Abstract: We analyze a monetary quasi-experiment in Sweden from 2010–2011, when the Riksbank raised the interest rate substantially. We argue that this increase was unrelated to labor market conditions, driven instead by new concerns at the Riksbank about financial stability. Using a battery of specifications that rule out domestic or international confounders, we show that this monetary tightening led to a substantial economic contraction, raising unemployment by 1–2 percentage points. Using administrative microdata, we find that sectors with nominal wage rigidity drove much of the response and that the monetary contraction was more regressive than the typical business cycle.

Abstract: We study the importance of wage rigidities for the monetary policy transmission mechanism. Using uniquely rich micro data on Swedish wage negotiations, we isolate periods when the labor market is covered by fixed wage contracts. Importantly, negotiations are coordinated in time but their seasonal patterns are far from deterministic. Using a two-regime VAR model, we document that monetary policy shocks have a larger impact on production during fixed wage episodes as compared to the average response. The results do not seem to be driven by the periodic structure, nor the seasonality, of the renegotiation episodes. 

Abstract: Using Swedish microdata, I analyze wage adjustments and employment flows following an aggregate demand shock. For identification, I exploit firm-level variation in exposure to the Great Recession, driven by differences in export-to-sales ratios. I estimate a wage-to-output elasticity of 6\% for incumbent workers, but the primary channel of adjustment occurred through employment reductions. Wage-setting institutions affected these responses: workers covered by predetermined union contracts with individual wage-growth guarantees experienced employment-to-output responses more than four times as large as their wage-to-output elasticities, while workers covered by less stringent contracts exhibited an  employment-to-wage adjustment ratio below one.

Abstract:  The canonical business-cycle model with rigid wages assumes that workers have market power in setting wages ex ante and that firms choose hours ex post along a labor-supply schedule. Several recent papers invert this setup: firms have market power ex ante, and households choose hours ex post along a labor-demand schedule. While firm market power is consistent with ample empirical evidence of monopsonistic labor markets, supply-determined hours generate implausible predictions in models with realistic household heterogeneity (Auclert et al., 2023; Broer et al., 2020). Moreover, they conflict with the fact that business cycles are characterized by a large labor supply wedge (Karabarbounis, 2014). We introduce a contracting model with firm market power, rigid wages, and demand-determined hours. Ex ante, firms post nominal wage contracts that survive probabilistically, Calvo-style, into the next period, taking a firm-specific labor-supply curve as given. Ex post, firms choose hours conditional on the wage contract and the realization of idiosyncratic shocks. We show that the degree of labor market power is irrelevant for business-cycle dynamics of output and inflation but shapes the dynamics of labor compensation. The importance of firm market power for compensation dynamics increases with the rigidity of wage contracts.

Abstract:    We study how bargaining institutions affect within-job gender pay gaps by exploiting cross-firm variation in contract rigidities for otherwise similar jobs. Using data on blue-collar workers in Sweden, we find that gender gaps are smaller when agreements guarantee a minimum pay raise for each worker. The patterns also hold within firms as gender gaps in uncovered occupations are uncorrelated with blue-collar rigidities, and the results are robust to sorting. The effects are strongest in female-underrepresented settings and in low-productivity firms. The results show that local bargaining protocols can have a substantial impact on gender wage inequality in low-paid market segments.

Abstract (extended): What is the origin of business cycles? The traditional view is that a business cycle is due to shocks correlated across sectors. This is complemented by a recently emerging literature where idiosyncratic shocks to larger or well interconnected sectors contribute to aggregate variation. This paper addresses the relative empirical importance of these two channels of business cycle variation. Based on a network-model à la Acemoglu et al. (2012), I derive an influence vector for empirical aggregation and evaluation. Further, by decomposing this vector I identify the elements that drive the amplification. Results demonstrate that up to one-third of the business cycle is driven by idiosyncratic productivity variation together with network amplifications. In addition, there may exist important sector-level frictions, which motivate a complicated weighting matrix based on network-linkages, but they do not further skew the interconnections between sectors. This suggests that the size distribution is a sufficient statistic for detecting the macroeconomic implications of micro-level shocks.