Michael Neugart

• Full professor of public economics and economic policy at Technical University of Darmstadt

The advent of artificial intelligence is changing the task allocation of workers and machines in firms’ production processes with potentially wide ranging effects on workers and firms. We develop an agent-based simulation framework to investigate the consequences of different types of automation for industry output, the wage distribution, the labor...

There is considerable evidence nowadays that friendship networks account for a large part of an individual’s success or failure in life. Little, however, is known about the extent to which friendship networks are associated with an individual’s genotype. Using data from the German TwinLife study, we explore, within a classical twin design, whether...

en Monopsony power by firms and social preferences by consumers are well established. We analyze how wages and employment change in a monopsony if workers compare their income with that of a reference group. We show that the undistorted, competitive outcome may no longer constitute the benchmark for welfare comparisons and derive a condition that g...

The riskiness of individuals’ saving behaviour affects their old-age wealth and has wider-ranging implications for macroeconomic development and stability. To which extent individuals take financial risks depends on their preferences, which may be moulded by the economic system they live in. I analyse households’ financial risk taking after the col...

In this paper, we employ the agent-based macroeconomic Eurace@Unibi model to study the economic implications of different degrees of de-centralization in the wage setting. We think of de-centralization as wages being a weighted average of an economy-wide ‘union wage’ and a firm-specific component depending on the firm’s productivity and the experie...

This paper investigates whether the employment status of neighbors influences the employment probability of workers who lost their job due to a plant closure, and the channels through which this occurs. Combining rich spatial information with administrative records, we find that a 10 percentage points higher neighborhood employment rate increases t...

This paper provides a detailed description of the Eurace@Unibi model, which has been developed as a versatile tool for macroeconomic analysis and policy experiments. The model explicitly incorporates the decentralized interaction of heterogeneous agents across different sectors and regions. The modeling of individual behavior is based on heuristics...

Redistributive so‐called social pension schemes have seen a remarkable surge in developing countries. These schemes often target the rural elderly and correlate with urbanization rates, urban rural‐wage differentials, and family norms. We use this stylized evidence to motivate a political economy model for a Beveridgean pension system with trade‐of...

Regions within the European Union differ substantially not only with respect to per capita GDP, but also with respect to income inequality within the regions. This paper studies the effects of different types of technology-oriented cohesion policies, aiming at the reduction of regional differences, on the convergence of regions and the dynamics of...

This chapter introduces the Eurace@Unibi model, one of the agent-based simulation models that are relatively new additions to the toolbox of macroeconomists, and the research that has been done within this framework. It shows how an agent-based model can be used to identify economic mechanisms and how it can be applied to spatial policy analysis. T...

In the aftermath of the financial crisis, with periphery countries in the European Union falling even more behind the core countries economically, there have been quests for various kinds of fiscal policies in order to revert divergence. How these policies would unfold and perform comparatively is largely unknown. We analyze four such stylized poli...

A large body of evidence suggests that social comparisons matter for workers’ valuation of the wage they receive. The consequences of social comparisons in imperfectly competitive labor markets are less well understood. We analyze an oligopsonistic model of the labor market where workers derive (dis-) utility from comparing their own wage with wage...

When countries need to implement costly economic policy reforms, these often imply uncertainties about their effectiveness for the home country and their spillovers to other countries. We develop a model to show that under these circumstances countries implement too few or too many policy reforms. From a social perspective, too many reforms follow...

Discrimination of women in the labor market requires appropriate policy interventions. Affirmative action policies typically advocate the introduction of an employment quota uniformly applied to all firms. In a heterogeneous labor market such a policy may yield avoidable welfare losses. We propose a tradable employment quota showing its effects on...

It is widely debated whether a monetary union has to be accompanied by a fiscal transfer scheme to accommodate asymmetric shocks. We build a model of a monetary union with a central bank and two heterogeneous countries that are linked by a fiscal transfer scheme with repercussions on monetary policy. A central bank aiming at securing the existence...

Discrimination of women in the labor market requires appropriate policy interventions. Affirmative action policies typically advocate the introduction of an employment quota uniformly applied to all firms. In a heterogeneous labor market such a policy may yield avoidable welfare losses. We propose a tradable employment quota showing its effects on...

A lobbying model of the legislative and judicial process is presented to explore why dismissal protection often relies on the involvement of courts.•As employer associations become stronger, court activity increases, and firms’ costs and workers’ payoffs decrease.•Higher court costs tend to reduce the extent of labor court disputes and may, therefo...

In this paper we study the effectiveness of different types of cohesion policies with respect to convergence of regions. A two-region agent-based macroeconomic model is used to analyze short-, medium- and long-term effects of policies improving human capital and fostering adoption of technologies in lagging regions. With fully integrated labor mark...

The paper develops a theory about the relation between monetary uncertainty and government incentives to implement reforms to reduce structural distortions in labor markets. We show that uncertainty about the central bank's behavior leads to more reforms. Empirical tests employing recently developed measures of central bank transparency around the...

Agent-based simulation models are a relatively new addition to the tool-box of macroeconomists. The aim of this chapter is to review work that has been carried out in recent years. Particularly, we present the Eurace@Unibi model and set it into perspective with other agent-based macroeconomic models. Besides presenting a sketch of the Eurace@Unibi...

Following the events of the credit crunch and the onset of a global recession, alternative ways of modeling modern economies and mechanisms for carrying out policy analysis are now an urgent priority. Traditional mathematical economics is widely viewed to have been compromised through gross simplifications with many assumptions that are now seen to...

The implementation of European Union directives into national law is at the discretion of member states. We analyze incentives for member states to deviate from these directives when the European Commission may sue a defecting member state and rulings at the European Court of Justice (ECJ) are uncertain. We find that higher uncertainty about the pr...

From 2005 to 2011 employment rose and unemployment rates declined considerably in Germany. This favourable development followed the labour market reforms initiated in 2003, and there has been a tendency to attribute the improved labour market performance to those reforms. Causal micro‐evaluations of the various measures, however, show hardly any ef...

This paper studies the effectiveness of different types of cohesion policies with respect to convergence of regions. A two-region agentbased macroeconomic model is used to analyze short-, medium- and long-term effects of policies improving human capital and fostering adoption of technologies in lagging regions. With fully integrated labor markets t...

Economic theory suggests that incentives matter for people's decisions. This paper investigates whether this also holds for less self-evident areas of life such as the timing of births. We use a natural experiment when the German government changed its parental benefit system on January 1, 2007. The policy change strongly increased economic incenti...

Regions within the European Union differ substantially not only with respect to per capita GDP, but also with respect to income inequality within the regions. This paper studies the effects of different types of technology-oriented cohesion policies, aiming at the reduction of regional differences, on the convergence of regions and the dynamics of...

We study the role of different labor market integration policies on economic performance and convergence of two distinct regions in an agent-based model. Production is characterized by a complementarity between the quality of the capital stock and the specific skills of workers using the capital stock. Hence, productivity changes in a region are in...

We study the role of different labor market integration policies on economic performance and convergence of two distinct regions in an agent-based model. Production is characterized by a complementarity between the quality of the capital stock and the specific skills of workers using the capital stock. Hence, productivity changes in a region are in...

A model of interactions of marriage and labor markets, taking into account a feedback process from aggregate divorce rates on individuals' decisions, explains why small changes in men's attitudes towards sharing the breadwinner role with their wives may change female labor force participation rates and divorce rates considerably.

Courts are an important element in the institutional framework of labor markets, often determining the degree of employment protection. German labor courts provide a vivid example in this regard. However, we know relatively little about court behavior. A unique dataset on German labor court verdicts reveals that social and other criteria like emplo...

Agent-based simulation models are used by an increasing number of scholars as a tool for providing evaluations of economic policy measures and policy recommendations in complex environments. On the basis of recent work in this area we discuss the advantages of agent-based modeling for economic policy design and identify further needs to be addresse...

The aim of the paper is to assess whether there is free-riding in teams when team production is sequential and when there is competition between teams. This a common case, which, however, has not been considered in the literature so far. We develop a model where team members contributing earlier have an incentive to free-ride more even when there i...

The importance of referral hiring, which is workers finding employment via social contacts, is nowadays an empirically well documented fact. It also has been shown that social networks for finding jobs can create stratification. These analyses are, by and large, based on exogenous network structures. We go beyond the existing work by building an ag...

The importance of referral hiring which is workers finding employment via social contacts is nowadays an empirically well documented fact. It also has been shown that social networks for finding jobs can create stratification. These analyses are by and large based on exogenous network structures. We go beyond the existing work by building an agent-...

We report results of economic policy experiments carried out in the framework of the EURACE agent-based macroeconomic model featuring a distinct geographical dimension and heterogeneous workers with respect to skill types. Using a calibrated model able to replicate a range of stylized facts of goods and labor markets, it is examined in how far effe...

We develop a model in which firms in the financial market lobby the government to lower compulsory contributions to the public pension system. Firms lobby in order to increase demand from households for their old-age savings products. We conclude with a comparison of two major pension reforms in Europe exemplifying the influence of financial market...

We develop an agent-based model of labor market regulation to study the consequences of employment protection legislations for labor market performance. Unlike most of the existing studies of labor market regulation we endogenize the institutional setting. Workers cast their vote on labor market regulation depending on the past payoffs that they ac...

In this article it is shown that more generous early retirement provisions as well as lower employment lead to lower steady state pension rates if governments weigh the welfare of the older persons relatively strongly. A relatively stronger weight on the welfare of the young reverses the results. The driving force behind those findings are governme...

I develop an agent-based computational economics (ACE) model with which I evaluate the aggregate impact of labor market policies. The findings are that government-financed training measures increase the outflow rate from unemployment to employment. Although the overall effect is positive, this effect is achieved by reducing the outflow rate for tho...

With ideological parties being better informed about the state of the world than voters, the true motivation of policy proposals is hard to judge for the electorate. However, if reform proposals have to be agreed upon by coalition parties, it may become possible for the government to signal to the voters its private information about the necessity...

We develop an agent-based macroeconomic model featuring a distinct geographical dimension and heterogeneous workers with respect to skill types. The model, which will become part of a larger simulation platform for European policymaking (EURACE), allows us to conduct exante evaluations of a wide range of public policy measures and their interaction...

Employment protection and unemployment benefits are considered the most prominent insurance devices for workers to protect themselves against the risk of unemployment. It occurs that societies either choose a high level of employment protection relative to unemployment benefits or vice versa. This paper explains where countries locate on this trad...

When enacting labor market regulation governments face courts that interpret and implement the legal code. We show that the incentives for governments for labor market reform increase with the uncertainty that is involved in the implementation of legal codes through courts. Given that judges have more discretion in common as opposed to civil law sy...

Economic policy reforms are usually costly to governments in the sense that they may lose electoral support and be voted out of office. However, oftentimes they are not the only actor that implements pol-icy changes. Courts may play an important role in interpreting the legal code. Probably more so in common as opposed to civil law sys-tems. Judges...

Employment protection and unemployment benefits are considered as the most prominent insurance devices for workers to protect themselves against the risk of unemployment. It occurs that societies either choose a high level of employment protection relative to unemployment benefits or vice versa. This paper explains where countries locate on this tr...

I develop an agent-based computational economics (ACE) model with which I evaluate the aggregate impact of labor market policies. The findings are that government-financed training measures increase the outflow rate from unemployment to employment. Although the overall effect is positive this effect is achieved by reducing the outflow rate for thos...

Labor courts play an important role in determining the effective level of labor market regulation in Germany, but their application of law may not be even-handed. Based on a simple theoretical model and a new panel data set, we identify a nomination bias in labor court activity - that is, court activity varies systematically with the political lean...

A striking feature of OECD labour markets in the 1990s has been the very rapid increase of temporary agency work. We augment the equilibrium unemployment model as developed by Pissarides and Mortensen with temporary work agencies in order to show that the improvement in the matching efficiency of agencies led to the emergence and growth of temporar...

This paper examines whether electoral motives and government ideology influence short-term economic performance. I employ data on annual GDP growth in 21 OECD countries over the 1951-2006 period and provide a battery of empirical tests. In countries with two-party systems GDP growth is boosted before elections and, under leftwing governments, in th...

"The current German government, against the odds, has managed to introduce a number of labour market reforms previously seen as impossible. The reforms are briefly outlined, and the author, drawing on a number of theoretical approaches, suggests a number of reasons why these reforms have happened when they did." Copyright (c) Institute of Economic...

The matching function has become a popular tool in labor economics. It relates job creation (a flow variable) to two stock variables: vacancies and job searchers. In most studies the matching function is considered to be exogenous and assumed to have certain properties. The present study, instead, looks at the properties of an endogenous matching f...

We develop a worker flow model with a nonlinear and endogenous outflow rate from unemployment. Inconsistent claims on the output lead to changing inflation rates which feedback on job offers through the real money supply. Via simulations one can show that the nonlinear outflow rate causes asymmetric adjustment of unemployment to the ‘equilibrium ra...

We estimate a linear and a piecewise linear Phillips curve model with regional labor market data for West German and Neue Länder. Employing regional observations allows us to country difference the data. This eliminates, under the assumption of homogeneous Länder, supply shocks and changes in the formation of expectations as possible identification...

Enrollment rates to higher education reveal quite large variation over time which cannot be explained by productivity shocks alone. We develop a human capital investment model in an overlapping generations framework that features endogenous fluctuations in the demand for education. Agents are heterogeneous in their beliefs about future wage differe...

Conflict over the appropriate degree of policy centralization on the supranational level has been a major theme throughout the history of European integration, from the early beginnings in the 1950s to the present (Wallace 1996). At present, and as a corollary of the move to a European Monetary Union, the field of fiscal policy is one of the hottes...

Augmenting existing models studying incentives to reform labor market, we model labor unions not only as wage setters but also as lobbyists. Acting as interest groups they seek to push governments toward policies that are advantageous to their members. We find that as labor unions can more easily influence governments’ policy decisions, fewer labor...

A striking feature of OECD labor markets in the 1990s has been the very rapid increase of temporary agency work. We augment the equilibrium unemployment model as developed by Pissarides and Mortensen with temporary work agencies in order to focus on their role as matching intermediaries and to examine the aggregate impact on employment. Our model i...

Introduction.- Nonlinear and Chaotic Economic Dynamics.- Earlier models revisited.- Interaction and irregular dynamics Overlapping generations and endogenous cycles Growth models The role of expectations Evidence on chaos in economic dynamics.- Tests for nonlinearities and chaos Results Some pitfalls and shortcomings Nonlinear Labor Supply and Real...

We estimate a labor supply model with German data on engineering enrollments and starting salaries. In one model agents have backward looking expectations, in the other rational expectations on future wages. Only the model with backward looking expectations delivers significant coefficients with signs in accordance with out theoretical model. Lagge...

Evidence on the role of chaotic and nonlinear dynamics on labor markets is mixed. It is unclear whether nonlinear relationships are responsible for the dynamic patterns observed in Europe during the past decades. In this paper, we test German labor market data for the null hypothesis of an i.i.d. process with the BDS test. As several processes incl...

Books reviewed: Employment with Human Face: Balancing Efficiency, Equity, and Voice by John W. Budd. ILR Press, an imprint of Cornell University Press, Ithaca and London, 2004. Workplace Justice Without Unions by Hoyt B. Wheeler, Brian S. Klaas and Douglas M. Mahony. W.E. Upjohn Institute for Employment Research, Kalamazoo, Michigan, 2004. The Blue...

This essay argues that experience from more than three decades of labour market forecasting shows that forecasting helps greasing the wheels of labour markets. Applied correctly not in the sense of old fashioned manpower planning models - sufficiently disaggregated employment outlooks support individuals in making better informed decisions on human...