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We examine the institutional development of a set of transition economies since the dissolution of the USSR, with a particular focus on the effect of natural resource dependency, EU accession and institutional experience. In a cross-sectional analysis these factors show a significant association with the different dimensions of institutional quality. To provide a more comprehensive picture of the development and to control for confounding factors, a Hausman-Taylor estimator on panel data is applied. This analysis confirms the positive relationship between institutional experience and institutional development; moreover, it also confirms the positive effects of the EU accession process on institutional development. Finally, resource dependency, although highly significant in the cross-section, has no significant relationship with average institutional quality in the panel. However, the panel results suggest that resource dependency has a negative effect on the quality of political institutions, while it has no significant association with administrative or legal institutions. Overall, the analysis highlights the persistent nature of institutions and indicates that experience of having independent institutions can affect the pace and path of institutional development.

Emissions are directly linked to economic output and consequently subject to business cycle fluctuations. The present study analyses the interactions between climate policies and business cycles through the lens of a New Keynesian dynamic stochastic general equilibrium model. We compare a static cap-and-trade policy with a dynamically adjusting policy in terms of macroeconomic stabilisation, welfare and emissions price dynamics. The results of the quantitative evaluation suggest that a constant policy leads to lower aggregate volatility but is associated with larger welfare costs. In contrast, under the dynamic policy emissions prices and labour markets display less variations.

This paper examines the dynamics of wealth and income inequality along the business cycle and assesses how they are related to fluctuations in the functional income distribution. In a panel estimation for OECD countries between 1970 and 2016 we find that on average income inequality -measured by the Gini coefficient -is countercyclical and also shows a significant association with the capital share. Up on a closer look, we find that a remarkable share of one third of all countries display a rather pro-or acyclical relationship. In order to understand the underlying cyclical dynamics of inequality we incorporate distributive shocks, modeled as exogenous changes in the capital share, into a real business cycle model, where agents are ex-ante heterogeneous with respect to wealth and ability. We show how to derive standard inequality measures within this framework, which allow us to analyze how productivity and distributive shocks affect both, the macroeconomic variables and the personal income and wealth distribution over the business cycle.We find that whether wealth and income inequality in the model behaves countercyclical or not depends on two aspects. The intertemporal elasticity of substitution and the persistence of the shocks. We use Bayesian techniques in order to match GDP, capital share and consumption to quarterly U.S. data. The resulting parameter estimates point towards a non-monotonic relationship between productivity fluctuations and inequality. On impact, inequality increases in response to TFP shocks but declines in later periods. This pattern is consistent with the empirically observed relationship in the USA. Furthermore, we find that TFP shocks explain about 17 percent of the cyclical fluctuations in inequality in the USA. JEL-Classification: D31, E25, E32

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