Fields of interest
- International Macroeconomics
- Migration and Labour Markets
- Fiscal and Monetary Integration
- Economic Growth and Distribution
- DSGE Modelling
Work in progress
Paper presented at the CEF 2018 @ Milano, ESPE 2018, Antwerpen, EALE 2018, SMYE 2017 @ Halle, EEA-ESEM 2016 @ Geneva, Econometric Society NASM* 2016 @ Philadelphia, 12th Dynare Conferenc @ Rome, 10th CFE Conference @ Sevilla, BERA Macroeconomic Workshop @ Berlin,Lyon.
Investigating the business cycle in 55 bilateral migration corridors in the euro area over the period 1980-2010, we find evidence for business cycle related fluctuations in net migration flows and the crucial role of unemployment in shaping migration patterns. While on average wage and unemployment differentials are negatively correlated with net migration, across migration corridors we document a considerable heterogeneity in both dimensions that is more pronounced for wages. In line with these findings, we built a two-country dynamic stochastic general equilibrium (DSGE) model of internal business cycle migration in the euro area and allow for unemployment that occurs as a consequence of labor market frictions and rigidities in both countries. Our model is able to replicate the empirical observations and explains the heterogeneity of migration corridors by differences in the type of shock that hits an economy and the relative price/wage rigidity. We contribute to the literature on the causes and consequences of temporary migration and bridge it to DSGE models with unemployment.
Paper presented at the EEA-ESEM* 2018 @ Cologne, Verein für Socialpolitik* Annual Conference 2016 @ Augsburg, 11th Dynare Conference @ Brussels, CEF* 2015, Taipeh, HU Brown Bag Seminar @ Berlin, PRSE Seminar* @ Potsdam.
A European unemployment insurance scheme has gained increased attention as a new and ambitious common fiscal instrument which could be used for temporary cross-country transfers. Part of the national stabilizers composing unemployment insurance schemes would be transferred to the central level. Unemployed are then insured by both layers. When a country is hit by an asymmetric shock, it would receive positive net transfers from the central
fund in the form of reduced taxes and increased benefits, providing risk-sharing for the whole union.
We build a two-country DSGE model with supply, demand and labor market shocks in order to capture the recent national insurance system and the unemployment insurance union (UIU) design. The model is calibrated to the euro area core and periphery data and matches the empirically observed cyclicality of the net replacement rate, the wage and unemployment dynamics. This baseline scenario is then compared to a optimal unemployment insurance union with passive and active benefit policies. For all underlying shocks, we find that the UIU reduces the fluctuation of consumption and unemployment while it increases the fluctuation of the trade balance. In case of a positive domestic government spending shock the UIU reduces the negative crowding out effect on private consumption and investment. The model will be used to analyze the effects of national and supranational benefit policies on labour market patterns and welfare.
Paper presented at the EALE* 2018, Lyon, Verein für Socialpolitik* 2018, Freiburg, CEF 2018*, Milano, SED* 2017 @ Edingburgh, EEA-ESEM* 2017 @ Lisbon, EUROFRAME 2017 @ Berlin
This paper concentrates on the short-term business cycle effects on income and wealth inequality. In a panel estimation for OECD countries between 1991 and 2017 we find that on average income inequality - measured by the Gini coefficient - is countercyclical. We also find that a remarkable share of one third of all countries have rather a pro- or acyclical pattern. In order to understand the underlying cyclical dynamics of inequality we incorporate distributive shocks in a real business cycle model, where agents are ex-ante heterogeneous with respect to wealth and ability. This framework allows us to analyze how productivity, demand and distributive shocks affect both, the macroeconomic variables and the personal income and wealth distribution over the cycle.
We can show that whether wealth and income inequality in the model behaves countercyclical or not depends on two aspects. First, while demand shocks lead to countercyclical income and wealth inequality no matter of the parameter specification, the effect of TFP shocks on inequality measures depends crucially on the intertemporal elasticity of substitution. Second, we can show that distributive shocks have distinct dynamics: An exogenous increase of the
capital share increases income inequality. Thus, income inequality becomes more procyclical in case of redistributive shocks. It also turns out that these shocks drive a wedge between the dynamics of the income and the wealth distribution. In a second step we estimate the model via Bayesian techniques for the USA. The resulting parameter estimates point towards a procyclical relationship between TFP and inequality. Conducting a variance decomposition provides evidence that two thirds of fluctuations in the income distribution are attributed to typical business cycle shocks (TFP, demand). In case of
GDP fluctuations 25 percent can be contributed to distributional shocks, i.e. changes in the capital ratio.
Paper will be presented at the CEF 2019, Ottawa
Heterogeneous Agents Models with Aggregate Shocks
We augment the ‘truncated history approach’ with a loss (penalty) function in order to approximate the solution of a heterogeneous agent model with aggregate shocks. We apply the solution technique to a standard real business cycle model hit by TFP and fiscal shocks and assess the goodness of the approximation in comparison to the non-linear solution of the model without aggregate uncertainty. We find that incorporating the loss function does a better job in tracing the ’true’ responses of aggregate variables and inequality measures for both, TFP and fiscal shocks. Importantly, in contrast to the baseline truncated history approach, Ricardian equivalence breaks down in the model with a loss function. This feature allows to compare the welfare effects of different fiscal policies according to their financing conditions, i.e. debt-intensive vs. tax-intensive policy. We use the augmented model to compute welfare effects of business cycles and different fiscal policies. In summary, our results are twofold: First, and more general, we find that the average welfare costs of business cycles over time and households are smaller than in the representative agent model. Second, with regards to fiscal rules, we find that switching from a debt-intensive fiscal rule to a tax-intensive fiscal rule is associated with small welfare losses on average. However, we also find that such a switch would yield moderate welfare gains for roughly 20% of households.
Paper will be presented at the 2nd Behavioral Macroeconomics Workshop 2019, Bamberg.
Paper presented at the EEA-ESEM* 2016 @ Geneva, RES* Annual Conference 2016 @ Brighton, PRSE Seminar @ University of Potsdam.
* own presentation