Do firms reduce employment when their insiders (established, incumbent employees) claim higher wages? The conventional answer in the theoretical literature is that insider power has no influence on employment, provided that the newly hired employees (entrants) receive their reservation wages....

The East German labour market has hardly made any progress since German reunification, despite massive migration flows and support from the West. We argue that East Germany is in trouble precisely because of the support it has received. This paper explores the phenomenon of 'the caring hand that...

This paper presents a theory explaining the labor market matching process through microeconomic incentives. There are heterogeneous variations in the characteristics of workers and jobs, and firms face adjustment costs in responding to these variations. Matches and separations are described...

In this paper we propose a novel way to model the labor market in the context of a New-Keynesian general equilibrium model; incorporating labor market frictions in the form of hiring and firing costs. We show that such a model is able to replicate many important stylized facts of the business...

In the standard macroeconomic search and matching model of the labor market, there is a tight link between the quantitative effects of (i) aggregate productivity shocks on unemployment and (ii) unemployment benefits on unemployment. This tight link is at odds with the empirical literature. We...

In the standard macroeconomic search and matching model of the labor market, there is a tight link between the quantitative effects of (i) aggregate productivity shocks on unemployment and (ii) unemployment benefits on unemployment. This tight link is at odds with the empirical literature. We...

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.

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...

This paper explores the influence of on-the-job training on the employment effect of firing costs. It shows that on-the-job training (generating firm specific skills) causes firing costs to have a contractionary influence on average employment (over the booms and recessions of the business cycle).