Accounting for Labor GAPS

Francois Langot and Alessandra Pizzo

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: We develop a balanced growth model with labor supply and search and matching frictions in the labor market to study the impact of economic policy variables on the two margins which constitute the (total) labor input: the extensive one (the rate of employment) and the intensive one (the hours worked per worker). We show that the dynamics of the taxes have an impact mainly on the hours worked while labor market institutions have a large influence on the rate of employment. However, our findings underline that there is an interaction between the two margins. The model is tested on four countries (US, France, Germany and UK) which experiment different tax and labor market dynamics since the sixties. Using this structural approach, we can then perform counterfactual experiments about the evolution of the policy variables and to compare welfare levels implied by policy changes.

Date: 2015-04
New Economics Papers: this item is included in nep-dge
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Working Paper: Accounting for Labor Gaps (2015)
Working Paper: Accounting for Labor Gaps (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:757

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