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Complementarity of Labor Market Institutions, Equilibrium Unemployment and the Propagation of Business Cycles

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Michael C. Burda
Mark Weder

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Abstract

This paper evaluates complementarities of labor market institutions and the business cycle in the context of a stochastic dynamic general equilibrium model economy. Matching between workers and vacancies with endogenous time spent in search, Nash-bargained wages, payroll taxation, and differential support for unemployed labor in search and leisure are central aspects of the model. For plausible regions of the policy and institutional parameter space, the model exhibits more persistence than standard real business cycle models and can exhibit indeterminacy of rational expectations paths without increasing returns in production. Furthermore, labor market institutions act in a complementary fashion in generating these effects. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2002.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1468-0475.00049
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Article provided by Blackwell Publishing in its journal German Economic Review.

Volume (Year): 3 (2002)
Issue (Month): 1 (02)
Pages: 1-24
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Handle: RePEc:bla:germec:v:3:y:2002:i:1:p:1-24

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  15. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bruno, VAN DER LINDEN, 2003. "Unemployment insurance and training in an equilibrium matching model with heterogeneous agents," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
    Other versions:
  2. Takushi Kurozumi & Willem Van Zandweghe, 2008. "Labor market search and interest rate policy," Research Working Paper RWP 08-03, Federal Reserve Bank of Kansas City. [Downloadable!]
  3. Odile Chagny & Frédéric Reynès & Henri Sterdyniak, 2004. "Le taux de chômage et d'équilibre : Discussion empirique et évaluation empirique," Macroeconomics 0411017, EconWPA, revised 08 Dec 2004. [Downloadable!]
  4. Frank Oskamp & Dennis J. Snower, 2007. "Interactions between Employment and Training Policies," Kiel Working Papers 1389, Kiel Institute for the World Economy. [Downloadable!]
  5. Nigar Hashimzade & Salvador Ortigueira, 2004. "Endogenous Business Cycle with Search in the Labour Market," Money Macro and Finance (MMF) Research Group Conference 2004 78, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
  6. Odile Chagny & Frédéric Reynès & Henri Sterdyniak, 2002. "The equilibrium rate of unemployment : a theoretical discussion and an empirical evaluation for six OECD countries," Documents de Travail de l'OFCE 2002-04, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  7. Nicola Giammarioli, 2003. "Indeterminacy and search theory," Working Paper Series 271, European Central Bank. [Downloadable!]
  8. Jens Rubart, 2006. "Dismissal Protection or Wage Flexibility," Computing in Economics and Finance 2006 406, Society for Computational Economics. [Downloadable!]
  9. M. Scarlato & M. Cenci, 2004. "Innovazione tecnologica e offerta di skills:una simulazione," Computational Economics 0401003, EconWPA. [Downloadable!]
  10. Thomas Lubik & Michael Krause, 2004. "A Note on Instability and Indeterminacy in Search and Matching Models," Economics Working Paper Archive 518, The Johns Hopkins University,Department of Economics. [Downloadable!]
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