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Shocks and institutions in a job matching model

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  • Christian Haefke

Abstract

This paper explains the divergent behavior of European an US unemployment rates using a job market matching model of the labor market with an interaction between shocks an institutions. It shows that a reduction in TF growth rates, an increase in real interest rates, and an increase in tax rates leads to a permanent increase in unemployment rates when the replacement rates or initial tax rates are high, while no increase in unemployment occurs when institutions are "employment friendly". The paper also shows that an increase in turbulence, modelle as an increase probability of skill loss, is not a robust explanation for the European unemployment puzzle in the context of a matching model with both endogenous job creation and job estruction.

Suggested Citation

  • Christian Haefke, 2001. "Shocks and institutions in a job matching model," Economics Working Papers 568, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2001.
  • Handle: RePEc:upf:upfgen:568
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    References listed on IDEAS

    as
    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. repec:wop:calsdi:97-23 is not listed on IDEAS
    3. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    4. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084, Elsevier.
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    More about this item

    Keywords

    Job matching model; unemployment; unemployment benefits; turbulence; TFP slowdown;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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