About the project
In order to understand the effects of the two deep macroeconomic changes over the last 50 years, the project will develop and use macroeconomic models with heterogeneity. The welfare effects of government redistribution policies are a recurrent topic.
The project aims to improve structural macroeconomic models with individual heterogeneity and micro-based individual behavior.
In order to bridge the gap between policy makers and economists in this field, the ultimate aim is to contribute to turning these models into useful tools in macro, development and labor economics, and actual policy making.
The project is divided into seven sub-projects.
Sub-projects
1. Education, risk, and redistribution
The rise in U.S. wage inequality has caused substantial concern and debate. The presumption is that this has had sharply negative welfare consequences for US households, in particular for low skilled.
Illuminate the welfare effects of a changing wage structure
The aim of this subproject is to illuminate the welfare effects of a changing wage structure - including a rising college premium - and to investigate how these changes influence the optimal government policy in general equilibrium.
Several types of government redistribution policies will be considered:
- progressive taxation
- disability pensions
- educational subsidies
Participants
- Gianluca Violante, New York University
- Jonathan Heathcote, FRB Minneapolis
- post doc 1
2. Inequality and aggregate fluctuations
While macroeconomics generally abstracts from heterogeniety, studies of inequality often abstract from aggregate fluctuations.The purpose of this subproject is to explore how fluctuations in heterogeneity can have aggregate effects, and how these effects may influence asset prices and the cost of business cycles. A business cycle is basically defined in terms of periods of expansion or recession.
Work harder in periods of recessions?
The intuition is that in response to an uninsurable wage schock, the unlucky ones will have to work harder to make up for the loss in earnings, provided that the risk aversion is reasonably high. Therefore, larger uninsurable risk will reduce average productivity and aggregate consumption. Conversely, larger insurable risk will allow workers to take advantage of working more in periods when they are more productive, which in turn will increase average productivity per hour and aggregate consumption.
The idea of the sub project is to study the aggregate effects of time-varying inequality.
Participants
- Gianluca Violante, New York University
- Jonathan Heathcote, FRB Minneapolis
- post doc 1
3. Human mistakes in macro models
Many people make errors in their financial planning for retirement. This sub-project will revisit the design of pension reforms, and other welfare state policies, when human error and bounded rationality are taken into account. Bounded rationality is the idea that in decision-making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision.
Bridge the gap between policy makers and Economists
The potential gains for this subproject are large. The grand aim of modern macroeconomics is to build a structural model of human behavior that is sufficiently rich to capture human behavior and sufficiently simple that it remains tractable and can be useful for addressing real policy questions. A major obstacle for having policy makers take seriously macroeconomic implications of policy reforms is that these models have so far lacked a convincing element of human error.
4. Sharing growth: China’s welfare state in transition
While China’s economic transition represents a “growth miracle,” the success is lump-sided: cross-sectional inequality is rising and the welfare of the majority of the population is not keeping pace with the high output growth. The rising inequality has caused a shift in policy makers’ attention from a singular focus on growth to a broader aim of promoting social welfare.
Possible reforms of the Chinese welfare state
Is it possible to allow more people to share the benefits of high growth without choking the economic performance? If so, what institutional arrangements can achieve such goal? This subproject aims at addressing these questions by undertaking a systematic evaluation of the (limited) Chinese welfare state, and possible reforms of it, within a fully specified general equilibrium model of the economic transformation.
The sub-project will focus on three growing cleavages; the differences between
- young and old generations
- urban and rural areas
- workers and entrepreneurs/capitalists
Participants
- Zheng Michael Song, Chinese University of Hong Kong
- Yikai Wang, University of Oslo
- Fabrizio Zilibotti, University of Zurich
- post doc 3
- graduate student
5. Trade surplus and currency manipulation
One of the most significant events in international economics over the last decades is the emergence of global imbalances, partly driven by China’s vast and growing foreign surplus.
Currency manipulation in China?
A common argument in the west is that the culprit of global imbalances is the exchange rate manipulation carried out by the Chinese authorities. The manipulation thesis rests on the simple idea that the imbalance itself is evidence of a misalignment of the exchange rate. Letting market forces determine the exchange rate would, according to this view, restore trade balance.
Unfortunately, the proponents of this view do neither spell out explicitly the mechanism of their claim nor do they provide much evidence corroborating it. The question is: how could China possibly maintain a severely misaligned real exchange rate for more than a decade, without feeding domestic inflation pressure, e.g., by increasing the demand of non-traded goods and stimulating domestic wage pressure?
As a comparison, when many European countries repeatedly devalued their currencies in the 1980, the only effect remaining two-three years after the devaluation was an increased inflation. The fact that China’s standard of living increased at a staggering pace during this period amplifies the puzzle: one would expect that as people get richer, they consume a larger share of non-traded goods, and this should feed into domestic wage growth.
This subproject aims at taking the currency-underevaluation thesis seriously by modelling such manipulation explicitly and studying how its theoretical predictions matches up with the empirical evidence for China.
Participants
- Zheng Michael Song, Chinese University of Hong Kong
- Fabrizio Zilibotti, University of Zurich
- post doc 3
- graduate student
6. Regional growth disparities in China
China has – by any measure – had an impressive growth since the economic liberalization started around 1980. Urban wages are about ten times larger today than thirty years ago. However, the growth is not evenly distributed across different regions in China – it is the coastal regions which have grown.
Why has the coastal regions grown so much more?
The aim of this subproject is to understand the sources of growth in China and, in particular, to understand the reversal of fortune: why did the coastal regions take off, while the internal regions lagged behind, despite their large initial industrial base?
Participants
- Loren Brandt, University of Toronto
- Gueorgui Kambourov, University of Toronto
- post doc 3
- graduate student
7. Dynamic political economy
Macroeconomics is scant on theories of government debt. Given this large recent public interest in government debt accumulation, there is a strong need for progress in this area.
Sustainable pension system
This subproject aims at understanding what – if anything – may sustain the pension systems and prevent governments from choosing ever-increasing government debt. One lead they will investigate is if fiscal policies may be complements to other policies: voters who know the future government must repay a large debt may strive to increase the tax base through educational subsidies and business-friendly policies.
Participants
- Zheng Michael Song, Chinese University of Hong Kong
- Fabrizio Zilibotti, University of Zurich
- post doc 4
Previous events
2017: Micro and Macro Perspectives on Inequality
Time and place: Aug. 28, 2017 8:50 AM – Aug. 29, 2017 4:00 PM, Tøyen hovedgård
ESOP is organising a workshop with focus on micro and macro perspectives on inequality.
The workshop is part of the research project "The Macroeconomics of Inequality, Development and the Welfare State (MACROINEQUALITY)"
Host: Professor Kjetil Storesletten
Workshop programme
Monday August 28
- 09.00 College Pricing and Income Inequality: Jonathan Heathcote, Federal Reserve Bank of Minneapolis
- 10.00 Use it or Lose it: Efficiency Gains from Wealth Taxation: Fatih Guvenen, University of Minnesota
- 11.30 Provider incentives and Health Care Costs: Evidence from Long-Term Care Hospitals: Neale Mahoney, University of Chicago Booth School of Business
- 13.45 The Effect of the Affordable Care Act on the Labor Supply, Savings, and Social Security of Older Americans: Eric French, University College London
- 15.00 Income and Wealth Distribution in Macroeconomics: A Continuous-Time Approach: Benjamin Moll, Princeton University
- 16.00 Children, time allocation and consumption insurance: Richard Blundell, University College London
Tuesday August 29
- 09.00 Secular Labor Reallocation and Business Cycles: Gabriel Chodorow-Reich, Harvard University
- 10.00 Monetary Policy, Heterogeneity and the Housing Channel: Kurt Mitman, Stockholm University
- 11.30 A Theory of Credit Scoring and the Competetive Pricing of Default Risk: José Víctor Ríos Rull, University of Pennsylvania
- 13.45 Marriage, Labor Supply and the Social Safety Net: Luigi Pistaferri, Stanford University
- 15.00 Earning Dynamics, Mobility Costs and Transmission of Firm and Market Level Shocks: Magne Mogstad, University of Oslo
2014-2017: Seminars
2017
BB-seminar with Martin Blomhoff Holm (BI)
Time and place: June 13, 2017 12:30 PM – 1:30 PM, Room 529, Eilert Sundt
Martin Blomhoff Holm (PhD) from BI present “Consumption with Liquidity Constraints: An Analytical Characterization".
BB-seminar: Hans Holter presents "Fiscal Consolidation Programs and Income Inequality"
Time and place: June 1, 2017 12:30 PM – 1:30 PM, Eilert Sundt, Room 1220
Hans Holter presents "Fiscal Consolidation Programs and Income Inequality", joint work with Pedro Brinca, Miguel Ferreira, Francesco Franco and Laurence Malafry.
BB-seminar: Yikai Wang presents " The Optimal Quantity of Capital and Debt "
Time and place: May 31, 2017 12:30 PM – 1:30 PM, Eilert Sundt, Room 1220
Yikai Wang presents "The Optimal Quantity of Capital and Debt ", joint work with Marcus Hagedorn and Hans Holter.
OMG/BB-seminar: Hans Holter presents "The Distribution of Income Risk: Evidence from Norwegian Registry Data"
Time and place: May 30, 2017 12:30 PM – 1:30 PM, Eilert Sundt, Room 1047
Hans Hotler present "The Distribution of Income Risk: Evidence from Norwegian Registry Data", joint work with Elin Halvorsen, Serdar Ozkan and Kjetil Storesletten.
BB- Seminar: Nicolai Ellingsen present "Misallocation and Lumpy Investments"
Time and place: May 24, 2017 12:30 PM – 1:30 PM, Eilert Sundt, Seminar Room 1220
Nicolai Ellingsen (PhD, UiO) presents "Misallocation and Lumpy Investments".
BB-Seminar: Yicheng Wang presents "A Note on Creative Destruction and Incomplete Market"
Time and place: May 16, 2017 12:30 PM – 1:30 PM, Eilert Sundt, seminar room 1220
Yicheng Wang presents "A Note on Creative Destruction and Incomplete Market", joint work with Yongsung Chang.
2016
BB-seminar: Martin Blomhoff Holm presents
Time and place: Dec. 6, 2016 12:30 PM – 1:30 PM, Eilert sundt, Room 1220
Martin Blomhoff Holm, BI Nydalen, presents "self-insurance with low interest rates".
BB-Seminar: Yikai Wang presents "The Effects of Chinese Economic Stimulus Program in 2008"
Time and place: Nov. 8, 2016 12:30 PM – 1:30 PM, Eilert Sundt, 529
Yikai Wang (UiO) present "The Effects of Chinese Economic Stimulus Program in 2008" which is jointly work with Fabrizio Zilibotti (UZH) and Kjetil Storesletten (UiO)
Matteo Alpino: Would you vote for me if I lower your taxes?
Time and place: Oct. 18, 2016 12:30 PM – 1:30 PM, Seminar Room 1047, Eilert Sundt
BB-seminar October 18, Matteo Alpino presented "Would you vote for me if I lower your taxes?".
Hans Holter: The Real Effects of Financial (Dis)integration: A Spatial Equilibrium Analysis of Europe
Time and place: May 31, 2016 2:15 PM – 3:15 PM, Eilert Sundt, Seminar room 1220
BB-Seminar May 31, Hans Holter presented "The Real Effects of Financial (Dis)integration: A Spatial Equilibrium Analysis of Europe" to the macrogroup.
Yicheng Wang: Risk sharing and risk taking with financial markets improvement
Time and place: May 23, 2016 2:15 PM – 3:15 PM, Eilert Sundt, Seminar room 1220
Yicheng Wang presented his work on "Risk sharing and risk taking with financial markets improvement" at BB-seminar this Monday.
Yikai Wang: Divide and Rule: An Origin of Polarization and Ethnic Conflict
Time and place: May 10, 2016 12:15 PM – 1:15 PM, Seminar Room 1220, Eilert Sundt
Presentation by Yikai Wang on "Divide and Rule: An Origin of Polarization and Ethnic Conflict", written jointly with Simon Alder.
Andreas Muller: "Time-Consistent Optimal Taxation of Factor Income in a Small Open Economy"
Time and place: Apr. 26, 2016 2:15 PM – 3:15 PM, Seminar Room 1220, Eilert Sundt
Presentation by Andreas Muller on "Time-Consistent Optimal Taxation of Factor Income in a Small Open Economy" at the BB-seminar April 26.
Mike Elsby: "Vacancy Chains"
Time and place: Apr. 12, 2016 12:15 PM – 1:15 PM, Seminar room 1220,Eilert Sundt
Mike Elsby is Professor of Economics at University of Edinburgh. He presents ongoing research under the title "Vacancy Chains"
Alessia Russo: "Youth Enfranchisement, Political Responsiveness, and Education Expenditure: Evidence from the U.S."
Time and place: Apr. 8, 2016 12:15 PM – 1:15 PM, Seminar room 1220, Eilert Sundt
BB-seminar: Alessia Russo presents "Youth Enfranchisement, Political Responsiveness, and Education Expenditure: Evidence from the U.S."
Tobias Broer: "Risk-Sharing in Village Economies Revisited"
Time and place: Feb. 9, 2016 12:15 PM – 1:15 PM, Seminar Room 1047, Eilert Sundt
BB-Seminar: Tobias Broer, Institute for International Economic Studies, Stockholm University, presents "Risk-Sharing in Village Economies Revisited" (Joint work with Tessa Bold)
2015
Nicolai Ellingsen: "Chinese Transition: the Role of Embodied Technology"
Time and place: Dec. 8, 2015 12:15 PM – 1:15 PM, Eilert Sundt, Seminar room 1220
BB- seminar: Nicolai Ellingsen presents work on "Chinese Transition: the Role of Embodied Technology"
Yikai Wang presents "Why Not a Converging World? Creative Destruction and A Unified Theory of Development “Traps”"
Time and place: Dec. 1, 2015 12:15 PM – 1:15 PM, Eilert Sundt, Seminar Room 1220
BB-seminar: Yikai Wang gives a presentation titled: Why Not a Converging World? Creative Destruction and A Unified Theory of Development “Traps"
Yicheng Wang: Government-driven Mortgage Guarantee Programs and Macroeconomic Effects
Time and place: Nov. 19, 2015 12:15 PM – 1:15 PM, Eilert Sundt, Seminar Room 1220
BB-seminar: Yicheng Wang presents "Government-driven Mortgage Guarantee Programs and Macroeconomic Effects"
Alessia Russo: Sustainable Intergenerational Insurance
Time and place: Nov. 5, 2015 12:15 PM – 1:15 PM, Eilert Sundt, Seminar Room 1220
BB-seminar: Alessia Russo presents "Sustainable Intergenerational Insurance"
Anirban Mitra: Redistribution of Economic Resources due to Conflict: The Maoist Uprising in Nepal
Time and place: Oct. 22, 2015 12:15 PM – 1:15 PM, Eilert Sundts, Seminar room 1220
Macro BB seminar. Anirban Mitra presents "Redistribution of Economic Resources due to Conflict: The Maoist Uprising in Nepal".
Anderas Müller: Towards a theory of structural change that can fit the late rise in services
Time and place: Oct. 15, 2015 12:15 PM – 1:15 PM, Harriet Holter, Seminar room 101, Faculty of Social Siences
Macro BB Seminar. Andreas Müller presents "Towards a theory of structural change that can fit the late rise in services"
Arnaldur Sölvi Kristjansson: Optimal taxation of investors and workers
Time and place: Apr. 30, 2015 12:15 PM – 1:00 PM, Seminar room ES 1220, Faculty of Social Sciences, UiO
MACRO BB seminar. Arnaldur S. Kristjansson, PhD candidate and project member, presents "Optimal taxation of investors and workers".
Alessia Russo: Sustainable Intergenerational Insurance
Time and place: Apr. 21, 2015 12:15 PM – 1:00 PM, ESOP seminar room ES 1047
MACRO BB seminar. Alessia Russo, assistant professor and project member, presents the paper "Sustainable Intergenerational Insurance".
Yikai Wang: China's Shadow Banking System
Time and place: Apr. 8, 2015 1:00 PM – 1:45 PM, Seminar room ES 1220, Faculty of Social Sciences, UiO
MACRO BB seminar. Yikai Wang, assistant professor and project member, presents "China's Shadow Banking System".
Andreas Müller: Sovereign Default Risk in a Political Equilibrium
Time and place: Mar. 17, 2015 12:15 PM – 1:00 PM, Seminar room ES1220, Faculty of Social Sciences
MACRO BB seminar. Andreas Müller, assistant professor and project member, presents the paper "Sovereign Default Risk in a Political Equilibrium".
Alfonso Irrarazabal: Optimal Asset Allocation for Commodity Sovereign Wealth Funds
Time and place: Mar. 10, 2015 12:15 PM – 1:00 PM, Seminar room ES1220, Faculty of Social Sciences
MACRO BB seminar. Alfonso Irrarazabal, BI Norwegian Business School and UiO, presents the paper "Optimal Asset Allocation for Commodity Sovereign Wealth Funds" w. Lin Ma.
Jeffrey R. Campbell: Liquidity contraints of the middle class
Time and place: Mar. 3, 2015 12:15 PM – 1:15 PM, Faculty of Social Sciences, seminar room ES1220
MACRO BB seminar. Jeffrey R. Campbell, Federal Reserve Bank of Chicago, presents the paper "Liquidity contraints of the middle class".
2014
MACRO BB Seminar 4: Time-consistent Taxation of Foreign Assets: the Efficiency Cost of Piketty's Global Wealth Tax
Time and place: Dec. 3, 2014 12:15 PM – 2:00 PM, Room ES 1047, Eilert Sundts hus, Blindern
Andreas Müller will present the paper "Time-consistent Taxation of Foreign Assets: the Efficiency Cost of Piketty's Global Wealth Tax".
Macro BB Seminar 3: Education and Pensions: A Positive Theory of Intergenerational Social Contracts.
Time and place: Nov. 25, 2014 12:15 PM – 2:00 PM, Eilert Sundts hus, B-blokka, Room ES1220
Alessia Russo will present the paper "Education and Pensions: A Positive Theory of Intergenerational Social Contracts".
Macro BB Seminar 2: Optimal Taxation under Incomplete Markets (Heterogenous Agents)
Time and place: Nov. 19, 2014 12:15 PM – 2:00 PM, Room ES 1047, Eilert Sundts hus, Blindern
Yikai Wang will present "A Quantitative Analysis of Optimal Taxation under Incomplete Markets" by Marcus Hagedorn, Hans Holter, Yikai Wang.
Macro BB Seminar 1: Fiscal Multipliers in the 21st Century
Time and place: Nov. 12, 2014 12:15 PM, SV Fakultetet, Seminarrom 1015
Hans A. Holter will present his ongoing work on Fiscal Multipliers in the 21st Century.
News
2014: Equal, rich and unmannerly (Dagens Næringsliv)
Norwegian parents do not encourage the value of "hard work" and encourage fantasy. It is because we can afford it.
«We don’t need no education. We don’t need no thought control.» Pink Floyd, The Wall. (1979)
Source: Dagens Næringsliv,
By Eva Grinde.Based on the paper of Fabrizio Zilibotti «Parenting with style: Altruism and paternalism in intergenerational preference transmission»
2014: Why China can afford (and benefit from) a generous unfunded pension system (VOX CEPR's Policy Portal)
The design of the pension system is a hot policy issue in China, given its fast-ageing population. This column discusses how different pension systems could allow different generations to share the benefits of high growth. The authors argue that a reform of the current system is necessary to achieve financial sustainability. However, delaying its implementation is advisable on the grounds of its effect on income inequality.
Source: VOX CEPR's Policy Portal 19th. October 2014
By Zheng Song, Kjetil Storesletten, Fabrizio Zilibotti and Yikai Wang.
2014: Jacopo Bizzotto receives prize
Jacopo Bizzotto, Assistant Professor at the Department of Economics and the Macroinequality project, has been awarded the Louis-André Gérard Varet Prize for the best paper by a young author at the Asset conference in Aix-en-Provence.
The prize is each year awarded to a “young author of an outstanding paper singled out by the program committee among those submitted to the ASSET annual meeting”.
Jacopo won with the paper “Certifier Competition and Product Quality”.
Participants
The local team at UiO includes four assistant professors, one PhD candidate, one researcher in a part-time position, and a research assistant in addition to the principal investigator.
The international team consists of researchers from New York University, University of Zurich, University of Chicago, University of Toronto, and University of Rochester, who have part-time positions in the project.
