Frederik B. Christensen, CBS and PeRCent
“Improving Welfare by Public Education”

This paper conducts a positive experiment that is designed to evaluate the economic and social consequences of introducing education subsidies in the student-debt-ridden US. It does so, using a partial-equilibrium Overlapping-Generations (OLG) model with heterogeneous agents, endogenous human capital accumulation, a general number of generations, a general retirement age, probabilistic survival, population growth, and human capital depreciation, and, thus, contributes to a theoretical literature on public education by providing nuance on both the micro and the macro level. The paper shows that an appropriately designed education policy boosts economic activity, lowers student debt, limits inequality, and improves social welfare in the long run. Furthermore, in a short-run perspective, it proves that such a policy can be implemented under a modified intergenerational Pareto criterion, using either public pensions or government debt as a means of cost-sharing.

Peter Feldhütter, CBS
“Shades of green: why firms issue green bonds”

We study the economic function of the market for corporate green bonds. We develop a simple theoretical framework of green bond issuance in a setting where investors who value sustainability can invest in both the debt and equity of firms. We test model predictions using a unique database of green bond issuance and secondary market bond prices. To calculate the relative price of green bonds, we match green bonds with similar ordinary bonds of the same issuer. Green bonds have lower yields. The relationship between the overall sustainability of a firm’s assets and the benefits from the green bond issuance is inverse U-shaped: intermediately sustainable firms benefit the most from this market. Our results demonstrate how credit markets have an advantage (over equity markets) in allowing differential costs of capital for investments of the same firm but with different sustainability.


Marcin Kacperczyk, Imperial College London
“Do Investors Care about Carbon Risk?”

We study whether carbon emissions affect the cross-section of U.S. stock returns. We find that stocks of firms with higher total CO2 emissions (and changes in emissions) earn higher returns, controlling for size, book-to-market, and other return predictors. We cannot explain this carbon premium through differences in unexpected profitability or other known risk factors. We also find that institutional investors implement exclusionary screening based on direct emission intensity (the ratio of total emissions to sales) in a few salient industries. Overall, our results are consistent with an interpretation that investors are already demanding compensation for their exposure to carbon emission risk.


Arno Riedl, Maastricht University
“Why Do Investors Hold Socially Responsible Mutual Funds?”

To understand why investors hold socially responsible mutual funds, we link administrative data to survey responses and behavior in incentivized experiments. We find that both social preferences and social signaling explain socially responsible investment (SRI) decisions. Financial motives play less of a role. Socially responsible investors in our sample expect to earn lower returns on SRI funds than on conventional funds and pay higher management fees. This suggests that investors are willing to forgo financial performance in order to invest in accordance with their social preferences.


Mogens Steffensen, University of Copenhagen and PeRCent
“Forbrugerens udfordringer med pensionsbeslutninger: Et livs-cyklus perspektiv”

Denne rapport er udarbejdet af en ekspertgruppe nedsat af Penge- og Pensionspanelet. Opgaven var at udarbejde et notat, der med udgangspunkt i det eksisterende pensionssystem beskriver forbrugernes udfordringer med pensionsbeslutninger. Målgruppen er Penge- og Pensionspanelet og eksterne fagpersoner, og indirekte også finansielle forbrugere.

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