This paper proposes an explanation for observed differences in the business cycle volatility of employment and unemployment across a sample of OECD countries. Using an incomplete markets variant of the fair wage real business cycle model, increases in the gross replacement rate of public...

In this paper we develop a model of a multi-sector multi-factor small open economy with involuntary unemployment due to fair wages. The model is used inter alia to analyse the labour market effects of changes in unemployment benefits and the domestic labour supply. Our analysis covers both the...

This paper examines positive and normative implications of efficiency-wage induced unemployment within a model of endogenous growth. Sectorspecific impacts of the wage rate on labor efficiency establish a correlation between the growth rate and the rate of unemployment. The sign of this...

The double-dividend argument (as used in political debates) addresses worries that a green tax may lead to higher unemployment when wages are inflexible. As protection against this possibility, it is proposed to use the proceeds of the green tax to subsidize employment. In the best case, this...