We build quadratic labor adjustment costs into an otherwise standard New-Keynesian model of the business cycle and show that this is sufficient to increase both, output and inflation persistence. -- Monetary persistence ; labor adjustment costs

We build quadratic labor adjustment costs into an otherwise standard New-Keynesian model of the business cycle and show that this increases output persistence in a similar vein as other models of labor market frictions. Furthermore, it is demonstrated that quadratic labor adjustment costs imply...

This paper provides a theoretical and quantitative analysis of various types of wellknown employment subsidies. Two important questions are addressed: (i) How should employment subsidies be targeted? (ii) How large should the subsidies be? We consider measures involving targeting workers with...

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...

This paper sheds new light on the effects of the minimum wage on employment from a two-sided theoretical perspective, in which firms' job offer and workers' job acceptance decisions are disentangled. Minimum wages reduce job offer incentives and increase job acceptance incentives. We show that...

The aim of this paper is to analyze and estimate salient characteristics of unemployment dynamics. Movements in unemployment are viewed as "chain reactions" of responses to labor market shocks, working their way through systems of interacting lagged adjustment processes. In the context of...

This paper challenges what is the standard account of UK unemployment, namely that the major swings in unemployment over the past 25 years are due predominantly to movements in the underlying empirical "natural rate of unemploymentʺ (NRU). Our analysis suggests that the British NRU has remained...

This paper surveys major empirical regularities concerning changes in earnings inequality in Europe and the U.S. over the past 25 years. Next, it indicates which of these regularities can be explained within the competitive demand-supply framework of analysis and what is left unexplained....