Centralized Wage Setting and Active Labor Market Policies in Frictional Labor Markets

Francesco Vona and Luca Zamparelli
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Luca Zamparelli: UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]

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Abstract: We adopt a standard search and matching model with endogenous job destruction to investigate two issues. First, we use a simplified version of Boeri-Burda to show that at sufficiently low levels of wage share, centralized wage bargaining performs better than decentralized bargaining in terms of average productivity, unemployment, and income inequality. Second, we incorporate active labor market policies in the model and establish that they are more effective in reducing unemployment when wage setting is centralized. Finally, numerical analysis suggests that the difference in effectiveness is sizeable.

Keywords: Job destruction; Labor market policies; Numerical anlysis (search for similar items in EconPapers)
Date: 2014-06
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Published in Eastern and Economic Journal, 2014, 40 (3), pp.349 - 364. ⟨10.1057/eej.2013.11⟩

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Working Paper: Centralized Wage Setting and Active Labor Market Policies in Frictional Labor Markets (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03399413

DOI: 10.1057/eej.2013.11

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