Ådne Cappelen

Modeling income policies: some Norwegian experiences 1973-1993

Abstract During the second half of the 1970s there was massive government interference in wage and price formation in Norway. Income policies changed during the first half of the 1980s — the hey days of ‘dynamic tax policies’ in Norway — and during the second half of the 1980s new direct interventions in wage formation were implemented. These episodes of income policies have been discussed and their empirical importance assessed in the econometric price and wage equations of a large-scale macroeconometric model of the Norwegian economy. Model simulations have shown that, while price regulations have generally led to an expansion of output and the loss of cost competitiveness, wage regulations have produced both output expansion and a gain in competitiveness. The dynamic tax policy implemented in Norway was less successful and led to both higher prices and wages as well as lower output.

Forecasting Immigration in Official Population Projections Using an Econometric Model

Although substantial research has been conducted to quantify the determinants of international migration, most official population projections do not include such determinants in a formal migration model. Statistics Norway forecasts gross immigration to Norway using an econometric model based on standard migration theories. The main variables include income level, unemployment, and population size in Norway and the sending countries, and the number of immigrants already living in Norway. Projections of exogenous variables are drawn from international and Norwegian sources. Three different alternatives are specified for the income variables, leading to three different forecasts for gross immigration until 2100.

Inflation Dynamics in a Small Open Economy

We evaluate the empirical performance of forward‐looking models for inflation dynamics in a small open economy. Using likelihood‐based testing procedures, we find that the exact formulation is at odds with Norwegian data. Moreover, some of the parameters in the model are not well identified. We also find that the inexact formulation is not rejected statistically using a test based on a minimum distance method. However, confidence regions also reveal an identification problem with this model. Instead, we find a well‐specified backward‐looking model with imperfect competition underlying the price setting, which is a model that outperforms an alternative forward‐looking model in‐sample. The backward‐looking model also forecasts somewhat better than the alternative forward‐looking model, during and after the recent financial crisis.

Macroeconomic Modeling: The Norwegian Experience

Paper presented at the conference on New Approaches to Empirical Research in Macroeconomics, Ebeltoft, Denmark, May 24-27 1990. A somewhat shorter version of this paper will appear in Scandinavian Journal of Economics.

Measuring Labour Services: Quality-Adjusting the Entry and Exit of Workers

Many statistical agencies use the sum of hours worked when measuring labour services. This implies that all workers provide work of equal quality. Various indices for adjusting for labour quality have been employed in a large body of literature. However, this literature has not yet addressed the issue of how to quality‐adjust the impact of workers entering and exiting the labour market. We outline a theoretical framework for dealing with quality adjustment of labour services caused by workers entering and exiting employment. To illustrate the theoretical framework, we use the case of Norway in the period 1997–2013. The impact on labour services due to our quality adjustment of net entry is found to be cyclical. While the adjustment for the quality of net entry amounts to about −0.3 percentage points annually during expansions, it is offset by about the same magnitude during contractions.

The Effect on Immigration of Changes in Regulations and Policies: A Case Study†

Net migration has become the main factor driving Norwegian population growth. This article explores how changes in regulations and immigration policies have affected gross immigration to Norway. As in previous econometric studies, it finds that income differences and income distribution have a bearing on immigration, as well as aspects of the labour market. Various immigration policies have largely had the expected effects, and Norways membership of the European economic area since 1994 and inclusion in the Schengen area in 2001 have resulted in higher immigration. The enlargement of the EU in 2004 and 2007 substantially increased immigration to Norway. By 2010, the EU-related changes in regulations increased total immigration by some 20 per cent compared to a counterfactual situation where Norway did not become party to either of these agreements. The partial and accumulated effect on the total population in Norway in 2010 is estimated to be about 2 per cent.