The Intensive Margin Puzzle and Labor Market Adjustment Costs
AbstractThis paper documents a puzzling fact, namely that there is a significant negative relation between employment protection legislation and the usage of the intensive margin of labor market adjustments. We then make use of a Real Business Cycle model and introduce search and matching frictions as well as adjustment costs along the extensive and the intensive labor market margins. We show that the model is able to replicate the observed pattern, if we assume low firing costs and relatively large hours adjustment costs. Furthermore, the model requires those values to replicate the U.S. business cycle statistics
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1701.
Length: 17 pages
Date of creation: May 2011
Date of revision:
Adjustment Costs; Extensive Margin; Intensive Margin;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-11 (All new papers)
- NEP-DGE-2011-06-11 (Dynamic General Equilibrium)
- NEP-LAB-2011-06-11 (Labour Economics)
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.:
- 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.
- Wouter Denhaan & Garey Ramey & Joel Watson, 1997. "FORTRAN code for Job Destruction and Propagation of Shocks," QM&RBC Codes 61, Quantitative Macroeconomics & Real Business Cycles.
- Temel Taskin, 2013.
"Intensive Margin and Extensive Margin Adjustments of Labor Market : Turkey versus United States,"
1339, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- Temel Taskin, 2013. "Intensive margin and extensive margin adjustments of labor market: Turkey versus United States," Economics Bulletin, AccessEcon, vol. 33(3), pages 2307-2319.
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