Shocks and Institutions in a Job Matching Model / Wouter Den Haan, Christian Haefke, Garey Ramey.

Format:

Book

Author/Creator:

Haan, Wouter Den.

Contributor:

National Bureau of Economic Research.

Haefke, Christian.

Ramey, Garey.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8463.

NBER working paper series no. w8463

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

This paper explains the divergent behavior of European and US unemployment rates using a job market matching model of the labor market with an interaction between shocks and institutions. It shows that a reduction in TFP 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, modeled as an increased 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 destruction.

Notes:

Print version record

September 2001.