This article confronts monopsony theory’s predictions regarding workers’ wages with observed wage patterns over the business cycle. Using German administrative data for the years 1985 to 2010 and an estimation framework based on duration models, the authors construct a time series of the labor supply elasticity to the firm and estimate its relationship to the unemployment rate. They find that firms possess more monopsony power during economic downturns. Half of this cyclicality stems from workers’ job separations being less wage driven when unemployment rises, and the other half mirrors that firms find it relatively easier to poach workers. Results show that the cyclicality is more pronounced in tight labor markets with low unemployment, and that the findings are robust to controlling for time-invariant unobserved worker or plant heterogeneity. The authors further document that cyclical changes in workers’ entry wages are of similar magnitude as those predicted under pure monopsonistic wage setting.

We investigate drivers of Euro area inflation dynamics using a panel of regional Phillips curves and identify long-run inflation expectations by exploiting the crosssectional dimension of the data. Our approach simultaneously allows for the inclusion of country-specific inflation and unemployment-gaps, as well as time-varying parameters. Our preferred panel specification outperforms various aggregate, uni- and multivariate unobserved component models in terms of forecast accuracy. We find that declining long-run trend inflation expectations and rising inflation persistence indicate an altered risk of inflation expectations de-anchoring. Lower trend inflation, and persistently negative unemployment-gaps, a slightly increasing Phillips curve slope and the downward pressure of low oil prices mainly explain the low inflation rate during the recent years.

Global economic activity appears to be expanding rapidly during spring 2017. Confidence among managers is either strong or has improved in all major regions, and world trade and industrial production have, after two years of weakness, picked up markedly during last winter. For 2 ½ years, the euro area economy has now been constantly expanding at an annual rate of about 1.6%, slightly above potential. Employment has also been expanding steadily. Production and employment have been recently rising almost everywhere, including countries such as France and Italy where unemployment rates still do not appear to be on a downward trend. Official investment data for 2015 and 2016 appear to be distorted: big multinational firms relocated parts of their assets (intellectual property products in particular) or their registered business offices from countries outside the euro area to Ireland. As a consequence, reported gross fixed capital formation in Ireland expanded by 33% in 2015 and by 45% in 2016. Without this effect, investment growth in the euro area is about one percentage point lower in 2015 and 2016. Headline inflation hit 2% in February, but this was only the effect of higher world oil prices. The core rate is stubbornly at slightly below 1%, and wages rise annually by scarcely 1.5%. The revival of the economy will have to continue for considerably more time until inflation will come close to the ECB target zone. As monetary conditions continue to support growth, financial policies will be slightly expansive, and a certain external stimulus should come from the apparent recovery of world trade. Overall, we forecast euro area GDP to expand by 1.7% in both 2017 and 2018. However, policy uncertainty is substantial and could have a negative effect. In particular, elections in member states might give power to movements that aim at disintegrating Europe. Such a turn could rapidly undermine confidence, in particular in the financial strength of highly indebted member states.

Using long-running data from the German Socio-Economic Panel (1984–2012), we investigate the impact of paternal unemployment on child labour market and education outcomes. We first describe correlation patterns and then use sibling fixed effects and the Gottschalk (1996) method to identify the causal effects of paternal unemployment. We find different patterns for sons and daughters. Paternal unemployment does not seem to causally affect the outcomes of sons. In contrast, it increases both daughters’ worklessness and educational attainment. We test the robustness of the results and explore potential explanations.

In this paper we analyze the relationship between turnover-driven growth and subjective well-being. Our model of innovation-led growth and unemployment predicts that: (i) the effect of creative destruction on expected individual welfare should be unambiguously positive if we control for unemployment, less so if we do not; (ii) job creation has a positive and job destruction has a negative impact on well-being; (iii) job destruction has a less negative impact in areas with more generous unemployment insurance policies; and (iv) job creation has a more positive effect on individuals that are more forward-looking. The empirical analysis using cross sectional MSA (metropolitan statistical area)-level and individual-level data provide empirical support to these predictions.

Using long-running data from the German Socio-Economic Panel (1984-2012), we investigate the impact of paternal unemployment on child labor market and education outcomes. We first describe correlation patterns and then use sibling fixed effects and the Gottschalk (1996) method to identify the causal effects of paternal unemployment. We find different patterns for sons and daughters. Paternal unemployment does not seem to causally affect the outcomes of sons. In contrast, it increases both daughters‘ worklessness and educational attainment. We test the robustness of the results and explore potential explanations.

This paper analyzes how life-cycle unemployment of former apprentices depends on the size of the training firm. We start from the hypotheses that the size of training firms reduces long-run cumulated unemployment exposure, e.g. via differences in training quality and in the availability of internal labor markets, and that the access to large training firms depends positively on young workers’ ability and their luck to live in a region with many large and medium-sized training firms. We test these hypotheses empirically by using a large administrative data set for Germany and find corroborative evidence.

This paper studies the association between the unemployment experience of fathers and their sons. Based on German survey data that cover the last decades we find significant positive correlations. Using instrumental variables estimation and the Gottschalk (1996) method we investigate to what extent fathers' unemployment is causal for offsprings' employment outcomes. In agreement with most of the small international literature we do not find a positive causal effect for intergenerational unemployment transmission. This outcome is robust to alternative data structures and to tests at the intensive and extensive margin of unemployment.

Using data from 1992 to 2001, we study the impact of members’ economic forecasts on the probability of casting dissenting votes in the Federal Open Market Committee (FOMC). Employing standard ordered probit techniques, we find that higher individual inflation and real GDP growth forecasts (relative to the committee’s median) significantly increase the probability of dissenting in favor of tighter monetary policy, whereas higher individual unemployment rate forecasts significantly decrease it. Using interaction models, we find that FOMC members with longer careers in government, industry, academia, non-governmental organizations (NGOs), or on the staff of the Board of Governors are more focused on output stabilization, while FOMC members with longer careers in the financial sector or on the staffs of regional Federal Reserve Banks are more focused on inflation stabilization. We also find evidence that politics matters, with Republican appointees being much more focused on inflation stabilization than Democratic appointees. Moreover, during the entire Clinton administration ‘natural’ monetary policy preferences of Bank presidents and Board members for inflation and output stabilization were more pronounced than under periods covering the administrations of both George H.W. Bush and George W. Bush, respectively.

Building on the right-to-manage model of collective bargaining, this paper tries to infer union power from the observed results in wage setting. It derives a time-varying indicator of union strength taking account of taxation, unemployment benefits, and the labour market situation and confronts this indicator with annual data for Germany. The results show that union power did not change much from 1992 to 2002 but fell markedly (by about one-third) from 2002 to 2007 in the aftermath of substantial labour market reforms.