Shocks and Institutions in a Job Matching Model

56 Pages Posted: 8 Oct 2001

See all articles by Wouter J. den Haan

Wouter J. den Haan

University of Amsterdam; Centre for Economic Policy Research (CEPR); Tinbergen Institute

Christian Haefke

Institute for Advanced Studies (IHS); NYU, Abu Dhabi; IZA Institute of Labor Economics

Garey Ramey

University of California, San Diego (UCSD) - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: September 2001

Abstract

This Paper explains the divergent behavior of European and US unemployment rates using a job market-matching model of the labor market with an interaction between shocks and institutions. It shows that a reduction in TFP growth rates, an increase in real interest rates, and an increase in tax rates leads to a permanent increase in unemployment rates when the replacement rates or initial tax rates are high, while no increase in unemployment occurs when institutions are "employment friendly." The Paper also shows that an increase in turbulence, modeled as an increase probability of skill loss, is not a robust explanation for the European unemployment puzzle in the context of a matching model with both endogenous job creation and job destruction.

Keywords: Job matching model, unemployment, unemployment benefits, turbulence, TFP slowdown

JEL Classification: E24, J64

Suggested Citation

Den Haan, Wouter J. and Haefke, Christian and Ramey, Garey, Shocks and Institutions in a Job Matching Model (September 2001). Available at SSRN: https://ssrn.com/abstract=285957

Wouter J. Den Haan (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

HOME PAGE: http://www1.feb.uva.nl/toe/content/people/content/denhaan/pers.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Christian Haefke

Institute for Advanced Studies (IHS) ( email )

Josefstädter Straße 39
1080 Vienna
Austria

NYU, Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Garey Ramey

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-5721 (Phone)
858-534-7040 (Fax)

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