RECENT:

We are NOT Poorer Without the Euro 

The discussion about the euro has been revived recently by businessmen and politicians suggesting that we have become poorer without the euro and that we should introduce the euro in Sweden. Also, they suggest that we should convert the currency at a much higher value of the krona compared to the current rate. In Dagens Industri (March 7, 2024) I argue that fixing the rate at a much higher value would destroy our industry. Also, we have not become poorer compared to the countries which introduced the euro in 1999. On the contrary, real wages have increased more in Sweden; see GRAPH.

VoxEU: Reinterpreting the Beveridge Curve

According to the basic search-matching model, there are many vacancies when unemployment is low because there are few workers looking for jobs and it takes longer to fill the vacancies. In this column I argue that this cannot be the main explanation for the negative correlation between unemployment and vacancies (the ‘Beveridge curve’). While there are many vacancies in a boom, it is not primarily because they are hard to fill but because there is a large inflow of new vacancies when the labour market is tight. 

DEEP DYNAMICS  (with Glenn Mickelsson and Karolina Stadin)  NEW VERSION 2024    VERY SHORT PRESENTATION

We use panel data to examine how firms adjust production, employment, capital and inventories in response to demand-side shocks. Then, we construct a theoretical model that matches our estimated impulse-response functions. We find that a combination of convex adjustment costs and implementation lags explains average input adjustment very well. While inputs adjust slowly, production responds quickly to the demand shock and this is explained by increasing returns (overhead labor) and increased factor utilization. Inventory adjustment amplifies the effects of demand-side shocks on production.   

Response to referees at top journal 

Is Sweden the Poor Cousin of Euroland?  A comparison to the original members of the Eurozone 

With the weak krona, many appear to think that we have done poorly without the euro. This is not true.

See my article in Svenska Dagbladet (Sept. 25, 2023).

MATCHING AND THE BEVERIDGE CURVE: A REINTERPRETATION   (with Karolina Stadin)  NEW VERSION December 2023   
We show that the Beveridge has been fundamentally misunderstood in the literature. There are few vacancies when unemployment is high, but it is not because vacancies are filled quickly as the textbook search-matching model suggests. Instead, it is because fewer employed workers find new jobs in periods of high unemployment leading to a low inflow of new vacancies. Vacancies are filled at roughly the same rate independent of the state of the labor market.  In this new version of the paper we estimate the alternative model and show that it can explain the Beveridge curve without search frictions. DATA

Referee comments 2021 and responses here

Referee comments 2023 and responses here: R1  R2 Response

Will high inflation lead to compensatory wage demands?

Seminar arranged by International Labour and Employment Relations Association (ILERA) September 2022 . 

Main presentations by Per Jansson (Deputy Governor of the Riksbank) and me  (in Swedish).

WHY? ЗАЧЕМ? Flogsta says NO TO WAR

FIRMS’ EMPLOYMENT DYNAMICS AND THE STATE OF THE LABOR MARKET

Karolina Stadin finally managed to publish her important paper in Macroeconomic Dynamics:

According to search and matching theory, a greater availability of unemployed workers should make it easier for a firm to fill a vacancy, but more vacancies at other firms should make recruitment more difficult. Simulating a theoretical model of a firm facing perfect competition in the product market and no convex adjustment costs (standard assumptions in the search and matching literature), I find that shocks to vacancies and unemployment lead to economically significant employment responses. Simulating a more realistic model with imperfect competition in the product market and convex adjustment costs, I find small employment effects of shocks to vacancies and unemployment. In particular, shocks to the number of unemployed seem to be unimportant. Estimating an employment equation on a panel of Swedish firms, I find that neither the number of unemployed workers nor the number of vacancies in the local labor market is important for firms’ employment decisions.

SWEDEN NEEDS MORE INFLATION Svenska Dagbladet 2020  (in Swedish) In a normal situation with positive interest rates, higher wage increases are costly for firms. But with an interest near zero, the logic becomes the reverse – higher wage increases raise inflation and reduce the real cost of financing for firms.

THE EUROPE-NORM IS IRRELEVANT (Europa-normen saknar relevans), report in Swedish commissioned by Swedish unions (6F) 2019.

We have strong unions in Sweden and coordination around a wage norm is important. We left the fixed exchange rate in November 1992 but some still argue as if we had a fixed exchange rate, saying that wage growth in Sweden should be in line with wage growth in "Europe". But with a flexible exchange rate and an inflation target, discussions about appropriate wage growth should instead focus on four aspects: i) the inflation target, ii) relative price changes, iii) productivity growth and iv) the labour market situation. Wage growth in "Europe" is irrelevant.

THE LABOR MARKET IN SWEDEN SINCE THE 1990s, IZA World of Labor online publication 2018

+ Labor force participation and employment rates in Sweden have increased and are now among the highest in the EU. 

+ The unemployment rate has been fairly stable and is below the EU average. 

+ Labor force participation among women is close to that of men, and labor force participation among older workers is high and trending up. 

+ Wage inequality is low and stable and women’s wages are catching up. 

+ Real wages have increased steadily for all major groups of workers.

- Labor force participation among young workers has declined. 

- The unemployment rate is more than twice as high as it was in the 1970s and 1980s. 

- Workers without upper secondary school education do poorly in the labor market, and their problems appear to be growing.

- Immigrants have high unemployment rates, but there is a positive trend in participation and employment rates.

- Income differentials have increased between those who have a job and those who do not.

NORGES BANK WATCH 2016 - An Independent Evaluation of Monetary Policy in Norway