The secular shift in labor demand from unskilled to skilled labor is explained within a model that is solved numerically. There are three branches producing a basic good, a differentiated luxury good, and an intermediate service. Production is more skill-intensive in the luxury good and the...

We distinguish and assess three fundamental views of the labor market regarding the movements in unemployment: (i) the frictionless equilibrium view; (ii) the chain reaction theory, or prolonged adjustment view; and (iii) the hysteresis view. While the frictionless view implies a clear...

We develop a two-sector endogenous growth model with a dual labour market resulting from the presence of an effort extraction function in one sector. Effort of workers can be influenced by pay and monitoring. This results in an endogenous non-competitive wage differential between sectors and a...

We explore the far-reaching implications of low-wage subsidies on skill formation, aggregate employment and welfare. Low-wage subsidies have three important effects. First, they promote employment of low-skilled workers (who tend to be the ones who earn low wages). Second, by raising the payoff...

This paper examines the interactions between employment and training policies. Their effectiveness in stimulating income and employment may be interdependent for various important reasons. For example, the more employment policies stimulate the employment rate, the greater the length of time...

This discussion paper has resulted in an article in 'Economica', 2002, 69(273), 21-40.

The construction bust which accompanied the Great Recession, and the accompanying need to shift workers across sectors, have provoked a discussion about mismatch and the Beveridge Curve, alongside a discussion about firm-level dispersion. These discussions echo an ongoing discussion about the...

This paper examines the labour market matching process by distinguishing its two component stages: the contact stage, in which job searchers make contact with employers and the selection stage, in which they decide whether to match. We construct a theoretical model explaining two-sided selection...

We investigate experimentally the economic effects of wage taxation to finance unemployment benefits for a closed economy and an international economy. The main findings are the following. (i) There is clear evidence of a vicious circle in the dynamic interaction between the wage tax and...

This paper analyses how and to which degree the Danish flexicurity concept and its various elements achieve the renowned Danish miracle by evaluating their unemployment and inequality effects and their complementarities. We develop a microfounded model of searching workers and firms, calibrate...