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Publications (224)
We analyze an investor who delegates information acquisition and investment decisions to an agent. The investor cannot monitor the agent’s effort or information. Optimal pay schemes contain bonuses that increase with the net return rate of the investment, but, unlike conventional contracts, at a decreasing rate. Moreover, investments with low retur...
In many countries, sickness absence financed by generous insurance benefits has become an important concern in the policy debate. It turns out that there are strong variations in absence behavior between local geographical areas, and it has been difficult to explain these variations by observable socioeconomic factors. In this paper we investigate...
In this paper we treat an individual’s health as a continuous variable, in contrast to the traditional literature on income insurance, where it is regularly treated as a binary variable. This is not a minor technical matter; in fact, a continuous treatment of an individual’s health sheds new light on the role and functioning of income insurance and...
This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours an...
We develop a simple yet realistic model of income insurance, where the individual’s ability and willingness to work is treated as a continuous variable. In this framework, income insurance not only provides income smoothing, it also relieves the individual from particularly burdensome work. As a result, the individual adjusts his labor supply in a...
Does the average level of sickness absence in a neighborhood affect individual sickness absence through social interaction on the neighborhood level? To answer this question, we consider evidence of local benefit-dependency cultures. Well-known methodological problems in this type of analysis include avoiding the so-called reflection problem and di...
This paper analyzes economic–social interaction in China in connection with the country's change of economic system. I define an economic system in terms of a multi-dimensional vector of broad institutional characteristics, and I emphasize that important features of the social development are closely related to specific changes in these various dim...
Este trabajo trata de identificar los principales problemas, tanto exógenos como endógenos, que afectan al Estado de Bienestar e intenta señalar alternativas para afrontarlos.
Lundberg was born in Stockholm and obtained a Ph.D. in economics in 1937 at the Stockholms Högskola. From 1937 to 1955 he was director of the Government Economic Research Institute (Konjunkturinstitutet), and from 1946 to 1965 he was professor of economics at the University of Stockholm; he held the same post at the Stockholm School of Economics fr...
This article starts out with a brief discussion of the historical background, the justifications and the political forces behind the creation of the modern welfare state. It also summarizes its major achievements in terms of economic efficiency and redistribution. The article also tries to identify some major problems of contemporary welfare-state...
We experimentally investigate social effects in a principal-agent setting with incomplete contracts. The strategic interaction scheme is based on the well-known Investment Game (Berg et al., 1995). In our setting four agents (i.e., trustees) and one principal (i.e., trustor) are interacting and the access to choices of peers in the group of trustee...
Both the efficiency wage theory and the insider-outsider theory are promising attempts to explain the existence of unemployment. These theories also explain why workers are often laid-off or fired, rather than retained at lower wages than the initial ones when there is a reduction in the demand for labour. The type of unemployment that is explained...
Tol and Yohe point out that, in their reply [Vol. 8, No. 1] to Tol and Yohe’s review [Vol. 7, No. 4], the Stern team demonstrates the fragility of the numerical findings of the cost–benefit analysis in the Stern Review. At the same time, the Stern team puts less weight on cost–benefit analysis as a guide to policy making on climate change. To...
I discuss the nature of the economic reforms in China during the last quarter of a century in the context of a typology of economic systems, emphasizing the interaction between economic and social mechanisms. I also consider China’s options for further reforms. I focus on economic reforms that make the growth path less resource demanding and social...
The publication of János Kornai’s memoirs, By Force of Thought, provides an excellent opportunity to remind ourselves of Kornai’s great contributions to economic research. This paper discusses both his basic research strategy and some of his main research results. Kornai has usually dealt with great, system-oriented issues, and he has been more ins...
The author applies a systems-oriented"holistic"approach to China's radical economic reforms during the past quarter of a century. He characterizes China's economic reforms in terms of a multidimensional classification of economic systems. When looking at the economic consequences of China's change of economic system, he deals with both the impressi...
Empirically, disincentive effects on work of generous welfare state arrangements tend to appear with a substantial time lag. One explanation is that norms concerning work and benefit dependency delay such effects. We model altruistic parents' economic incentives for instilling such work norms in their children. Anticipated economic support from par...
This paper starts out with a brief discussion of the historical background, the justifications and the political forces behind the built up of the modern welfare state. It also summarizes its major achievements in terms of economic efficiency and redistribution. The paper also tries to identify some major problems of contemporary welfare-state arra...
We analyze economic rationales for, and possible alternatives to, the Stability and Growth Pact (SGP). We identify various cross-country spillover effects and domestic policy failures as potential rationales. The two sets of problems suggest different corrective measures, and different measures than those applied in the context of SGP. We contrast...
We analyze the consequences for sickness absence of a selective softening of job security legislation for small firms in Sweden in 2001. According to our differences-in-difference estimates, aggregate absence in these firms fell by 0.2-0.3 days per year. This aggregate net figure hides important effects on different groups of employees. Workers rem...
Sweden has a long and distinguished tradition in economics, beginning with Knut Wicksell and continuing with Gustav Cassel, Eli Heckscher, Erik Lindahl, Gunnar Myrdal, Bertil Ohlin, and Erik Lundberg, all of whom are now gone. Yet, for several of these men, economics was not enough: Wicksell spoke out on moral issues and served time in jail, and My...
We analyze economic rationales for, and possible alternatives to, the Stability and Growth Pact (SGP). We identify various cross-country spillover effects and domestic policy failures as potential rationales. The two sets of problems suggest different corrective measures, and different measures than those applied in the context of the SGP. We contr...
A large literature on ex ante moral hazard in income insurance emphasizes that the individual can affect the probability of an income loss by choice of lifestyle and hence, the degree of risk-taking. The much smaller literature on moral hazard ex post mainly analyzes how a “moral hazard constraint” can make the individual abstain from fraud (“mimic...
The paper discusses a number of threats to the financial sustainability of social spending: increased internationalization of national economies, gradually higher relative costs of producing a number of human services, the “graying” of the population, slower productivity growth in the private sector, low employment rates, and various types of disin...
Since unification, the debate about Germany's poor economic performance has focused on supply-side weaknesses, and the associated reform agenda sought to make low-skill labour markets more flexible. We question this diagnosis using three lines of argument. First, effective restructuring of the supply side in the core advanced industries was carried...
We analyze motivations for, and possible alternatives to, the Stability and Growth Pact (SGP). With regard to the former, we identify domestic policy failures and various cross-country spillover effects; with regard to the latter, we contrast an "economic-theory" perspective on optimal corrective measures with the "legalistic" perspective adopted i...
It is useful to discuss welfare-state arrangements and their consequences in the context of dynamic processes, with the development in one period having a critical influence on subsequent developments. For example, the expansion of welfare-state arrangements during the twentieth century may be seen as the result of dynamic interaction between marke...
The expansion of welfare-state arrangements is seen as the result of dynamic interaction between market behaviour and political behaviour, often with considerable time lags, sometimes generating either virtuous or vicious circles. Such interaction may also involve induced (endogenous) changes in social norms and political preferences. Moreover, th...
The paper analyses the interaction between economic incentives and work norms in the context of social insurance. If the work norm is endogenous in the sense that it is weaker when the population share of beneficiaries is higher, then voters will choose less generous benefits than otherwise. We also discuss welfare-state dynamics when there is a ti...
We classify social security pension systems in three dimensions: actuarial versus non-actuarial, funded versus unfunded, and defined-benefit versus defined-contribution systems. Recent pension reforms are discussed in terms of these dimensions. Shifting to a more actuarial system reduces labor-market distortions, although limiting the scope for red...
We classify social security pension systems in three dimensions: actuarial versus non-actuarial, funded versus unfunded, and defined-benefit versus defined-contribution systems. Recent pension reforms are discussed in terms of these dimensions. Shifting to a more actuarial system reduces labor-market distortions, although limiting the scope for red...
This volume, in a sense, aims at reflecting the qualities of the honoree and it does so in two respects. On the one hand, it covers a great variety of subdisciplines of economics. On the other hand, the book ranges from theoretical and mathematical economics to hands-on applied analyses of economic-policy issues. All essays are driven by the aspira...
Incl. bibl., index.
The new information and communication technology, ICT, induces households to take over tasks from firms and government agencies, using tools and systems provided by these very same organizations. The result is often joint production activities. We argue that the importance of ICT for the exchange process between households and organizations is unde...
We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 fi...
In this study, we estimate the impacts of differences in international tax rates on the probability of choosing a location for an affiliate of a multinational firm. In particular, we distinguish between the tax sensitivity of Greenfield and M&A investments. Based on a novel firm-level dataset on German outbound FDI, we find evidence that location d...
Perotti's paper is a thoughtful and comprehensive review of an interesting literature on a politically salient topic: the political economy of deficit spending. Perotti states a high standard of evaluation when he asks: "[W]hat insights with some policy relevance the recent research has to offer on the issue of budget deficit reductions". After rea...
This article is an idiosyncratic survey of the insider-outsider theory, describing the vision underlying the theory, and evaluating salient contributions to the literature in the light of this vision. We also indicate what appear to have been dead-ends and red herrings in past research. The first section deals with the theory, concerning how labor...
Incl. abstract, bibl. Developing countries, in particular the least developed ones, probably have more to learn from social policies in Europe during the early 20th century than from the elaborate welfare-state arrangements after World-War II. In addition to macroeconomic growth and stability, the main ambitions must be to fight human deprivation,...
Developing countries, in particular the least developed ones, probably have more to learn from social policies in Europe during the early 20th century than from the elaborate welfare-state arrangements after World War II. In addition to macroeconomic growth and stability, the main ambitions must be to fight human deprivation, including illiteracy,...
We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 fi...
The paper examines the implications for wage bargaining of an important aspect of the ongoing reorganization of work – the move from occupational specialization toward multi-tasking. The analysis shows how, on account of such reorganization, centralized bargaining becomes increasingly inefficient and detrimental to firms’ profit opportunities, sinc...
Socioeconomic conditions and values have changed considerably since the emergence of elaborate welfare-state arrangements during the first decades after World War II. For instance, recent socioeconomic changes have created new needs (justifications) for intertemporal reallocations of income as well as for protection against new types of income risk...
We experimentally investigate social effects in a principal-agent setting with incomplete contracts. The strategic interaction scheme is based on the well-known Investment Game (Berg et al., 1995). In our setting four agents (i.e., trustees) and one principal (i.e., trustor) are interacting and the access to choices of peers in the group of trustee...
This article surveys the insider-outsider theory, which analyzes the behavior of economic agents in markets were some participants have more privileged positions than others. Incumbent workers (insiders) in the labor market enjoy more favorable employment opportunities than others (outsiders), on account of labor turnover costs (e.g. costs associat...
The paper discusses the consequences for the functioning of different pension systems of various types of socioeconomic changes, mainly demographic developments, variations in productivity growth and changes in real interest rates. Two of the pension systems have exogenous and four have endogenous contributions rates. I analyze both marginal and ra...
Recent developments in society have generated misalignment between the welfare state and socio-economic conditions and preferences. This paper emphasis developments in the labor market and the structure, stability and preferences of the family, as well as macroeconomic changes. The latter include new patterns of short-term macroeconomic instability...
This paper presents a unified analytical framework for the analysis of social security reform. It discusses reform along two dimensions: Pay-As-You-Go versus fully funded on the one hand, and actuarial versus non-actuarial on the other. Making the system more actuarial entails a trade-off between less distorted work incentives and intra-generationa...
The article analyzes an important aspect of the contemporary reorganization of work within firms: the shift from "Tayloristic" organization (characterized by specialization by tasks) to "holistic" organization (featuring job rotation, integration of tasks, and learning across tasks). We examine four driving forces behind this restructuring process:...
This paper discusses how ICT and emerging electronic commerce in consumer products influence the relative efficiency in production of households and firms, resulting in changes in the division of tasks between these two types of agents. Increased information and competence of households, in combination with stiffer competition among firms, will als...
As a consequence of the rapid growth of temporary agency employment in Germany, the debate on the remuneration of temporary agency workers has intensified recently. The study finds that the earnings gap of temporary help workers in Germany is indeed large and increased during the past decade. Decomposition reveals that the widening gap mainly is dr...
Structural unemployment differs from cyclical unemployment by not disappearing in cyclical booms. In economic theory, structural unemployment is usually analysed in terms of the concept of equilibrium unemployment (the "natural unemployment rate" in Friedman’s terminology). Two elaborate concepts of equilibrium unemployment – the non-accelerating i...
In conjunction with its tercentenary celebrations in 1968, Sveriges Riksbank (Bank of Sweden) instituted a new award, “The Central Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel" on the basis of an economic commitment by the bank in perpetuity. The award is given by the Royal Swedish Academy of Sciences according to the same pr...
New informationa and communication technology (ICT) makes consumers better informed about available products, product quality and prices, which mitigates problems of assymetry of information. The entry of firms is facilitated, competition and economic efficiency is boosted and the market powers of households is increased. Firms are likely to respon...
The paper analyzes the contemporary organizational restructuring of production and work within firms. We emphasize the shift from a Tayloristic organization of work (characterized by significant specialization by tasks) to a holistic organization (featuring job rotation, integration of tasks and learning across tasks). We examine four driving force...
The paper analyzes the contemporary organizational restructuring of production and work within firms. We emphasize the shift from a "Tayloristic" organization of work (characterized by significant specialization by tasks) to a "holistic" organization (featuring job rotation, integration of tasks and learning across tasks). We examine four driving f...
In conjunction with its tercentenary celebrations in 1968, Sveriges Riksbank (Bank of Sweden) instituted a new award, "The Central Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel" on the basis of an economic commitment by the bank in perpetuity. The award is given by the Royal Swedish Academy of Sciences according to the same pr...
This paper analyzes the interplay between social norms and economic incentives in the context of work decisions in the modem
welfare state. We assume that to live off one's own work is a social norm, and that the larger the population share adhering
to this norm, the more intensely it is felt by the individual. Individuals face two choices: one eco...
The paper shows how prolonged price inertia can arise in a macroeconomic system in which there are temporary price rigidities as well as production lags in the use of intermediate goods. In this context, changes in production demand-generated, say, by changes in the money supply - have long-lasting price and quality effects.
In conjunction with its tercentenary celebrations in 1968, Sveriges Riksbank (Bank of Sweden) instituted a new award, "The Central Bank of Sweden price in Economic Sciences in Memory of Alfred Nobel" on the basis of an economic commitment by the bank in perpetuity. Which criteria have guided the awards so far? And what have been the main problems w...
New information and communication technology (ICT) makes consumers better informed about available products, product quality and prices, which mitigates problems of asymmetric information. The entry of firms is facilitated, competition and economic effiency is boosted and the market powers of households increased.
Structural unemployment differs from cyclical unemployment by not disappearing in cyclical booms. In economic theory, structural unemployment is usually analyzed in terms of the concept of equilibrium unemployment (the "natura unemployment rate" in Friedman's terminology). The paper pinpoints various factors that influence the level of structural u...
This paper discusses how ICT and emerging electronic commerce in consumer products influence the relative efficiency in production of households and firms, resulting in changes in the division of tasks between these two types of agents.
In conjunction with its tercentenary celebrations in 1968, Sveriges Riksbank (the central bank of Sweden) instituted a new award, "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel" on the basis of an economic commitment by the bank in perpetuity. The award is given by the Royal Swedish Academy of Sciences according to the...
This paper considers the possibility of letting a pay-go pension system mimic a fully funded pension system. Generically, it turns out to be impossible to make a less than fully funded pension system actuarially fair on average. But a non-funded pay-go pension system can provide an actuarially fair implicit return on the margin, which increases eco...
The paper examines the determinants of the division of labour within firms. It provides an explanation of the pervasive change in work organization away from the traditional functional departments and towards multi-tasking and job rotation. Whereas the existing literature on the division of labour within firms emphasizes the returns from specializa...
This paper addresses various attempts by so-called new Keynesians, writing mainly in the 1980s and 1990s, to strengthen the analytical basis, in particular the microeconomic foundations, of these assertions. What, exactly, have then the new Keynesians accomplished, and how should their contributions be valued in the relation to other recent contrib...
Can income equality be combined with high economic efficiency and rapid economic growth? Fortunately, we need not answer such a general question. Indeed, the question is poorly phrased. The relationship between income and wealth distribution on one hand, and efficiency/growth on the other, depends on how a certain distribution of income and wealth...
When reforming their own countries, several observers, ideologues and politicians in former socialist countries have pointed to Sweden as a blueprint. It is then believed that Sweden, or the "Swedish model", has combined the efficiency, dynamism and flexibility or capitalist market economies with the economic security and egalitarianism so highly e...
In an analysis of the risk-sharing properties of different types of pension systems, we show that only a fixed-fee pay-as-you-go (PAYG) pension systems can provide intergenerational risk sharing for living individuals. Under some circumstances, however, other PAYG pension systems can enhance the expected welfare of all generations by reducing inter...
This paper deals with economic incentives and welfare-state arrangements in OECD countries; it also offers some lessons for would-be welfare states. These arrangements differ, of course, among OECD countries. In particular, there is wide variation in the extent to which countries rely on four basic institutions - the state, the firm, the family and...
The paper examines the determinants of the division of labor within firms. It provides an explanation of the pervasive change in work organization away from the traditional functional departments and towards multi-tasking and job rotation. Whereas the existing literature on the division of labor within firms emphasizes the returns from specializati...
How do we explain the poor employment performance in Western Europe since about the mid-1970s? This question is in fact twofold: what initiated the dramatic rise in unemployment, and what mechanisms have made it continue for so long? My attempts to answer these questions form the basis for a discussion of various policy options. A main point of the...
The deterioration of the economic performance in Sweden from about 1970 was to some extent the result of a number of exogenous shocks and "unnecessary" policy mistakes. It was, however, also related to basic changes in the economic and social system in Sweden in the late 1960s and early 1970, when government spending, taxes, and regulations started...
Abstract Arationale for a compulsory ,pension system is that the government wants to correct supposedly myopic behavior by the individuals. Given the existence of such a system, we calculate the optimal relation between marginal contributions and benefits, i.e., the optimal degree of marginal actuarial fairness, as seen from the point of view of th...
: The paper examines the determinants of the division of labor within firms. It provides an explanation of the pervasive change in work organization away from the traditional functional departments and towards multi-tasking and job rotation. Whereas the existing literature on the division of labor within firms emphasizes the returns from specializa...
this paper, though the relative importance of various aspects differ, particularly regarding rational imitation of successful economic behavior of others, group dynamics, economic domination and explicit punishment of individuals who threaten the interests of norm senders. Moreover, my discussion of the last two examples -- norms against wage under...
: The paper examines the implications of an important aspect of the ongoing reorganization of work - the move from occupational specialization toward multi-tasking - for centralized wage bargaining. The analysis shows how, on account of this reorganization, centralized bargaining becomes increasingly inefficient and detrimental to firms' profit opp...
This paper analyzes the interplay between social norms and economic incentives in the context of work decisions in the modern welfare state. We assume that to live off one's own work is a social norm, and that the larger the population share adhering to this norm, the more intensely it is felt by the individual. Individuals face two choices: one ec...
I modify the uniform-price auction rules in allowing the seller to ration bidders. This allows me to provide a strategic foundation for underpricing when the seller has an interest in ownership dispersion. Moreover, many of the so-called "collusive-seeming" equilibria disappear.
this paper as the consequence of (i) temporary supply and demand shocks with (ii) strong persistence effects added to (iii) a rising trend of equilibrium unemployment. 22 A recurrent theme in my presentation is that isolated reforms and policy actions are not likely to improve the employment situation to any considerable extent in Western Europe. C...
This paper explores the implications of the ongoing reorganization of firms for inequality in the labour market. We show how recent technological advances in physical and human capital can lead to the breakdown of occupational barriers, creating demands for new combinations of skills, and thereby leading to new patterns of wage inequality. Specific...
This paper deals with economic incentives and welfare-state arrangements in OECD countries; it also offers some lessons for wouldbe welfare states. These arrangements differ, of course, among OECD countries. In particular, there is wide variation in the extent to which countries rely on four basic institutions - the state, the firm, the family and...
The paper examines the implications of an important aspect of the ongoing reorganization of work - the move from occupational specialization toward multi-tasking - for centralized wage bargaining. The analysis shows how, on account of this reorganization, centralized bargaining becomes increasingly inefficient and detrimental to firms' profit oppor...
over the next decade. The organization of many firms in both the manufacturing and service sectors is being progressively restructured. This process calls into question the need for extreme specialization by skill-specific occupation, creates demands for new combinations of skills, and thereby leads to new patterns of wage inequality. The restructu...
This paper analyzes the interplay between economic incentives and social norms in a public finance context. We assume that to live off one's own work is a social norm, and that the larger the population fraction adhering to this norm, the more intensely it is felt by the individual.
niversity and associate researcher at IUI, Stockholm. Julie Sundqvist has improved the English language. 2 relation between the welfare state and full-employment policies. It turned out to be possible to combine full employment with high economic security and a gradually more even distribution of income, which are important ambitions of the welfare...
We estimate the causal effect of mandatory participation in the military service on the involvement in criminal activities. We exploit the random assignment of young men to military service in Argentina through a draft lottery to identify this causal effect. Using a unique set of administrative data that includes draft eligibility, participation in...
: The paper analyzes the contemporary organizational restructuring of production and work and derives some salient implications for the labor market. The analysis focuses on the switch from occupational specialization at "Tayloristic" organizations to multi-tasking at "holistic" organizations. The restructuring process is shown to create demands fo...