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Job Turnover, Unemployment and Labor Market Institutions

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Author Info

  • Joseph, Gilles

    ()
    (Université catholique de Louvain)

  • Pierrard, Olivier

    ()
    (Central Bank of Luxembourg)

  • Sneessens, Henri R.

    ()
    (University of Luxembourg)

Abstract

This paper studies the role of labor market institutions on unemployment and on the cyclical properties of job flows. We construct an intertemporal general equilibrium model with search unemployment and endogenous job turnover, and examine the consequences of introducing an unemployment benefit, a firing cost and a downward wage rigidity. The model is able to reproduce the main cyclical properties of a typical European economy. It also suggests that downward wage rigidities, rather than unemployment benefit or firing cost, may well play a dominant role in explaining both the high unemployment rate and the cyclical properties of such an economy.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 835.

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Length: 29 pages
Date of creation: Jul 2003
Date of revision:
Publication status: published in: Labour Economics, 2004, 11 (4), 451-468
Handle: RePEc:iza:izadps:dp835

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Keywords: institutions; job flows dynamics; unemployment;

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References

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  1. Cahuc, Pierre & Zylberberg, Andre, 1999. "Job Protection, Minimum Wage and Unemployment," IZA Discussion Papers 95, Institute for the Study of Labor (IZA).
  2. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  3. Den Haan, Wouter & Haefke, Christian & Ramey, Gary, 2001. "Shocks and Institutions in a Job Matching Model," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2970, C.E.P.R. Discussion Papers.
  4. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
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  6. David Coe & Dennis Snower, 1996. "Policy Complementarities: The Case for Fundamental Labor Market Reform," Archive Discussion Papers, Birkbeck, Department of Economics, Mathematics & Statistics 9625, Birkbeck, Department of Economics, Mathematics & Statistics.
  7. Pierrard, Olivier & Sneessens, Henri R., 2003. "Low-Skilled Unemployment, Biased Technological Shocks and Job Competition," IZA Discussion Papers 784, Institute for the Study of Labor (IZA).
  8. John M. Abowd & Francis Kramarz, 1997. "The Costs of Hiring and Separations," NBER Working Papers 6110, National Bureau of Economic Research, Inc.
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  10. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
  11. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, American Economic Association, vol. 86(1), pages 112-32, March.
  12. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  13. Boeri, Tito, 1996. "Is Job Turnover Countercyclical?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(4), pages 603-25, October.
  14. P Garibaldi, 1995. "Job Flow Dynamics and Firing Restrictions," CEP Discussion Papers dp0256, Centre for Economic Performance, LSE.
  15. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  16. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(482), pages 829-853, October.
  17. Wouter J. den Haan & Garey Ramey & Joel Watson, 1997. "Job Destruction and Propagation of Shocks," NBER Working Papers 6275, National Bureau of Economic Research, Inc.
  18. Bertola, Giuseppe & Rogerson, Richard, 1997. "Institutions and labor reallocation," European Economic Review, Elsevier, Elsevier, vol. 41(6), pages 1147-1171, June.
  19. Collard, Fabrice & Juillard, Michel, 2001. "Accuracy of stochastic perturbation methods: The case of asset pricing models," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(6-7), pages 979-999, June.
  20. Ljungqvist, Lars & Sargent, Thomas J, 2002. "The European Employment Experience," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3543, C.E.P.R. Discussion Papers.
  21. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(2), pages 269-300, November.
  22. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199279173, October.
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