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Implications of insights from behavioral economics for macroeconomic models

Steinar Holden ()

No 2012/12, Working Paper from Norges Bank

Abstract: The last 20 years, the importance of a number of behavioral features has been widely accepted within economics, and they are now regularly included in standard macro models. Where has this development led us? I argue that the insights from behavioral economics have led to important progress in our understanding of macroeconomic phenomena. One of the most important is the effect of fairness considerations on wages and employment relationships. Another important insight is that most or all individuals are affected by various behavioral features, which should be taken into account in the design of saving plans and pension schemes. A third insight is that plausible macro models provide large scope for important effects of sentiments and psychological factors. Future research should follow different routes, like incorporating behavioral features in standard models, improving estimated empirical models, and learning from case studies and historical episodes.

Keywords: Behavioral; macroeconomics (search for similar items in EconPapers)
JEL-codes: E2 E3 D8 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-11-06
New Economics Papers: this item is included in nep-evo and nep-mac
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Related works:
Working Paper: Implications of Insights from Behavioral Economics for Macroeconomic Models (2012) Downloads
Working Paper: Implications of insights from behavioral economics for macroeconomic models (2012) Downloads
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