectionist or liberalising, whether the shock was originated by the US or a trade partner, and whether the statement refers to an implementation of a policy change or a mere announcement.

The second chapter explores the impact of physical risk from climate change on residential real estate prices. I identify climate change shocks using temporal and spatial variation of natural events in Germany between 2013-2021. Using geo-coded property-level data, I uncover that real estate prices drop significantly after climate change shocks, not only in directly affected areas but also in unaffected areas of similar risk or geographically close to the affected areas. This study also investigates differential property risk and the media’s role in spreading local climate shocks.

The third chapter of this thesis (joint with Russell Cooper) turns to a different topic and methodology. This paper examines the dependence of a household’s marginal propensity to consume on its homeownership status. This is relevant for assessing arguments that policy innovations impact spending through the relatively large consumption response to income variations of home-owners with mortgages. In contrast with existing claims, we do not find robust evidence that the MPC of agents with mortgages exceeds that of outright homeowners and renters.