Karl Harmenberg

Karl Harmenberg

Assistant Professor

Copenhagen Business School


I am an assistant professor at the Department of Economics, Copenhagen Business School. My research focuses on micro behavior, macro dynamics, and inequality. I obtained my PhD in economics from the Institute for International Economic Studies, Stockholm University, in 2018.


  • Macroeconomics
  • Inequality


  • PhD, 2018

    IIES, Stockholm University



Consumption Dynamics under Time-Varying Unemployment Risk

Journal of Monetary Economics (forthcoming)
(with Erik Öberg)

Published version Final draft version, October 2020

In response to an adverse labor-market shock, a calibrated heterogeneous-agent model predicts that aggregate spending on durable goods falls mainly due to the ex-ante increase in income uncertainty caused by higher unemployment risk. In contrast, aggregate spending on nondurable goods falls mainly due to the ex-post income losses associated with realized unemployment spells. When households hold little liquid assets, the nondurable spending response is amplified, whereas the durable spending response is dampened. These differences stem from micro-level adjustment frictions involved in purchases of durable goods. The model is corroborated with evidence from micro survey data.

Gender Disparities in Top Earnings: Measurement and Facts for Denmark 1980-2013

Journal of Economic Inequality (accepted)

Published version Final draft version, December 2020 Code

Extending the work of Atkinson et al. (2018), we decompose top-earnings gender disparities into a glass-ceiling coefficient and a top-earnings gender gap. The decomposition uses that both male and female top earnings are Pareto distributed. If interpreting top-earnings gender disparities as caused by a female-specific earnings tax, the top-earnings gender gap and glass-ceiling coefficient measure the tax level and tax progressivity, respectively. Using Danish data on earnings, we show that the top-earnings gender gap and the glass-ceiling coefficient evolve differently across time, the life cycle, and educational groups. In particular, while the top-earnings gender gap has been decreasing in Denmark over the period 1980-2013, the glass-ceiling coefficient has been remarkably stable.

Working papers

Integrated Epi-Econ Assessment

First version, December 2020 NBER working paper, December 2020

We formulate an economic time use model and add to it an epidemiological SIR block. In the event of an epidemic, households shift their leisure time from activities with a high degree of social interaction to activities with less, and also choose to work more from home. Our model highlights the different actions taken by young individuals, who are less severely affected by the disease, and by old individuals, who are more vulnerable. We calibrate our model to time use data from ATUS, employment data, epidemiological data, and estimates of the value of a statistical life. There are qualitative as well as quantitative differences between the competitive equilibrium and social planner allocation and, moreover, these depend critically on when a cure arrives. Due to the role played by social activities in people's welfare, simple indicators such as deaths and GDP are insufficient for judging outcomes in our economy.

A Simple Theory of Pareto Earnings

CBS working paper, December 2020

I introduce a simple model which endogenously generates a Pareto distribution in top earnings, consistent with empirics. Workers inhabit different niches, and the earnings of a worker is determined by the niche-specific supply of labor and a constant-elasticity labor-demand curve. The highest paid workers are the ones that inhabit a niche with few other workers. A Pareto tail in earnings emerges as long as the distribution of workers over niches satisfies a regularity condition from extreme-value theory, satisfied by virtually all continuous distributions in economics.

Aggregating Heterogeneous-Agent Models with Permanent Income Shocks

CBS working paper, September 2020

I introduce a method for simulating aggregate dynamics of heterogeneous-agent models where log permanent income follows a random walk. The idea is to simulate the model using a counterfactual permanent-income-neutral measure which incorporates the effect that permanent income shocks have on macroeconomic aggregates. With the permanent-income-neutral measure, one does not need to keep track of the permanent-income distribution. The permanent-income-neutral measure is both useful for the analytical characterization of aggregate consumption-savings behavior and for simulating numerical models. Furthermore, it is trivial to implement with a few lines of code.

Labor-Market Hysteresis and Persistent Paradox-of-Thrift Recessions

First version, July 2020

Following the recent disruption in production due to COVID-19, we investigate whether temporary adverse shocks can result in persistent demand-driven recessions through sluggish labor-market dynamics. We consider an incomplete-markets model with sticky prices and search frictions, and show how introducing sluggish vacancy creation and endogenous layoffs gives rise to a powerful and persistent feedback loop between unemployment risk and aggregate demand. Endogenous layoffs are central because they generate a rapid rise in unemployment following a temporary shock. Sluggish vacancy creation is central because it implies that job-finding rates remain persistently low following the surge in layoffs. As a result, the negative feedback loop continues even after the initial shock dies out. The feedback mechanism is weak in the corner cases of either free entry, exogenous separations or complete markets. The model provides justification for using match-saving subsidies to stabilize the business cycle.

The Labor-Market Origins of Cyclical Income Risk

Latest version, November 2017

We use Danish administrative data 1980-2013 to study the underlying mechanisms generating fluctuations in income risk. We partition the population into 37 narrowly defined educational categories and document the cyclicality of labor income risk for each category separately. For the individual educational categories, mean income growth is strongly correlated with income growth skewness, with an average correlation of 0.87−0.88. We show that the connection between income growth skewness and mean income growth is not only strong in the time dimension, but also in the cross section. Across the 37 educational categories, the correlation between mean income growth and income growth skewness is 0.93−0.96. We show that labor-market frictions together with variations in productivity growth generate the relationship between mean income growth and income growth skewness. In a quantitative job-ladder model, variations in productivity growth quantitatively capture both the time-series and cross-sectional relationship. In contrast, variations in the job-finding rate, the job-separation rate and the offer-arrival rate for employed fail to generate the relationship between mean income growth and income growth skewness in our framework.

Work in progress

Wage Contracts in Dynamic General Equilibrium

Papers not intended for publication

Confronting Epidemics: The Need for Epi-Econ IAMs

Report for the National Institute of Economic Research, December 2020

We discuss what tools would be useful in confronting epidemics, especially from the perspective of economics. Our main proposal is for policymakers to employ “epi-econ IAMs”: explicit Integrated Assessment Models, where epidemiology is integrated with economics. These models are under rapid development, but arguably not yet quite ready for quantitative use.

Older note

A Note: Assortative Mating and Income Inequality

Latest version, 2014


The Philosophy and Economics of Inequality in the 21st Century

I am teaching a course on inequality in the first quarter of each academic year. The course is an elective and has no formal prerequisites. The syllabus from the last time I taught the course is here.

Advanced Macroeconomics

I am teaching a course in macroeconomics in the spring. Should be fun, stay tuned!

Reading Group on Macroeconomic Policy

See here for a syllabus for a reading group on macroeconomic policy from fall 2020. If you are interested in writing a thesis with me as a supervisor, the papers in this syllabus could be a good place to start.