This paper investigates unemployment and labour market rigidities in OECD countries in 1983?1994. The central issue is the taxation-unemployment relationship and whether this relationship is exogenous or simultaneously determined. Hausman specification tests indicate that the impact of taxation...

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.

We investigate the effects of globalisation on the labour market using the factor price frontier. The factor price frontier defines a negative relationship between the real rate of return and the real wage rate. As international capital mobility equalises the real rate of return in all...

This paper estimates a series of shocks to hit the US economy during the Great Depression, using a New Keynesian model with unemployment and bargaining frictions. Shocks to long-run inflation expectations appear to account for much of the cyclical behavior of employment, while an increase in...

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...

The endorsement of expansionary fiscal packages has often been based on the idea that large multipliers can contrast rising unemployment. Is that really the case? We explore those issues in a New Keynesian model in which unemployment arises because of matching frictions. We compare fiscal...

This paper documents the short run and long run behavior of the search and matching model with staggered Nash wage bargaining. It turns out that there is a strong tradeoff inherent in assuming that previously bargained sticky wages apply to new hires. If sticky wages apply to new hires, then the...

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 shows that the German labor market is more volatile than the US labor market. Specifically, the volatility of the cyclical component of several labor market variables (e.g., the job-finding rate, labor market tightness, and job vacancies) divided by the volatility of labor...

Relational contracts when employed as a tool of economic policy create mutual dependency between State and enterprises. This bluntly contradicts the principles of „Ordnungspolitik" as the key policy device to ensure efficiency on the microeconomic level and growth on the macroeconomic level....