European Economic Review最新文献

This paper studies the asymmetry in the macroeconomic effects of central bank asset market operations induced by state dependency and the associated role of household heterogeneity. We build a New Keynesian model with borrowers and savers in which quantitative easing and tightening operate through portfolio rebalancing between short-term and long-term government bonds. We highlight the significance of an occasionally binding zero lower bound in explaining a weaker aggregate impact of asset sales relative to asset purchases. In this context, when close to the lower bound, raising the nominal interest rate prior to unwinding quantitative easing mitigates the economic costs of monetary policy normalization. Furthermore, our results imply that household heterogeneity in combination with state dependency amplifies the revealed asymmetry, while household heterogeneity alone does not enhance the aggregate effects of asset market operations.

Firms without paid employees account for up to 80 % of all firms, but only a small minority ever hires. This paper investigates the relationship between labour costs and the decision to hire a first employee and become an employer. Leveraging a unique policy in Belgium that permanently reduced the labour cost of the first employee by 13 %, we find that the number of new, first-time employers jumped by 31 % immediately following the reform. The elasticity of the probability to hire the first employee with respect to the labour cost is −2.39 [95 % CI: −3.45, −1.25].

Recent public and corporate policies restricting social identity expression, such as the face-covering restrictions in many European countries, presume that prominent signals of our social identity differences drive division even when inference about social identity is unaffected. Social identity theory predicts that limiting identity expression could positively or negatively affect how groups interact. We use an experiment to test whether a treatment that bans displaying an identity pin affects cooperation in public goods provision. Our subjects are U.K. residents who were in favor of leaving or remaining in the European Union. Each subject is simultaneously in two different yet economically identical environments that are distinguished only by the social identities of the group members. They play two simultaneous one-shot public goods games, one with others who share their identity (in-group public good), and one with a mixture of Leavers and Remainers (mixed-group public good). The political identities of all subjects and the structure of each group are known by everyone. Our treatments vary whether there exists a ban on displaying a Leaver/Remainer identity pin to others and whether Leavers or Remainers are the majority identity in the mixed groups. We find that banning pinning increases contributions to the mixed group when Leavers are the majority. These increases can be explained by changes in beliefs rather than the notion that shared group identity per se affects behavior. These setting- and identity-specific results suggest that policies designed to promote integration should be examined in the context in which they will be applied.

This paper studies the racial female wage penalty to remote work in the U.S. Instrumental variable estimates yield wage penalties that reach 66.3 % for black women and 33.9 % for white women when hours worked at home increase to 5 per week. Promotion bias, task reassignment and lack of productive social interaction are the most likely mechanisms for the wage losses. The estimates provide rare evidence on the costs of physical distancing due to work from home, particularly for women of different races managing the needs of their sick children.

Within a tractable New Keynesian model with stochastic asset-market participation, we analyze the normative implications of bubbly fluctuations for monetary policy. For a welfare-maximizing central bank, bubbly fluctuations imply an endogenous tradeoff between stabilizing cross-sectional consumption dispersion and stabilizing inflation/output. Inflation targeting is thus a generally suboptimal monetary-policy regime, despite the “divine coincidence”. Optimal deviations from inflation targeting are larger if the economy fluctuates around a balanced-growth path with small or no equilibrium bubbles, in which case the endogenous tradeoff is more stringent. The specific optimal-policy response to bubbly fluctuations depends however on the intrinsic nature of latter, and the associated effects on consumption dispersion.

Grain was the most important food source in Europe during the early modern period (c. 1500–1800). The price level of grain and its volatility played a pivotal role in determining food security and, ultimately, societal and human well-being. Conflicting findings have been reported as to what extent early modern grain price volatility decreased over time. We systematically reassess early modern grain price variability, using 69 annual price series of barley, oats, rye and wheat, and different statistical methods to obtain insights into spatio-temporal changes. Over the entirety of Europe, the different grain types showed a strong price correlation, implying a low level of food security, but the price inter-correlation between grain types decreased over time — indicating an improved level of food security. Grain price volatility significantly decreased over time, especially after c. 1725 and at coastal locations, lessening the risk of food stress and reflecting market improvement from the perspective of consumers. Changes in price volatility closely followed changes in price levels until the mid-seventeenth century, when both started to be increasingly independent of each other, partly owing to less abrupt volatility changes. The largest increase in both price level and volatility is observed during the ‘price revolution’ of the late sixteenth century as well as during the Thirty Years’ War (1618–1648). In general, a high-price–low volatility pattern (and vice versa) is found throughout the early modern period and especially during the seventeenth century. This relationship, however, exhibits a somewhat geographically heterogeneous pattern, although with lower prices but higher volatility predominating in inland regions. To summarise, our results support the assumption that the level of food security improved over time and especially during the eighteenth century, but at the same time reveal considerable differences between grain types, measures considered, and geographical regions. The findings of this study point towards the need for further research on the geographical patterns of grain price variability and the factors explaining them.

We examine the interaction between agency issues and business taxation in a growth model with an endogenous market structure. Agency issues arise from two types of management delegation: day-to-day production and research and development (R&D) activities. We calibrate the model to the US economy. A reduction in profit tax fosters business dynamics, R&D investments, and income growth in the short and medium term but hampers long-term growth. Lower-quality governance dampens short-term income gains and amplifies long-term growth losses. Additionally, we compare the effects of profit tax cuts with those from dividend and executive income tax cuts. Our analysis includes a welfare and inequality evaluation of profit tax reforms.

Subsidies promoting residential solar systems are intended to reduce carbon emissions by lowering demand for electricity from the grid. The ability of these subsidies to reduce grid demand hinges on how close, on aggregate, the two sources of electricity are to perfect substitutes. To test the efficacy of these policies, we form a tractable model of national residential electricity demand that identifies the aggregate substitutability between residential systems and electricity drawn from the grid. When estimated on the United States, we find that while the two are close to perfect substitutes, the degree to which substitutability is imperfect has material implications for policy. Subsidies inducing one $\mathrm{kWh}$ of residential solar electricity demand displace only 0.5 $\mathrm{kWh}$ of grid consumption. As an emissions reduction policy, subsidies had national abatement costs of $332 per MTCO${}_2$ in 2018.

The growth rates of the four largest European economies – France, Germany, Italy, and the United Kingdom – have slowed in recent decades. The persistence of the slowdown suggests that a low-frequency structural change is at work. Longer life expectancy and declining fertility have led to gradually ageing populations. These demographic trends contribute to economic growth directly through aggregate savings and labor supply decisions and indirectly through distortionary taxes needed to fund pension systems. We provide a structural framework to quantify the demographic contributions to historical and future growth rates. Several reforms have been suggested to increase late-life labor supply and, through that, output growth. Our structural framework also gives a welfare measure to evaluate these proposed reforms. The welfare implications are heterogeneous across age, wealth, and income. Welfare heterogeneity offers some insights into the political economy of pension reforms and the opposition to their implementation despite the projected increase in aggregate output growth.

We develop a micro-founded monetary model to inquire the role of a privately provided e-money instrument for household consumption smoothing and welfare. Different from fiat money, e-money users pay electronic transaction fees, but in turn e-money reduces their spatial separation frictions and enables risk-sharing through remittance transfers. We characterize the profit maximizing e-money transaction fees charged by a monopolist technology provider and the optimality of price regulation. Calibrating the model for the context of Kenya’s e-money product M-Pesa shows that the introduction of M-Pesa through a monopolist increases aggregate welfare by 1.0%, while regulating e-money prices and fully eliminating the monopoly power of the technology provider raises the aggregate welfare only by 0.1% beyond what is achieved through the monopolist.