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Working paper

Demographics and the Decline in Firm Entry: On the Role of Population Growth and Longevity, with Oke Röhe and Nikolai Stähler, submitted

Abstract: Since the late 1970s, firm entry rates in the United States have declined significantly. This also hold for other OECD countries over the past years. At the same time, these economies experienced a gradual process of population aging. Using a state-level panel VAR for the US, we confirm a negative relationship between population demographics and business dynamism. We propose a tractable life-cycle model with endogeneous firm dynamics and relate the falling US firm entry and exit rates to the demographic transition. Besides the negative effects of a slowdown in working-age population growth on firm entry, outlined in recent papers, our framework highlights that an increase in longevity also congributes to the decline in business dynamism. 

Presented at the Vfs Meeting 2020, SED Meeting 2021

Current working paper version 

Digital transformation and its impact on aggregate labor productivity - A multi-sector perspective, with Johannes Strobel and Oke Röhe

Abstract: Recent years have seen a controversial debate on how the rapid spread of digital tech-nologies has affected labor productivity in advanced economies. Using a multi-sector dynamic general equilibrium model, we show that the lion’s share of labor productivity growth in the U.S. over the period from 1997 to 2018, about 70%, is related to effciency gains from digital goods producing sectors – despite their relatively small size in terms of value added. Digitalization-related effciency increases also play a key role for productivity growth in Germany and France, and have a lesser although still noticeable impact in Italy. This is not only because TFP growth in the digital sectors is exceptionally high, but also because other sectors benefit from these effciency improvements via production linkages. Our analysis illustrates that these input-output linkages can act as a main channel for transmitting effciency gains of the digital transformation.

Presented at International Conference in Computing in Economics  and Finance 2023, the 2023 Dynare conference, the 2023 annual congress of the German Economic Association and the 2024 Royal Economic Society Meeting.

Pessimism and Consumption Spending 

Abstract: Does individual pessimism about the economy matter for the decision making of agents? Previous  empirical literature has a hard time to document a significant and robust relationship between inflation expectations and readiness to spend. Taking into account heterogeneity in sentiment about the general economy across households, I do uncover a stable relationship between inflation expectations and readiness to spend. Based on the Michigan survey of consumer expectations, I find that higher inflation expectations have no effect on spending for individuals with a pessimistic view about the state of the economy, while they matter for non-pessimistic individuals. Moreover, higher inflation expectations are negatively correlated with expected future consumption spending for pessimistic individuals. The results suggest that an increase in expected inflation can stimulate aggregate demand only for non-pessimistic consumers which has important implications for monetary policy. The results can be reconciled in a heteogenous agents model in which agents perceive a certain probability to switch to a worse state in the future.      

Presented at the Spring Meeting of Young Economists 2021

Current version (updated version in the making...)              

Regional price changes and inflation expectations of households

Abstract: What drives inflation expectations of households? This paper studies the impact of regional price changes on inflation expectations of private households in the United Kingdom. The analysis uses regional price data that underlies the official CPI index and matches it to household expectations data according to the households' geographical location. The results show that individual inflation expectations are strongly driven by regional prices for food, tobacco/alcohol, rents and restaurant menus. The impact of the prices of different product classes varies with the social status of the household and are in line with the different expenditure shares of food or restaurant visits in the consumption baskets of high- and low-income households. The results suggest that households extrapolate from experienced price changes when they form expectations about future aggregate inflation dynamics.

Other publications:

Twenty years of the ECB Survey of Professional Forecasters in the ECB Economic Bulletin Issue 1, 2019
with R. de Vincent-Humpfreys, I. Dimitrova, L. Henkel and A. Meyler.

The impact of climate change and policies on productivity, A report of the ESCB Expert Group on Productivity, innovation and technological changes, Occasional Paper Series No. 340, European Central Bank, 2024.
Also published as: Productivity in the Face of Climate Change, NBB Economic Review No.1 2024.

Key factors behind the productivity trends in EU countries, Workstream on productivity, innovation and technological progress, ECB Occational Paper No. 268, Sept. 2021.