Termination of dynamic contracts in an equilibrium labor market model

In an equilibrium model of the labor market, workers and firms enter into dynamic contracts that can potentially last forever, but are subject to optimal terminations. Upon termination, the firm hires a new worker, and the worker who is terminated receives a termination contract from the firm and is then free to go back to the labor market to seek new employment opportunities and enter into new dynamic contracts. The model permits only two types of equilibrium terminations that resemble, respectively, the two kinds of labor market separations that are typically observed in practice: involuntary layoffs and voluntary retirements. The model allows for the simultaneous determination of a large set of important labor market variables including equilibrium unemployment and labor force participation. An algorithm is formulated for computing the model's equilibria. I then simulate the model to show quantitatively that the model is consistent with a set of important stylized facts of the labor market.     

我国劳动力市场培育的目标模式定位

借鉴西方市场经济国家劳动力市场的特点与经验,充分考虑我国劳动力市场的特殊性,吸收理论界关于我国劳动力市场培育目标模式的合理内核,我国劳动力市场培育的目标模式应当定位为:建立劳动力资源商品化、劳动力市场机制健全化、劳动力市场主体和中介组织化、劳动力市场管理制度化、劳动关系和谐化的"五化"劳动力市场。     

Job search and academic achievement

The paper develops a structural model for the labor market behavior of students entering the labor market. We explicitly model the trade-off between devoting effort to studying and to job search. Furthermore, we allow for on-the-job search. The model is estimated using a unique data set of individuals who completed undergraduate education in the Netherlands between 1995 and 2001. Our estimation results show that labor market returns of high grades are low. Wage increases between jobs are explained by labor market friction rather than returns of early work experience. Our results indicate that a 1 percentage point decrease in the unemployment rate increases wage offers on average by 3 percent, but that the amount of job search effort is not very sensitive to business cycle fluctuations. Policy simulations show that study effort and hence academic achievement are much more sensitive to financial incentives than job search effort and labor market outcomes.     

贸易增长、劳动力市场刚性与产业间劳动力转移——基于面板数据门槛效应模型的实证研究

劳动力市场刚性的存在是决定国际贸易能否促进产业间劳动力转移的关键因素之一,然而现有的实证研究却忽视了劳动力市场刚性的决定性作用。本文基于国外文献的度量方法构建劳动力市场刚性和产业间劳动力转移的度量指标,并利用面板数据门槛效应模型研究当劳动力市场刚性存在差异时贸易增长对产业间劳动力转移所产生的不同影响。本文的研究发现,当劳动力市场刚性程度低于门槛值时,贸易增长能加速产业间劳动力转移;而当劳动力市场刚性程度高于门槛值时,贸易增长则会阻碍产业间劳动力转移。由此得出结论,欲使中国的贸易增长起到促进产业间劳动力转移的效果,必须先在劳动力市场领域进行改革,消除劳动力市场刚性。     

Economic growth and the employer of last resort: A simple model of flexicurity capitalism

This paper presents a model of economic growth with unemployment due to labor market rigidities. The economy consists of a firm that maximizes profits, of a government and of two types of households that maximize inter-temporal utility. One household supplies skilled labor at the first labor market, the other household supplies simple labor at the second labor market. The government in the economy raises taxes and uses its revenues to employ labor receiving unemployment benefits, to finance transfers to the household in the second labor market and to finance public spending. We analyze both the version with exogenous growth as well as an endogenous growth variant, where growth is made endogenous by assuming positive externalities of capital. The exogenous growth model is characterized by global determinacy while it is locally indeterminate. The endogenous growth model can be globally indeterminate with the high balanced growth path being locally indeterminate and the low balanced growth path being locally determinate. We also study how taxation and how the speed of the wage adjustment affect the economy.     

A three state model of worker flows in general equilibrium

We develop a simple model featuring search frictions and a nondegenerate labor supply decision along the extensive margin. The model is a standard version of the neoclassical growth model with indivisible labor and idiosyncratic productivity shocks and frictions characterized by employment loss and employment opportunity arrival shocks. We argue that it is able to account for the key features of observed labor market flows for reasonable parameter values. Persistent idiosyncratic productivity shocks play a key role in allowing the model to match the persistence of the employment and out of the labor force states found in individual labor market histories.     

Skills,sunspots and cycles

This paper explores the ability of a class of one-sector, multi-input models to generate indeterminate equilibrium paths, and endogenous fluctuations, without relying on factors’ hoarding. The model presents a novel theoretical economic mechanism that supports sunspot-driven expansions without requiring upward sloping labor demand schedules. Its distinctive characteristic is that the skill composition of aggregate labor demand drives expansionary i.i.d. demand shocks. Next, the model explains the labor market dynamics from the supply side, while endogenizing the capital productivity response to changes in the aggregate labor demand composition. Last but not least, it is worth to mention that the model presents an effective shock propagation mechanism that operates into the labor market and across labor market segments through the cross elasticities of equilibrium labor demand and supplies.      

Labor force participation and the discouraged worker effect

This article analyzes labor force participation with particular reference to the discouraged worker effect. Discouraged workers are those who will search for work when the labor market is tight but do not search for work when the labor market is slack because they consider their chances of finding a suitable job too low. The theoretical point of departure is a search model where the worker evaluates the expected utility of searching for work and decides to participate in the labor market if the expected utility of search exceeds the utility of not working. From this framework, we derive an empirical model for the probability that the worker will be out of the labor force, unemployed, or employed. The model is estimated on a sample of married and cohabitating women in Norway covering the period from 1988 to 2008. The results show that the discouraged worker effect is substantial. On average, about one-third of those who are out of the labor force are discouraged, according to our analysis.     

Can Countries with Severe Labor Market Frictions Gain from Globalization?

The interaction between increased Southern trade integration (globalization) and labor market frictions is analyzed in a dynamic general-equilibrium North–South nonscale growth model with endogenous Northern innovation and endogenous Southern imitation. The qualitative employment, growth, and relative-wage effects of globalization are shown to depend crucially on the degree of Northern labor market frictions. I demonstrate that only Northern countries with particularly large labor market adjustment costs for both firms and workers benefit from globalization in terms of permanently lower unemployment, temporarily faster growth, and permanently higher wages. This is because of the resulting general-equilibrium feedback effects of Northern labor market frictions that deter Southern imitation incentives. The result does not imply the recommendation to increase Northern labor market rigidities, but it challenges the common belief that labor market flexibility helps Northern countries to better adjust to the "globalization threat" coming from the South.     

Labor Mobility, Trade, and Social Capital

Labor market integration raises welfare in the absence of distortions. This paper examines labor and goods market integration in a general‐equilibrium model with social capital. The findings are: (i) labor market integration has an ambiguous impact on welfare, and raises it if the goods and labor skills are sufficiently different; (ii) compared to Pareto optimum, labor mobility (social capital) is excessively large (depleted); (iii) trade is superior to labor market integration if trading costs are no higher than private migration costs, otherwise the outcome is ambiguous; and (iv) the creation of new institutions in response to labor market integration has an ambiguous impact on welfare.     

The estimation of a disequilibrium real wage equation for Britain

An aggregate wage equation is formulated based on a disequilibrium labor market model. The specification allows for an important special case to be tested, namely the equilibrium hypothesis that real wages move instantaneously to equate the demand for and supply of labor. The hypothesis that the British labor market has been in equilibrium is rejected. The adjustment path for real wages is monotonic and dominated by demand factors. Real wages move quickly to eliminate excess demand but the results contradict the monetarist contention that the aggregate labor market is continuously in a temporary, if not full, equilibrium.     

Labor market frictions and the international propagation mechanism

The paper studies the role of labor market frictions in accounting for international business cycle comovement. To this aim, we embed labor market search and matching frictions in a two-country New Keynesian model. We show that labor market frictions amplify the international propagation of supply and demand shocks. In terms of cyclical properties then, they raise the cross-country output correlation. Adding labor market search in the New Keynesian model thus improves its ability to account for the business cycle comovement observed in G7 countries in the recent decades. Nominal wage rigidity substantially contributes to this result. Labor market institutions also play a role. Yet, their impact is not unequivocal depending on the institution considered. Business cycle synchronization is thus found to increase with the generosity of the unemployment benefits system, whereas it decreases with the strictness of employment protection.     

Housing and unemployment: The search for the “American Dream”

This paper constructs a model of search and bargaining across two different markets: the labor market and the housing market. Interestingly, the model highlights that housing prices and frictions in the housing market have a profound impact on labor market activity through the desire of workers to eventually purchase a home, the “American Dream.” In particular, higher housing prices adversely affect workers’ incentives in the labor market as employment can eventually lead to access to housing through the ability to purchase a home. Similarly, labor market frictions can impact housing market activity. Notably, tighter housing markets are associated with higher unemployment rates and less job creation. Consequently, our work suggests that policymakers should be very careful in implementing policies targeted towards housing – housing markets are likely to generate significant external effects to other sectors of the economy, especially the labor market.     

Labor search and matching in macroeconomics

The labor search and matching model plays a growing role in macroeconomic analysis. This paper provides a critical, selective survey of the literature. Four fundamental questions are explored: How are unemployment, job vacancies, and employment determined as equilibrium phenomena? What determines worker flows and transition rates from one labor market state to another? How are wages determined? What role do labor market dynamics play in explaining business cycles and growth? The survey describes the basic model, reviews its theoretical extensions, and discusses its empirical applications in macroeconomics.The model has been developed against the background of difficulties with the use of the neo-classical, frictionless model of the labor market in macroeconomics. Its success includes the modelling of labor market outcomes as equilibrium phenomena, the reasonable fit of the data, and—when inserted into business cycle models—improved performance of more general macroeconomic models. At the same time, there is evidence against the Nash solution used for wage setting and an active debate as to the ability of the model to account for some of the cyclical facts.     

我国劳动收入比重偏低的成因分析——基于劳动力市场的视角

近年来我国劳动收入在初次分配中的比重呈下降趋势。劳动收入比重偏低会对收入分配公平、消费投资平衡和经济增长质量产生负面影响。文章基于劳动力市场的视角对我国劳动收入比重偏低的成因进行了理论研究,并采用我国2000-2011年省级面板数据,构建了一个劳动收入比重决定模型,实证检验了经济发展过程中,二元经济转型和劳动力市场分割对我国劳动收入比重变化的影响。研究结果表明,我国劳动收入比重偏低是二元经济转型的特定发展阶段和劳动力市场分割的制约力量协同作用的结果。在二元经济转型过程中,劳动收入比重的变化趋势呈U型规律。我国劳动收入比重偏低的原因在于,劳动力市场城乡分割和劳动力市场行政垄断行业分割延缓了二元经济转型进程,增加了劳动收入比重在下降阶段的停留时间。因此,稳定我国劳动收入比重的关键是削弱劳动力市场分割,加快二元经济转型。     

The German labor market during the Great Recession: Shocks and institutions

This paper analyzes Germany's unusual labor market experience during the Great Recession. We estimate a general equilibrium model with a detailed labor market block for post-unification Germany. This allows us to disentangle the role of institutions (short-time work, government spending rules) and shocks (aggregate, labor market, and policy shocks) and to perform counterfactual exercises. We identify positive labor market performance shocks (likely caused by labor market reforms) as the key driver for the “German labor market miracle” during the Great Recession.     

The welfare cost of imperfect competition and distortionary taxation

The welfare cost of imperfect competition in the product and labor markets in the United States is quantified in a dynamic general equilibrium model. We find that the welfare cost of imperfect competition in the product market is 3.62 percent while it is 0.58 percent in the labor market, taking the transition path from the distorted to the optimal steady state into account. If we also take into account that the US economy is characterized by distortionary taxation, the welfare cost of the product market distortion increases to 13.51 percent and the labor market distortion to 4.35 percent.     

中国劳动力市场结构与 农村剩余劳动力转移

中国劳动力市场的特殊结构对农村剩余劳动力转移有重要影响。本文通过吸收二元制劳动力市场分割理论的基本假设和对制度变量的讨论,建立了中国农村剩余劳动力转移的“二元市场与二元劳动力”模型,并用以解释中国农村剩余劳动力转移的特点。本文认为,政府的强制性制度障碍导致“S型的人力资本投资曲线”的产生,从而使城市居民在主要劳动力市场具有政策和人力资本优势;作为对福利制度缺失的替代,“隐形补贴”等诱致性制度创新导致农村剩余劳动力在次要劳动力市场具有成本优势。这一模型对于我国农村剩余劳动力迁移中的特殊现象有较好的解释力,对于我国城市化战略和我国一元劳动力市场的形成有重要的理论意义。     

对中国“知识失业”成因的一个解释

许多国家的经验表明,在教育快速发展的过程中往往伴随着“知识失业”。近年来,我国在经历教育快速发展的同时,也开始面临这样的问题。本文以扩展的工作搜寻模型为框架,分析了当前“知识失业”产生的原因。根据分析结果,现阶段出现的“知识失业”,在很大程度上是由劳动力市场的制度性分割引起的,因此应该逐步消除劳动力市场的制度性分割,鼓励大学毕业生到西部和农村等次要劳动力市场上就业,在确定高等教育的发展规模时要适当考虑劳动力市场的发育状况。     

Caste discrimination and transaction costs in the labor market: Evidence from rural North India

This paper is an empirical attempt to quantify caste-based discrimination in the labor market using household data taken from rural North India. In the regression analysis, transaction costs associated with entry into the labor market and reservation wages are estimated simultaneously along with market wages. The estimation results provide evidence of the existence of transaction costs in the labor market and discrimination against backward classes with regard to access to regular employment. In line with previous studies, the results suggest that the achievements of India's reservation policy so far have at best been limited. In addition, a comparison between the estimates from the model employed in this paper and conventional (reduced-form) approaches shows that discrimination in labor market entry is likely to be underestimated in the conventional reduced-form approaches.