Accounting for Labor Gaps

Francois Langot and Alessandra Pizzo

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

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.

Keywords: taxes; labor market institutions; hours; employment; labor market search (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-dge
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01164076v1
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Published in 2015

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Working Paper: Accounting for Labor Gaps (2015)
Working Paper: Accounting for Labor Gaps (2015)
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