This paper studies the costs of adjusting employment, distinguishing between firms’ firing and workers’ mobility costs. We construct a simple dynamic general equilibrium model of labor demand and supply and show that only the joint response of employment and wages to firm level shocks can...

The purpose of this paper is to analyze the European Commission's approach to state aid for foreign direct investment in a competition policy framework. The Commission shows to consider variable cost aid (VCA) to be more distortive than start-up or fixed cost aid (FCA). This paper addresses that...

This paper modifies the standard Mortensen-Pissarides job matching model in order to explain the cyclical behavior of vacancies and unemployment. The modifications include strategic wage bargaining (Hall and Milgrom, 2006) and convex labor adjustment costs. The results reveal that our model...

We show how the use of panel data methods such as those proposed in single equations by Kao and Pedroni or in systems by Larsson and Lyhagen to investigate economic hypotheses such as purchading power pariety or the term structure of interest rates may be affected by the existence of cross-unit...

We consider multicointegration in the sense of Granger and Lee (1990), that is, the cumulated equilibrium error cointegrates with the process itself. It is shown, that if the process is given by the cointegrated VAR model for I(1) variables, then multicointegration cannot occur. If, however, the...

Concert tickets can either be sold at a single price or at different prices to reflect the various levels of seating categories available. Here we consider how two product characteristics (the artist's age and venue capacity) influence the likelihood that pop music concert tickets will be sold...

A test for the cointegrating rank of a vector autoregressive (VAR) process with a possible shift and broken linear trend is proposed. The break point is assumed to be known. The setup is a VAR process for cointegrated variables. The tests are not likelihood ratio tests but the deterministic...

The paper generalizes a costly state verification model along two dimensions: 1) diversity of opinions, and 2) endogenous formation of a financial intermediary, modeled as a multilender coalition. In contrast with previous contributions (e.g. [35] and [36]), our model can account for the...

We contrast two potential explanations of the substantial di¤erences in entrepreneurial activity observed across geographical areas: entry costs and external effects. We extend the Lucas model of entrepreneurship to allow for heterogeneous entry costs and for externalities that shift the...