Search results for "jel:E2"
showing 10 items of 25 documents
Aggregate Behavior and Microdata
2004
Abstract It is shown how one can effectively use microdata in modelling the change over time in an aggregate (e.g. mean consumption expenditure) of a large and heterogeneous population. The starting point of our aggregation analysis is a specification of explanatory variables on the micro-level. Typically, some of these explanatory variables are observable and others are unobservable. Based on certain hypotheses on the evolution over time of the joint distributions across the population of these explanatory variables we derive a decomposition of the change in the aggregate which allows a partial analysis: to isolate and to quantify the effect of a change in the observable explanatory variab…
Household Leverage and Fiscal Multipliers
2011
We study the size of fiscal multipliers in response to a government spending shock under different household leverage conditions in a general equilibrium setting with search and matching frictions. We allow for different levels of household indebtedness by changing the intensive margin of borrowing (loan-to-value ratio), as well as the extensive margin, defined as the number of borrowers over total population. The interaction between the consumption decisions of agents with limited access to credit and the process of wage bargaining and vacancy posting delivers two main results: (a) higher initial leverage makes it more likely to find output multipliers higher than one; and (b) a positive g…
A rational expectations model for simulation and policy evaluation of the Spanish economy
2010
This paper presents the model used for simulation purposes within the Spanish Ministry of Economic Affairs and Finance. REMS (a Rational Expectations Model for the Spanish economy) is a small open economy dynamic general equilibrium model in the vein of the New-Neoclassical-Keynesian synthesis models, with a strongly micro-founded system of equations. In the long run REMS behaves in accordance with the neoclassical growth model. In the short run, it incorporates nominal, real and financial frictions. Real frictions include adjustment costs in consumption (via habits in consumption and rule-of-thumb households) and investment into physical capital. Due to financial frictions, there is no per…
An international cohort comparison of size effects on job growth
2015
The contribution of different-sized businesses to job creation continues to attract policymakers’ attention, however, it has recently been recognized that conclusions about size were confounded with the effect of age. We probe the role of size, controlling for age, by comparing the cohorts of firms born in 1998 over their first decade of life, using variation across half a dozen northern European countries Austria, Finland, Germany, Norway, Sweden, and the UK to pin down size effects. We find that a very small proportion of the smallest firms play a crucial role in accounting for cross-country differences in job growth. A closer analysis reveals that the initial size distribution and surviv…
How do Banking Crises Impact on Income Inequality?
2012
We show that banking crises have an important effect on income distribution: inequality increases before banking crisis episodes and sharply declines afterwards. We also find that, while a large government size does not per se seem to reduce inequality, a rise in financial depth (i.e. better access to credit provided by the banking sector) contributes to a more equal distribution of income.
Bubbles and Crowding-in of Capital via a Savings Glut
2017
This paper uncovers a mechanism by which bubbles crowd in capital investment. If capital formation is initially depressed by a binding credit constraint, a bubble triggers a savings glut. Higher returns in a new bubbly equilibrium attract additional savings, which are channeled to expand investment at the extensive margin, leading to permanently higher capital, output, and wages. We demonstrate that crowding-in through this channel is a robust phenomenon that occurs along the entire time path.
The Employment Effect of Reforming a Public Employment Agency
2015
By how much does an increase in operating effectiveness of a public employment agency (PEA) and a reduction of unemployment benefits reduce unemployment? Using a recent labour market reform in Germany as background, we find that an enhanced effectiveness of the PEA explains about 20% of the observed post-reform unemployment decline. The role of unemployment benefit reduction explains just about 5% of the observed decline. Due to disincentive effects resulting from the reform, the reform of the PEA could have had an even higher impact on unemployment reduction if there had been less focus on long-term unemployed workers.
Monopolistic competition and different wage setting systems
2010
In this paper, we present a disequilibrium unemployment model without labor market frictions and monopolistic competition in the goods market within an infinite horizon model of growth. We consider different wage setting systems and compare wages, the unemployment rate, and income per capita in the long-run at firm, sector, and national (centralized) levels. The aim of this paper is to determine under which conditions, the inverted-U hypothesis between unemployment and the degree of centralization of wage bargaining, reported by Calmfors and Driffill [Economic Policy, 6, 14¿61, 1988], is confirmed. Our analysis shows that a high degree of market power normally produces the inverted-U shape …
Fairness Considerations in Labor Union Wage Setting : A Theoretical Analysis
2012
We consider a theoretical model in which unions not only take the outside option into account, but also base their wage-setting decisions on an internal reference, called the fairness reference. Wage and employment outcomes and the shape of the aggregate wage-setting curve depend on the weight and the size of the fairness reference relative to the outside option. If the fairness reference is relatively high compared to the outside option, higher wages and lower employment than in the standard model will prevail. If hit by an adverse technology shock, the economy will then react with a stronger downward adjustment in employment, whereas real wages are more rigid than in the standard model. W…
Household debt and labor market fluctuations
2011
Abstract The co-movements of labor productivity with output, total hours, vacancies and unemployment have changed since the mid 1980s. This paper offers an explanation for the sharp break in the fluctuations of labor market variables based on endogenous labor supply decisions following the mortgage market deregulation. We set up a search model with efficient bargaining and financial frictions, in which impatient borrowers can take an amount of credit that cannot exceed a proportion of the expected value of their real estate holdings. When borrowers' equity requirements are low, the impact of a positive technology shock on the marginal utility of consumption is strengthened, which in turn re…