Abstract. We show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by fi
Do Employers Have More Monopsony Power in Slack Labor Markets?
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.
Handbook of Labor Economics
What new tools and models are enriching labor economics?Developments in Research Methods and their Application, Volume 4A summarizes recent advances in the ways economists study wages, employment, and labor markets. Mixing conceptual models and empirical work, contributors cover subjects as diverse as field and laboratory experiments, program evaluation, and behavioral models. The combinations of these improved empirical findings with new models reveal how labor economists are developing new and innovative ways to measure key parameters and test important hypotheses. - Investigates recent advances in methods and models used in labor economics - Demonstrates what these new tools and techniques can accomplish - Documents how conceptual models and empirical work explain important practical issues
Household Debt: Facts, Puzzles, Theories, and Policies
Borrowing decisions affect most households, with large stakes and implications for research subfields as varied as macroeconomics and industrial organization. I review theoretical and empirical work on household debt: its prevalence, level, growth, and composition, as well as various measures of consumer choice and market (in)efficiency, elasticities, and prices, including new evidence on how borrowing heterogeneity affects the distribution of the opportunity cost of consumption. I also discuss opportunities and challenges in policy evaluation. A key takeaway is that puzzles abound, and I highlight numerous avenues for further research.
CMV: The labor theory of value is flawed
72 votes, 407 comments. This might be an obscure topic, however, in some—largely Marxist circles— the approach seems to motivate much of the dialogue…
Mind the Gap: AI Adoption in Europe and the U.S.
This paper combines international evidence from worker and firm surveys conducted in 2025 and 2026 to document large gaps in AI adoption, both between the US and Europe and across European countries. Cross-country differences in worker demographics and firm composition account for an important share of these gaps. AI adoption, within and across countries, is also closely linked to firm personnel management practices and whether firms actively encourage AI use by workers. Micro-level evidence suggests that AI generates meaningful time savings for many workers. At the macro level, in recent years industries with higher AI adoption rates have experienced faster productivity growth. While we do not establish causality, this relationship is statistically significant and similar in magnitude in Europe and the US. We do not find clear evidence that industry-level AI adoption is associated with employment changes. We discuss limitations of existing data and outline priorities for future data collection to better assess the productivity and labor market effects of AI.
The Marginal Productivity Theory of Distribution : A Critical History
The Marginal Productivity Theory of Distribution (MPTD) claims that in a free-market economy the demand for a factor of production will depend upon its marginal product – where "marginal product" is defined as the change in total product that is caused by, or that follows, the addition or subtraction of the marginal unit of the factor used in the production process, with all other inputs held constant. From its inception in the early nineteenth century the MPTD has been claimed by some economists to be a solution to the ethical problem of distributive justice, i.e. to be a means of determining fairness in wages, profits, interest and rent. Other economists have rejected this ethical claim, but have seen the MPTD as a valid demand-side criterion in the determination of equilibrium and efficiency. This book argues that the MPTD is valid, neither as a normative theory of social justice, nor as a positive law of economics. It suggests that economics is yet to develop a satisfactory theory of distribution that is scientific in the quantitative or mathematical sense. Through a survey of the origin and subsequent evolution of the MPTD in the writings of over 50 contributors over 150 years, John Pullen presents a critical history of the concept. The book begins by examining the conceptual tools that have been deployed to facilitate this analysis of past contributions to the MPTD and then looks at various economists and their contribution to the debate including its supporters such as Wicksteed, Marshall, Wicksell and Stigler, and its critics such as Pareto, Hobson, Edgeworth, Adriance and Cassel.
Fungibility and Consumer Choice: Evidence from Commodity Price Shocks*
Abstract We formulate a test of the fungibility of money based on parallel shifts in the prices of different quality grades of a commodity. We embed the test in a discrete-choice model of product quality choice and estimate the model using panel microdata on gasoline purchases. We find that when gasoline prices rise, consumers substitute to lower octane gasoline, to an extent that cannot be explained by income effects. Across a wide range of specifications, we consistently reject the null hypothesis that households treat “gas money” as fungible with other income. We compare the empirical fit of three psychological models of decision making. A simple model of category budgeting fits the data well, with models of loss aversion and salience both capturing important features of the time series.
The Hidden Tax on Blue-Collar Workers and Building in America
The unemployment insurance system has a design flaw that penalizes the construction industry, leading to fewer workers and lower productivity. Over time, that means less – and more expensive – housing.
AI Adoption and Inequality
There are competing narratives about artificial intelligence’s impact on inequality. Some argue AI will exacerbate economic disparities, while others suggest it could reduce inequality by primarily disrupting high-income jobs. Using household microdata and a calibrated task-based model, we show these narratives reflect different channels through which AI affects the economy. Unlike previous waves of automation that increased both wage and wealth inequality, AI could reduce wage inequality through the displacement of high-income workers. However, two factors may counter this effect: these workers’ tasks appear highly complementary with AI, potentially increasing their productivity, and they are better positioned to benefit from higher capital returns. When firms can choose how much AI to adopt, the wealth inequality effect is particularly pronounced, as the potential cost savings from automating high-wage tasks drive significantly higher adoption rates. Models that ignore this adoption decision risk understating the trade-off policymakers face between inequality and efficiency.
A Theory of the Consumption Function, with and without Liquidity Constraints
This paper argues that the modern stochastic consumption model, in which impatient consumers face uninsurable labor income risk, matches Milton Friedman's (1957) original description of the Permanent Income Hypothesis much better than the perfect foresight or certainty equivalent models did. The model can explain the high marginal propensity to consume, the high discount rate on future income, and the important role for precautionary behavior that were all part of Friedman's original framework. The paper also explains the relationship of these questions to the Euler equation literature, and argues that the effects of precautionary saving and liquidity constraints are often virtually indistinguishable.
Yeah, We're Going to Have to Tax the Middle Class
The AI Layoff Trap
If AI displaces human workers faster than the economy can reabsorb them, it risks eroding the very consumer demand firms depend on. We show that knowing this is not enough for firms to stop it. In...
You’ve Got Mail: A Randomized Field Experiment on Tax Evasion
We report from a large-scale randomized field experiment conducted on a unique sample of more than 15,000 taxpayers in Norway who were likely to have misreported their foreign income. By randomly manipulating a letter from the tax authorities, we cleanly identify that moral suasion and the perceived detection probability play a crucial role in shaping taxpayer behavior. The moral letter mainly works on the intensive margin, while the detection letter has a strong effect on the extensive margin. We further show that only the detection letter has long-term effects on tax compliance. This paper was accepted by Yan Chen, behavioral economics.
米テック5社AI投資、｢見えざる債務｣268兆円 注記のみ記載に危うさ
【シリコンバレー=山田航平】メタなど米ビッグテックで、バランスシート（貸借対照表）上では見えない人工知能（AI）関連投資の将来の債務が膨らんでいる。試算では主要5社合計で1兆6500億ドル（約268兆円）と約4年で8倍になり、実際の債務を上回った。リスク検証が一段と難しくなっている。グーグルを傘下にもつアルファベットとマイクロソフト、アマゾン・ドット・コム、メタ、オラクルの米5社を対象に、直近
Work, Justice, and Collective Capital Institutions: Revisiting Rudolf Meidner and the Case for <span style="font-variant:small-caps;">Wage‐Earner</span> Funds
ABSTRACT This article makes the case for a specific variety of what we call Collective Capital Institutions (CCIs), by returning to the idea of Wage‐Earner Funds (WEFs) – a 1970s Swedish policy proposal designed gradually to shift ownership and control over parts of the economy to democratically controlled institutions. We identify two attractive rationales in favour of such a scheme and argue that both can fruitfully be transposed to the current worldwide economic situation. The egalitarian rationale is that WEFs could help in the pursuit of equality by giving a wider set of people a stake in collectively owned companies and a right to their profits. The democratic rationale is that WEFs redistribute not only these profits, but also the power over economic decisions made within companies. We then contrast such schemes for collective capital ownership with the similar but much more privatised proposals set out in, for instance, John Rawls's idea of a ‘property‐owning democracy’. We argue that CCIs ultimately are more likely to contribute to the development of the ‘sense of justice’ within society that is needed for a stable just society. We conclude that CCIs deserve a great deal more exploration in academic and political discussions of egalitarian economic systems.
Canadian Prime Minister Mark Carney calls new U.S. tariffs ‘a miscalculation’ after trade talks collapse
The U.S. import taxes will apply to hockey sticks, building materials, liquors and certain kinds of clothing. Carney said “Canada will match those tariffs dollar for dollar.”
