Existing models of equilibrium unemployment with endogenous labor market participation are complex, generate procyclical unemployment rates, and suffer from the usual defects of matching models. We embed endogenous participation in a simple, tractable job market matching model, show analytically...

The lack of euro area labour market flexibility is a commonly mentioned issue. In particular, the relatively weak response of wages to high unemployment can pose adjustment problems. We address the issue using extensive simulations of an estimated macro-econometric model for the euro area (the...

n this paper we develop the Generalize Taylor Economy (GTE) in which there are many sectors with overlapping contracts of different lengths. We are able to show that even in economies with the same average contract length, monetary shocks will be more persistent when there are longer contracts....

This paper studies the dynamics of labor demand at the firm level. Recent studies emphasize the importance of non-convex components in the structure of hiring and firing costs in the form of either fixed or linear adjustment costs. Building from Cooper al. (2005) model and Rota (2004)...

Due to increased technological change which lead to an increased demand for skilled workers, it becomes more and more difficult for low skilled workers to find a job. How should a society or political decision makers react? Recently, German politicians are engaged in a discussion about the...

This paper studies the implications of labor taxation in determining the sensitivity of an economy to macroeconomic shocks. We construct a New Keynesian business cycle model with matching frictions of the labor market, where sluggish employment adjustment implies a key role for labor markets in...

In this paper, we reformulate the theoretical baseline DAS-AD model of Asada, Chen, Chiarella and Flaschel (2004) to allow for its somewhat simplified empirical estimation. The model now exhibits a Taylor interest rate rule in the place of an LM curve and a dynamic IS curve and dynamic...

Standard business cycle models often have difficulty matching salient stylized facts such as hump-shaped responses to shocks or persistence. This is mainly due to the lack of a strong endogenous propagation mechanism. In this paper we demonstrate that a real business cycle with a labor market...