IIES researcher awarded prestigious recruitment grant from the Swedish Research Council

The recruitment grant from the Swedish Research Council is one of the most prestigious research grants in Sweden and aims to strengthen Swedish research by enabling strategic recruitment of outstanding researchers. Karl Harmenberg’s successful bid highlights both his academic merits and the importance attributed to his upcoming project.

Karl holds a PhD from the IIES, making his return to the IIES particularly noteworthy.

Focus on the causes of recessions

Karl Harmenberg’s research centers on one of the most fundamental questions in economics: Why do recessions occur—and what can we do to prevent them?

In his project, he addresses these questions by analyzing the relationship between the labor market and business cycles. A key starting point is that the labor market functions differently from many other markets in the economy.

"Unlike other prices, wages are relatively rigid when economic conditions change. This means that negative shocks often lead to higher unemployment rather than lower wages, which in turn deepens the downturn," says Karl.

This idea has deep roots in economic theory and dates back to John Maynard Keynes and his classic 1936 work The General Theory of Employment, Interest, and Money. Keynes argued that the limited flexibility of wages is an important explanation for why recessions can become both deep and prolonged.

Combining theory and empirical evidence

An important part of the project is to integrate advanced macroeconomic theory with detailed empirical analysis. By developing models that closely reflect how firms and workers actually behave, Harmenberg aims to contribute to a more realistic understanding of economic dynamics.

The project is based in part on extensive register data from Sweden and Norway, enabling in-depth analyses of how individuals and firms act in the labor market. These empirical insights are then used to calibrate macroeconomic models so that they better reflect reality.

"By letting the data discipline the models, we can produce analyses that are not only theoretically elegant but also practically relevant," he explains.

Better foundations for economic policy

An overarching goal of the research is to contribute to better decision-making in economic policy. When models more accurately reflect real behavior, they also become more useful for analyzing the effects of different policy measures.

In the final phase of the project, the focus will therefore shift to how an improved understanding of the labor market affects the design of stabilization policies—such as monetary and fiscal policy—in times of economic uncertainty.

Strengthening the IIES and the Assar Lindbeck Centre

The recruitment of Karl Harmenberg represents an important addition to both the IIES and the Assar Lindbeck Centre.

"This is an excellent example of how we can strengthen our research environment through strategic recruitment. Karl Harmenberg’s project is at the research frontier and has the potential to provide important insights into how the economy works," says Professor Per Krusell, Director of the IIES.

Harmenberg will take up his position this autumn and looks forward to starting his work in Stockholm.

"IIES and the Assar Lindbeck Centre offer a unique research environment. I’m really looking forward to developing the project together with colleagues here," he says.

With support from the Swedish Research Council, the project is expected to generate new knowledge about both the causes of economic crises and how they can best be managed—issues that are as relevant today as ever.

Learn about the Assar Lindbeck Centre

Read more about Karl Harmenberg and his research