A key development in the "dismal science" has been the incorporation of explicit heterogeneity into models of the macroeconomy. As a result of taking micro data seriously, these theories study macroeconomic questions in terms of distributions of microeconomic variables like income or wealth rather than just aggregates. This approach opens up the door to examining the distributional implications of macroeconomic trends, shocks or policies, and to examine the two-way interaction between these distributions and the macroeconomy.
DisMaLS has been advancing this "distributional macroeconomics" agenda both theoretically and empirically. Theoretically, it has done so by developing new theories of the income and wealth distributions and their interactions with the macroeconomy in both the long and short run. Empirically, DisMaLS has brought to the table high-quality Norwegian administrative data to discipline and enrich these theories.
In terms of long-run trends, a striking feature regarding economic growth in many developed countries is that it has been unequally distributed. For example, in the U.S. real household incomes have grown by roughly two percent per year on average but income percentiles corresponding to the bottom 50% of the distribution have stagnated since the 1970s. DisMaLS has used a theory of income and wealth distribution to examine the potential drivers of these distributional trends, in particular automation and rising asset prices.
Turning to the short-run, DisMaLS has addressed some of the important policy challenges raised by the COVID-19 pandemic and the 2022/23 energy crisis. Specifically, the project has developed integrated economic and epidemiological models as well as models of Europe’s cut-off from Russian gas for providing quantitative answers to such policy questions.
