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Policy Analysis In A Matching Model With Intensive And Extensive Margins

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  • Lei Fang
  • Richard Rogerson

Abstract

The large differences in hours of work across rich countries reflect large differences in both employment to population ratios and hours per worker. We imbed the canonical model of labor supply into a matching model to produce a model with operative intensive and extensive margins, and assess the implications of several policies for changes along the two margins. Tax and transfer policies lead to decreases along both margins, whereas regulations that increase the cost of creating or maintaining a job may lead to decreases in employment, but necessarily lead to increases in hours per worker. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Lei Fang & Richard Rogerson, 2009. "Policy Analysis In A Matching Model With Intensive And Extensive Margins," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1153-1168, November.
    • Handle: RePEc:ier:iecrev:v:50:y:2009:i:4:p:1153-1168
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    References listed on IDEAS

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    Cited by:

    1. Noritaka Kudoh & Hiroaki Miyamoto & Masaru Sasaki, 2019. "Employment and Hours over the Business Cycle in a Model with Search Frictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 436-461, January.
    2. Kristie M. Engemann & Michael T. Owyang & Sarah Zubairy, 2008. "A primer on the empirical identification of government spending shocks," Review, Federal Reserve Bank of St. Louis, vol. 90(Mar), pages 117-132.
    3. Hashimoto, Ken-ichi & Ono, Yoshiyasu & Schlegl, Matthias, 2023. "Structural unemployment, underemployment, and secular stagnation," Journal of Economic Theory, Elsevier, vol. 209(C).
    4. Chen, Been-Lon & Lai, Chih-Fang, 2015. "Effects of labor taxes and unemployment compensation on labor supply in a search model with an endogenous labor force," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 300-317.
    5. Budrys, Žymantas & Porqueddu, Mario & Sokol, Andrej, 2022. "Striking a bargain: narrative identification of wage bargaining shocks," Research Bulletin, European Central Bank, vol. 98.
    6. Giorgos N. Diakoulakis & Athanasios Kampas, 2020. "A goal-framing approach to green payments' efficiency when vertical integration is an option," Working Papers 2020-1, Agricultural University of Athens, Department Of Agricultural Economics.
    7. Ohanian, Lee E. & Raffo, Andrea, 2012. "Aggregate hours worked in OECD countries: New measurement and implications for business cycles," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 40-56.
    8. Noritaka Kudoh & Hiroaki Miyamoto, 2021. "General Equilibrium Effects and Labor Market Fluctuations," Working Papers SDES-2021-4, Kochi University of Technology, School of Economics and Management, revised May 2021.
    9. Berentsen, Aleksander & Menzio, Guido & Wright, Randall D., 2007. "Inflation and Unemployment: Lagos-Wright meets Mortensen-Pissarides," Kiel Working Papers 1334, Kiel Institute for the World Economy (IfW Kiel).
    10. Been-Lon Chen & Chih-Fang Lai, 2016. "Relative effects of labor taxes on employment and working hours: role of mechanisms shaping working hours," Journal of Economics, Springer, vol. 117(1), pages 49-84, January.
    11. Aleksander Berentsen & Guido Menzio & Randall Wright, 2011. "Inflation and Unemployment in the Long Run," American Economic Review, American Economic Association, vol. 101(1), pages 371-398, February.
    12. Been-Lon Chen & Mei Hsu & Chih-Fang Lai, 2015. "Relative Effects of Labour Taxes and Unemployment Benefits on Hours Worked Per Worker and Employment," Pacific Economic Review, Wiley Blackwell, vol. 20(2), pages 282-309, May.
    13. repec:adr:anecst:y:2009:i:95-96:p:06 is not listed on IDEAS
    14. Kudoh, Noritaka & Miyamoto, Hiroaki, 2023. "Do general equilibrium effects matter for labor market dynamics?," Economic Modelling, Elsevier, vol. 119(C).
    15. Chen, Been-Lon & Hsu, Mei & Lai, Chih-Fang, 2016. "Relation between growth and unemployment in a model with labor-force participation and adverse labor institutions," Journal of Macroeconomics, Elsevier, vol. 50(C), pages 273-292.
    16. Rujin, Svetlana, 2024. "Labor market institutions and technology-induced labor adjustment along the extensive and intensive margins," Journal of Macroeconomics, Elsevier, vol. 79(C).
    17. Langot, François & Pizzo, Alessandra, 2019. "Accounting for labor gaps," European Economic Review, Elsevier, vol. 118(C), pages 312-347.
    18. Rujin, Svetlana, 2019. "What are the effects of technology shocks on international labor markets?," Ruhr Economic Papers 806, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    19. Kokonas, Nikolaos & Monteiro, Paulo Santos, 2021. "Aggregation in economies with search frictions," Journal of Mathematical Economics, Elsevier, vol. 96(C).
    20. 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.
    21. Yannic Stucki & Jacqueline Thomet, 2018. "The effects of firing costs on employment and hours per employee," Diskussionsschriften dp1820, Universitaet Bern, Departement Volkswirtschaft.
    22. Jose Emilio Boscá & Rafael Domenech & Javier Ferri, 2008. "Tax Reforms and Labour-market Performance: An Evaluation for Spain using REMS," Working Papers 0804, International Economics Institute, University of Valencia.
    23. Armando Näf & Yannic Stucki & Jacqueline Thomet, 2022. "The Effects of Firing Costs on Labour Market Dynamics," Economica, London School of Economics and Political Science, vol. 89(354), pages 461-488, April.
    24. Gonzalo Llosa & Lee Ohanian & Andrea Raffo & Richard Rogerson, 2014. "Firing Costs and Labor Market Fluctuations: A Cross-Country Analysis," 2014 Meeting Papers 533, Society for Economic Dynamics.
    25. Sevgi Coskun, 2016. "Labor Market Fluctuations in Developing Countries," EcoMod2016 9732, EcoMod.

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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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