Pub Date : 2025-10-10DOI: 10.1016/j.euroecorev.2025.105149
Stefan Bach , Charlotte Bartels , Theresa Neef
This paper estimates and analyzes the distribution and composition of pre-tax national income in Germany since reunification, combining personal income tax returns, household survey data, and national accounts. We find that pre-tax national income inequality has increased since the 1990s, though to a lesser extent than suggested by previous studies. Our results draw parallels in top income structure and concentration to the United States: Half of the top 1% earners are non-corporate business owners in labor-intensive professions contrasting with corporate top incomes in France. Also the concentration of pre-tax national income in Germany is similar to the United States and higher than in France.
{"title":"The distribution of national income in Germany, 1992–2019","authors":"Stefan Bach , Charlotte Bartels , Theresa Neef","doi":"10.1016/j.euroecorev.2025.105149","DOIUrl":"10.1016/j.euroecorev.2025.105149","url":null,"abstract":"<div><div>This paper estimates and analyzes the distribution and composition of pre-tax national income in Germany since reunification, combining personal income tax returns, household survey data, and national accounts. We find that pre-tax national income inequality has increased since the 1990s, though to a lesser extent than suggested by previous studies. Our results draw parallels in top income structure and concentration to the United States: Half of the top 1% earners are non-corporate business owners in labor-intensive professions contrasting with corporate top incomes in France. Also the concentration of pre-tax national income in Germany is similar to the United States and higher than in France.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"181 ","pages":"Article 105149"},"PeriodicalIF":2.4,"publicationDate":"2025-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145419638","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
What determines the stochastic path of inflation? We study this question in a monetary economy featuring imperfect information and rational expectations. The central bank targets inflation and releases noisy information about future non-monetary fundamentals through its non-systematic component. We show that real interest rate increases following such information releases lead the private sector to revise upward its expectations of future output — an outcome arising from “Fed information effects”. Through this channel, central bank communication influences market expectations about the economic outlook, adding further constraints to the equilibrium and ultimately determining the stochastic path of inflation. We propose a novel role for Fed information effects: their ability to serve as a mechanism for equilibrium selection.
{"title":"Controlling inflation with central bank news","authors":"Nikolaos Kokonas , Michalis Rousakis , Efthymios Smyrniotis","doi":"10.1016/j.euroecorev.2025.105176","DOIUrl":"10.1016/j.euroecorev.2025.105176","url":null,"abstract":"<div><div>What determines the stochastic path of inflation? We study this question in a monetary economy featuring imperfect information and rational expectations. The central bank targets inflation and releases noisy information about future non-monetary fundamentals through its non-systematic component. We show that real interest rate increases following such information releases lead the private sector to revise upward its expectations of future output — an outcome arising from “Fed information effects”. Through this channel, central bank communication influences market expectations about the economic outlook, adding further constraints to the equilibrium and ultimately determining the stochastic path of inflation. We propose a novel role for Fed information effects: their ability to serve as a mechanism for equilibrium selection.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105176"},"PeriodicalIF":2.4,"publicationDate":"2025-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145269448","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
What determines the stochastic path of inflation? We study this question in a monetary economy featuring imperfect information and rational expectations. The central bank targets inflation and releases noisy information about future non-monetary fundamentals through its non-systematic component. We show that real interest rate increases following such information releases lead the private sector to revise upward its expectations of future output — an outcome arising from “Fed information effects”. Through this channel, central bank communication influences market expectations about the economic outlook, adding further constraints to the equilibrium and ultimately determining the stochastic path of inflation. We propose a novel role for Fed information effects: their ability to serve as a mechanism for equilibrium selection.
{"title":"Controlling inflation with central bank news","authors":"Nikolaos Kokonas , Michalis Rousakis , Efthymios Smyrniotis","doi":"10.1016/j.euroecorev.2025.105176","DOIUrl":"10.1016/j.euroecorev.2025.105176","url":null,"abstract":"<div><div>What determines the stochastic path of inflation? We study this question in a monetary economy featuring imperfect information and rational expectations. The central bank targets inflation and releases noisy information about future non-monetary fundamentals through its non-systematic component. We show that real interest rate increases following such information releases lead the private sector to revise upward its expectations of future output — an outcome arising from “Fed information effects”. Through this channel, central bank communication influences market expectations about the economic outlook, adding further constraints to the equilibrium and ultimately determining the stochastic path of inflation. We propose a novel role for Fed information effects: their ability to serve as a mechanism for equilibrium selection.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105176"},"PeriodicalIF":2.4,"publicationDate":"2025-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270090","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-03DOI: 10.1016/j.euroecorev.2025.105162
Paul Hufe , Martyna Kobus , Andreas Peichl , Paul Schüle
Is the United States still a land of opportunity? We provide new insights on this question by leveraging a novel approach that allows us to measure inequality of opportunity in the joint distribution of income and wealth. We show that inequality of opportunity in the US has increased by 58% from the cohort born in 1935 to the cohort of 1980. Increases are driven by a less opportunity-egalitarian income distribution for birth cohorts after 1950 and a less opportunity-egalitarian wealth distribution after 1960. Our findings suggest that the United States has consistently moved further away from a level playing field in recent decades.
{"title":"Multidimensional equality of opportunity in the United States","authors":"Paul Hufe , Martyna Kobus , Andreas Peichl , Paul Schüle","doi":"10.1016/j.euroecorev.2025.105162","DOIUrl":"10.1016/j.euroecorev.2025.105162","url":null,"abstract":"<div><div>Is the United States still a land of opportunity? We provide new insights on this question by leveraging a novel approach that allows us to measure inequality of opportunity in the joint distribution of income and wealth. We show that inequality of opportunity in the US has increased by 58% from the cohort born in 1935 to the cohort of 1980. Increases are driven by a less opportunity-egalitarian income distribution for birth cohorts after 1950 and a less opportunity-egalitarian wealth distribution after 1960. Our findings suggest that the United States has consistently moved further away from a level playing field in recent decades.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105162"},"PeriodicalIF":2.4,"publicationDate":"2025-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270093","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-03DOI: 10.1016/j.euroecorev.2025.105162
Paul Hufe , Martyna Kobus , Andreas Peichl , Paul Schüle
Is the United States still a land of opportunity? We provide new insights on this question by leveraging a novel approach that allows us to measure inequality of opportunity in the joint distribution of income and wealth. We show that inequality of opportunity in the US has increased by 58% from the cohort born in 1935 to the cohort of 1980. Increases are driven by a less opportunity-egalitarian income distribution for birth cohorts after 1950 and a less opportunity-egalitarian wealth distribution after 1960. Our findings suggest that the United States has consistently moved further away from a level playing field in recent decades.
{"title":"Multidimensional equality of opportunity in the United States","authors":"Paul Hufe , Martyna Kobus , Andreas Peichl , Paul Schüle","doi":"10.1016/j.euroecorev.2025.105162","DOIUrl":"10.1016/j.euroecorev.2025.105162","url":null,"abstract":"<div><div>Is the United States still a land of opportunity? We provide new insights on this question by leveraging a novel approach that allows us to measure inequality of opportunity in the joint distribution of income and wealth. We show that inequality of opportunity in the US has increased by 58% from the cohort born in 1935 to the cohort of 1980. Increases are driven by a less opportunity-egalitarian income distribution for birth cohorts after 1950 and a less opportunity-egalitarian wealth distribution after 1960. Our findings suggest that the United States has consistently moved further away from a level playing field in recent decades.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105162"},"PeriodicalIF":2.4,"publicationDate":"2025-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270095","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-03DOI: 10.1016/j.euroecorev.2025.105156
Renaud Foucart , Jonathan H.W. Tan , Zichen Zhao
We study the role of incentives in determining how individuals with high and low ability endogenously form teams with homogeneous or heterogeneous abilities. Standard incentives that reward the best-performing team (team incentives) or the best member of each team (individual incentives) consistently lead to the formation of homogeneous teams, even when socially inefficient. Conversely, equal sharing rules, which offer all members an identical share of total production, elicit optimal matching but are vulnerable to moral hazard. We show that hybrid incentives, which combine team and individual incentives, elicit optimal matching and are robust to moral hazard. We conduct two experimental studies showing that hybrid incentives produce significantly more optimal teams than standard incentives, though fewer than under equal sharing.
{"title":"Endogenous formation of optimal teams","authors":"Renaud Foucart , Jonathan H.W. Tan , Zichen Zhao","doi":"10.1016/j.euroecorev.2025.105156","DOIUrl":"10.1016/j.euroecorev.2025.105156","url":null,"abstract":"<div><div>We study the role of incentives in determining how individuals with high and low ability endogenously form teams with homogeneous or heterogeneous abilities. Standard incentives that reward the best-performing team (<em>team incentives</em>) or the best member of each team (<em>individual incentives</em>) consistently lead to the formation of homogeneous teams, even when socially inefficient. Conversely, <em>equal sharing</em> rules, which offer all members an identical share of total production, elicit optimal matching but are vulnerable to moral hazard. We show that <em>hybrid incentives</em>, which combine team and individual incentives, elicit optimal matching and are robust to moral hazard. We conduct two experimental studies showing that hybrid incentives produce significantly more optimal teams than standard incentives, though fewer than under equal sharing.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105156"},"PeriodicalIF":2.4,"publicationDate":"2025-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270092","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-03DOI: 10.1016/j.euroecorev.2025.105156
Renaud Foucart , Jonathan H.W. Tan , Zichen Zhao
We study the role of incentives in determining how individuals with high and low ability endogenously form teams with homogeneous or heterogeneous abilities. Standard incentives that reward the best-performing team (team incentives) or the best member of each team (individual incentives) consistently lead to the formation of homogeneous teams, even when socially inefficient. Conversely, equal sharing rules, which offer all members an identical share of total production, elicit optimal matching but are vulnerable to moral hazard. We show that hybrid incentives, which combine team and individual incentives, elicit optimal matching and are robust to moral hazard. We conduct two experimental studies showing that hybrid incentives produce significantly more optimal teams than standard incentives, though fewer than under equal sharing.
{"title":"Endogenous formation of optimal teams","authors":"Renaud Foucart , Jonathan H.W. Tan , Zichen Zhao","doi":"10.1016/j.euroecorev.2025.105156","DOIUrl":"10.1016/j.euroecorev.2025.105156","url":null,"abstract":"<div><div>We study the role of incentives in determining how individuals with high and low ability endogenously form teams with homogeneous or heterogeneous abilities. Standard incentives that reward the best-performing team (<em>team incentives</em>) or the best member of each team (<em>individual incentives</em>) consistently lead to the formation of homogeneous teams, even when socially inefficient. Conversely, <em>equal sharing</em> rules, which offer all members an identical share of total production, elicit optimal matching but are vulnerable to moral hazard. We show that <em>hybrid incentives</em>, which combine team and individual incentives, elicit optimal matching and are robust to moral hazard. We conduct two experimental studies showing that hybrid incentives produce significantly more optimal teams than standard incentives, though fewer than under equal sharing.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105156"},"PeriodicalIF":2.4,"publicationDate":"2025-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145269447","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-01DOI: 10.1016/j.euroecorev.2025.105158
Peter Cramton , Axel Ockenfels
We propose a forward energy market design for Germany's electricity sector as an alternative to traditional capacity mechanisms. Drawing on two decades of U.S. experience, we point out the disadvantages of centralized capacity auctions and decentralized capacity obligations. Our forward energy market design enables transparent trading of granular energy products up to 48 months in advance through hourly batch auctions. In this design, load-serving entities have purchase obligations that increase from 0% to 100% of the realized load as the delivery date approaches. Unlike traditional capacity markets, which perpetuate spot market inefficiencies, our mechanism strengthens price signals, improves risk management, and enhances system resilience by providing efficient price discovery and clear investment signals. It also offers a robust, no-regret pathway to fostering innovation and demand flexibility, which are crucial for the energy transition.
{"title":"Efficient forward trade fosters innovation, investment, and resiliency","authors":"Peter Cramton , Axel Ockenfels","doi":"10.1016/j.euroecorev.2025.105158","DOIUrl":"10.1016/j.euroecorev.2025.105158","url":null,"abstract":"<div><div>We propose a forward energy market design for Germany's electricity sector as an alternative to traditional capacity mechanisms. Drawing on two decades of U.S. experience, we point out the disadvantages of centralized capacity auctions and decentralized capacity obligations. Our forward energy market design enables transparent trading of granular energy products up to 48 months in advance through hourly batch auctions. In this design, load-serving entities have purchase obligations that increase from 0% to 100% of the realized load as the delivery date approaches. Unlike traditional capacity markets, which perpetuate spot market inefficiencies, our mechanism strengthens price signals, improves risk management, and enhances system resilience by providing efficient price discovery and clear investment signals. It also offers a robust, no-regret pathway to fostering innovation and demand flexibility, which are crucial for the energy transition.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105158"},"PeriodicalIF":2.4,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145325826","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This Introduction provides an overview of the EER Special Issue on macroeconomic regime changes: Theory, evidence, and policy challenges ahead. The contributions are organized around four key thematic areas: (1) the dynamics and properties of inflation, (2) sectoral vulnerability to supply-chain disruptions and energy price shocks, (3) structural divergence and the economic impacts of climate change, and (4) the design and effectiveness of economic policies in times of crisis.
{"title":"Introduction to the special issue on macroeconomic regime changes: Theory, evidence, and policy challenges ahead","authors":"Pierpaolo Benigno , Claudio Morana , Patrizio Tirelli","doi":"10.1016/j.euroecorev.2025.105164","DOIUrl":"10.1016/j.euroecorev.2025.105164","url":null,"abstract":"<div><div>This Introduction provides an overview of the EER Special Issue on macroeconomic regime changes: Theory, evidence, and policy challenges ahead. The contributions are organized around four key thematic areas: (1) the dynamics and properties of inflation, (2) sectoral vulnerability to supply-chain disruptions and energy price shocks, (3) structural divergence and the economic impacts of climate change, and (4) the design and effectiveness of economic policies in times of crisis.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105164"},"PeriodicalIF":2.4,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270094","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We report the results of an experiment that examines the impact of centralized trading institutions on the formation of bubbles and crashes in laboratory asset markets. We employ three trading institutions: Call Market, Double Auction, and Tâtonnement. The results show that bubbles are significantly smaller in uniform-price institutions than in Double Auction. We reproduce this and other critical patterns of the data by calibrating a parsimonious model with heterogeneous agents with different levels of sophistication, featuring fundamental and myopic traders. The model matches untargeted data moments and produces larger bubbles under Double Auction, consistent with the experimental data. This is because multiple trades occur within a period under this institution, amplifying the impact of myopic traders with a positive bias on transaction prices.
{"title":"Trading institutions in experimental asset markets: Theory and Evidence","authors":"Bulent Guler , Volodymyr Lugovskyy , Daniela Puzzello , Steven Tucker","doi":"10.1016/j.euroecorev.2025.105148","DOIUrl":"10.1016/j.euroecorev.2025.105148","url":null,"abstract":"<div><div>We report the results of an experiment that examines the impact of centralized trading institutions on the formation of bubbles and crashes in laboratory asset markets. We employ three trading institutions: Call Market, Double Auction, and Tâtonnement. The results show that bubbles are significantly smaller in uniform-price institutions than in Double Auction. We reproduce this and other critical patterns of the data by calibrating a parsimonious model with heterogeneous agents with different levels of sophistication, featuring fundamental and myopic traders. The model matches untargeted data moments and produces larger bubbles under Double Auction, consistent with the experimental data. This is because multiple trades occur within a period under this institution, amplifying the impact of myopic traders with a positive bias on transaction prices.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"180 ","pages":"Article 105148"},"PeriodicalIF":2.4,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145325967","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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