The Impacts of Structural Changes in the Labor Market: a Comparative Statics Analysis Using Heterogeneous-agent Framework
AbstractIn this paper we aim at analyzing the impacts on welfare and wealth and consumption distribution across different labor market structural features. In particular, we pursue a steady-state analysis to assess the impacts of unit vacancy costs, unemployment replacement ratio or the job destruction rate, when they are changed in order to promote a given reduction in the unemployment rate. We combine a labor market search and matching framework with unions, based on Mortensen and Pissarides (1994) with a heterogeneous-agent framework close to Imrohoroglu (1989) in a closed economy model. Such approach enables the joint assessment of macroeconomic welfare and inequality together with implications derived from institutional changes in labor market. Moreover, the transition matrix between worker's states is endogenous, fully derived from labor market conditions. Using feasible calibration to the Euro Area, we conclude that different institutional changes to promote unemployment reduction have non-neutral and differentiated effects on welfare and inequality. While changing unit vacancy costs and job destruction can be ranked, changes in the unemployment benefit replacement ration involve a trade-off between gains in welfare and in consumption/income distribution.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1104.
Length: 25 pages
Date of creation: Jul 2011
Date of revision:
Labor market institutions; search and matching models; heterogeneous-agent models; welfare and inequality.;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-09 (All new papers)
- NEP-DGE-2011-08-09 (Dynamic General Equilibrium)
- NEP-LAB-2011-08-09 (Labour Economics)
- NEP-MAC-2011-08-09 (Macroeconomics)
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.:
- Makoto Nakajima, 2012.
"Business Cycles In The Equilibrium Model Of Labor Market Search And Self‐Insurance,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 399-432, 05.
- Makoto Nakajima, 2010. "Business cycles in the equilibrium model of labor market search and self-insurance," Working Papers 10-24, Federal Reserve Bank of Philadelphia.
- Christian Bayer & Klaus Wälde, 2010.
"Matching and Saving in Continuous Time: Theory,"
CESifo Working Paper Series
3026, CESifo Group Munich.
- Christian Bayer & Klaus Wälde, 2010. "Matching and Saving in Continuous Time: Theory," Working Papers 1004, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 13 Jan 2010.
- Christian BAYER & Klaus WALDE, 2010. "Matching and Saving in Continuous Time: Theory," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2010013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Enchuan Shao & Pedro Silos, 2007.
"Uninsurable individual risk and the cyclical behavior of unemployment and vacancies,"
2007-05, Federal Reserve Bank of Atlanta.
- Pedro Silos & Enchuan Shao, 2007. "Uninsurable Individual Risk and the Cyclical Behavior of Unemployment and Vacancies," 2007 Meeting Papers 420, Society for Economic Dynamics.
- Per Krusell & Toshihiko Mukoyama & Aysegul Sahin, 2009.
"Labor-Market Matching with Precautionary Savings and Aggregate Fluctuations,"
NBER Working Papers
15282, National Bureau of Economic Research, Inc.
- Per Krusell & Toshihiko Mukoyama & AyşegÃ¼l Şahin, 2010. "Labour-Market Matching with Precautionary Savings and Aggregate Fluctuations," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1477-1507.
- Per Krusell & Toshihiko Mukoyama & Ayseg ul Sahin, 2007. "Labor-Market Matching with Precautionary Savings and Aggregate Fluctuations," Levine's Bibliography 122247000000001783, UCLA Department of Economics.
- Krusell, Per & Mukoyama, Toshihiko & Sahin, Aysegul, 2009. "Labor-Market Matching with Precautionary Savings and Aggregate Fluctuations," CEPR Discussion Papers 7429, C.E.P.R. Discussion Papers.
- 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.
- Eric J. Bartelsman & Pieter A. Gautier & Joris de Wind, 2011.
"Employment Protection, Technology Choice, and Worker Allocation,"
DNB Working Papers
295, Netherlands Central Bank, Research Department.
- Eric J. Bartelsman & Pieter A. Gautier & Joris de Wind, 2010. "Employment Protection, Technology Choice, and Worker Allocation," Tinbergen Institute Discussion Papers 10-042/3, Tinbergen Institute.
- Bartelsman, Eric & Gautier, Pieter & De Wind, Joris, 2010. "Employment Protection, Technology Choice, and Worker Allocation," IZA Discussion Papers 4895, Institute for the Study of Labor (IZA).
- Bartelsman, Eric J & de Wind, Joris & Gautier, Pieter A., 2010. "Employment Protection, Technology Choice, and Worker Allocation," CEPR Discussion Papers 7806, C.E.P.R. Discussion Papers.
- Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
- Imrohoruglu, Ayse, 1989. "Cost of Business Cycles with Indivisibilities and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1364-83, December.
- Campolmi, Alessia & Faia, Ester, 2011. "Labor market institutions and inflation volatility in the euro area," Journal of Economic Dynamics and Control, Elsevier, vol. 35(5), pages 793-812, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Bonanca).
If references are entirely missing, you can add them using this form.