The course aims to teach students about the economics of transition and resilience. The focus will be on understanding the relevant phenomena and discuss the importance of resilience at the individual, firm (micro) and economy wide (macro) level as well as understand why rationally bounded agents and competitive markets cause resilience to be less than efficient. The course results in students designing feasible policies and institutional reforms that can promote resilience at one of the levels identified above.

Resilience is the ability to absorb and recover from negative shocks. Economic resilience then applies to economic shocks and can be studied at the level of individuals, households, firms and (national) economies alike. The shocks one might consider can range from mild and frequent shocks (like demand fluctuations and the flu season) to intense and infrequent (like floods and pandemics). Moreover, there is a difference in how one might prepare and respond rationally to shocks that are idiosyncratic to common and anticipated versus unanticipated. Tools to handle and prepare include insurance, buffers and redundancies, but the economics of these policies are not well understood. Resources spent on being resilient are real costs for which there are no benefits when the risks do not materialize. Moreover, resilience creates positive externalities in cases that they do. So, in competitive markets we might expect an undersupply of resilience. This is compounded by behavioural economics that teaches us that boundedly rational agents underestimate the importance of tail events and hyperbolically discount the distant future. Finally, one should realize that the environment is changing. Population growth, migration, globalization, climate change and technical development all cause shocks to become more frequent, impactful and arguably more correlated. Managing a transition to a more resilient economy is a challenge our students will face in their personal lives, their working environment and as citizens of the EU in transition.

To be determined

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