In empirical studies the finding of procyclical average labour productivity is common. Two possible explanations to these results have been suggested in the literature: (1) labour hoarding/labour utilization, and (2) the Real Business Cycle productivity/technology shock explanation. This study...

In this paper we study the consequences of endogenous active labor market policies. In particular it is assumed that all viable policies have to please the employed majority. The main objective is to seek the answer to the following question: In what sense does the political equilibrium deviate...

This paper explores the rationale for unemployment benefits as a complement to optimal non-linear income taxation. High-skilled workers and low-skilled workers face different exogenous risks of being unemployed. As long as the low-skilled workers face a higher unemployment risk, we find that...

This study reports the results from a repeat survey among managers in Swedish manufacturing, designed to explore how a severe and prolonged macroeconomic shock affects wage rigidity and unemployment. Our second survey was conducted in 1998, when the unemployment rate was much higher, and the...

Why do some vacancies offer a posted wage whereas others offer a negotiable wage? The paper endogenizes the choice of wage policy in a search model with heterogeneous workers. In particular, we characterize the circumstances under which there exist an equilibrium where all firms negotiate wages....

The paper extends the basic Stiglitz (1982) model of optimal income taxation into general search equilibrium. When we extend the basic taxation model to include a more realistic treatment of the labor market, a number of new interesting mechanisms arise. When wages are fixed we find that a "work...

This study reports the results from a repeat survey among managers in Swedish manufacturing, designed to explore how a severe and prolonged macroeconomic shock affects wage rigidity and unemployment. Our second survey was conducted in 1998, when the unemployment rate was much higher, and the...

In this paper, we outline a baseline DSGE model which enables a straightforward analysis of wage bargaining between firms and ouseholds/unions in a model with both staggered prices and wages. Relying on empirical evidence, we assume that prices can be changed whenever wages are changed.This...

Why do some vacancies offer a posted wage whereas other offer a negotiable wage? The paper endogenizes the choice of wage policy in a search model with heterogeneous workers. In particular, we characterize the circumstances under which there exist an equilibrium where all firms negotiate wages....

We develop a New Keynesian model with staggered price and wage setting where downward nominal wage rigidity (DNWR) arises endogenously through the wage bargaining institutions. It is shown that the optimal (discretionary) monetary policy response to changing economic conditions then becomes...