As a small, open economy, Norway has always been exposed to global economic developments. Climate change, the Covid-19 pandemic and a sharp decrease in oil prices pose specific challenges to the Norwegian economy and the sustainability of the welfare state. Although most signs suggest that oil has been a blessing for Norway, not all workers gain equally. Hence, there is a need to develop rigorous economic policy recommendations how to address the externalities and spillovers from the oil sector and challenges of resource rich economies in general. The unifying theme of "Macro-micro" is to use micro data and modern methods to study questions of macroeconomic importance and policy relevance.
"Macro-Micro" will contribute to a better understanding of how the transition away from a petroleum-based economy may affect the efficiency of resource allocations. The project will study the drivers, spillovers and challenges resource rich economies face and discuss Norway's challenges in connection with technological change, robotisation and digitalization. "Macro-micro" will analyse inequalities arising from business cycles and challenges to the sustainability of the welfare state and study the heterogeneous effects of macroeconomic policy in Norway, addressing business cycle conditions, the shift to a greener economy, and the management of the Government Pension Fund.
The Covid-19 pandemic and a sharp decrease in oil prices pose specific challenges to the Norwegian economy and welfare state. The project Macro-micro studies three challenges to the Norwegian economy. First, as petroleum activities are gradually phased out, Norway is no longer in a unique position and the economy is facing a necessary restructuring of the business sector. Second, although income inequality is low in Norway compared to other countries, rising economic inequality poses macroeconomic challenges such as lower aggregate demand and reduced social mobility. Third, the historically deep downturn due to the Covid-19 pandemic forced the government to implement aggressive fiscal and monetary policy measures with uncertain and heterogeneous impact on firms and households. The project Macro-micro studies these three challenges to the Norwegian economy. The unifying theme of the project is to use micro data and modern methods to study questions of macroeconomic importance and policy relevance. WP1 focuses on the transformation from a resources- to a knowledge-based economy. Knowledge flows can be traced through labor mobility across sectors. We will assess the long run effects of the oil boom in Norway on the accumulation of human capital and the degree of intergenerational occupation persistence. WP2 will investigate the long-run impact of the economic downturn due to the Covid-19 pandemic on gender equality. We assess career costs of motherhood in recessions and persistence of wealth persistence vary over the life cycle. WP3 investigates the heterogeneous effects of fiscal and monetary policy responses to the Covid-19 pandemic using disaggregated data. To estimate causal estimates, we will use the timing and institutional features of the construction of the budget in Norway to identify plausibly exogenous changes of fiscal policy. We analyze the effect of monetary policy during the Great Recession and the recent Covid-19 crises on consumption and inequality.