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Complementarity of labor market institutions, equilibrium unemployment and the propagation of business cycles

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  • Burda, Michael C.
  • Weder, Mark

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 RBC 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. --

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Bibliographic Info

Paper provided by Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes in its series SFB 373 Discussion Papers with number 2001,49.

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Date of creation: 2001
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Handle: RePEc:zbw:sfb373:200149

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Keywords: Business Cycles; European Labor Markets; Indeterminacy;

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References

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Citations

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Cited by:
  1. Nikolai Stähler & Carlos Thomas, 2011. "FiMod - a DSGE model for fiscal policy simulations," Banco de Espa�a Working Papers 1110, Banco de Espa�a.
  2. Guerrazzi, Marco, 2011. "The animal spirits hypothesis and the Benhabib-Farmer condition for indeterminacy," MPRA Paper 30673, University Library of Munich, Germany.
  3. 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.
  4. Giammarioli, Nicola, 2003. "Indeterminacy and search theory," Working Paper Series 0271, European Central Bank.
  5. Moyen, Stéphane & Stähler, Nikolai, 2009. "Unemployment insurance and the business cycle: prolong benefit entitlements in bad times?," Discussion Paper Series 1: Economic Studies 2009,30, Deutsche Bundesbank, Research Centre.
  6. Frank Oskamp & Dennis J. Snower, 2007. "Interactions between Employment and Training Policies," Kiel Working Papers 1389, Kiel Institute for the World Economy.
  7. Nigar Hashimzade & Salvador Ortigueira, 2004. "Endogenous Business Cycle With Search In The Labour Market," Royal Economic Society Annual Conference 2004 161, Royal Economic Society.
  8. 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).
  9. 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).
  10. repec:spo:wpecon:info:hdl:2441/1905 is not listed on IDEAS
  11. Jens Rubart, 2006. "Dismissal Protection or Wage Flexibility," Computing in Economics and Finance 2006 406, Society for Computational Economics.
  12. 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.
  13. 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.
  14. M. Scarlato & M. Cenci, 2004. "Innovazione tecnologica e offerta di skills:una simulazione," Computational Economics 0401003, EconWPA.

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