The labor-supply elasticity is a central element in many macroeconomic models. We argue that assumptions underlying previous econometric estimates of the intertemporal labor supply elasticity are inconsistent with incomplete markets economies. In particular, if the econometrician ignores...

We document a clear increase in Swedish earnings inequality in the early 1990s. Inequality in disposable income and earnings net of taxes and transfers also increased, but much less than the increased inequality in pre-government earnings. These different developments are most likely explained...

In an economy with distortionary taxes on labor, can subsidies on day care, financed by an increase in taxes, raise welfare by encouraging women with small children to work? We show, within a heterogeneous-agent life-cycle framework, that the Ramsey optimal policy consists in equalizing...

This paper decomposes the rise in cross-sectional earnings inequality in Sweden between 1990 and 2002 into changes in market prices of observable characteristics, changes in the composition of the labor force across demographic groups and industries, and changes in unobservables, and compares...

We use the neoclassical growth framework to model international capital flows in an economy with exogenous demographic change. We compare model implications and actual current account data and find that the model explains a small but significant fraction of capital flows between OECD countries,...

Swedish census data and tax records reveal an astonishing wage compression; the Swedish skill premium fell by more than 30 percent between 1970 and 1990 while the U.S. skill premium, after an initial decline in the 1970s, rose by 8 - 10 percent. Since then both skill premia have increased by...

We examine the cash-flow channel of monetary policy, i.e. the effect of monetary policy on spending when households hold debt linked to short-term rates such as adjustable rate mortgages (ARMs). Using registry-based data on Swedish households, we estimate substantial heterogeneity in consumption...

This paper examines how variations in labor supply can be used to self-insure against wage uncertainty, and the impact of such self-insurance on precautionary saving. The analytical framework is a two-period model with saving and labor-supply decisions where preferences are consistent with...

In this note, I examine how the responsiveness of the Swedish public budget to business-cycle conditions has developed between 1998 and 2009. I document substantial changes in three components behind the budget elasticity: (i) the average level of personal income taxes has fallen substantially,...

This note examines the accuracy of methods that are commonly used to approximate AR(1)-processes with discrete Markov chains. The quadrature-based method suggested by Tauchen and Hussey (1991) generates excellent approximations with a small number of nodes when the autocorrelation is low or...