Complementarity of Labor Market Institutions, Equilibrium Unemployment and the Propagation of Business Cycles

Michael Burda and Mark Weder

German Economic Review, 2002, vol. 3, issue 1, 1-24

Abstract: This paper evaluates complementarities of labor market institutions and the business cycle in the context of a stochastic dynamic general equilibrium model economy. Matching between workers and vacancies with endogenous time spent in search, Nash-bargained wages, payroll taxation, and differential support for unemployed labor in search and leisure are central aspects of the model. For plausible regions of the policy and institutional parameter space, the model exhibits more persistence than standard real business cycle models and can exhibit indeterminacy of rational expectations paths without increasing returns in production. Furthermore, labor market institutions act in a complementary fashion in generating these effects.

Date: 2002
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Journal Article: Complementarity of Labor Market Institutions, Equilibrium Unemployment and the Propagation of Business Cycles (2002)
Working Paper: Complementarity of Labor Market Institutions, Equilibrium Unemployment and the Propagation of Business Cycles (2001)
Working Paper: Complementarity of labor market institutions, equilibrium unemployment and the propagation of business cycles (2001)
Working Paper: Complementarity of labor market institutions, equilibrium unemployment and the propagation of business cycles (2001)
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DOI: 10.1111/1468-0475.00049

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