LIUC
The European Journal of Comparative Economics
ISSN: 1824-2979
LIUC
EJCE
Year: 2016, July. Volume: 13 - Issue: 1

Explaining labor wedge trends: An equilibrium search approach

Coralia A. Quintero Rojas ; François Langot

View this article (PDF)

Start page: 3 - End page: 35

Keywords:
Aggregate hours of work, intensive and extensive margins, labor market institutions, labor wedge, matching model
Abstract:
In this paper, we present a search and matching model of the labor market and use this as a device to explain the long-run variation in the aggregate hours worked in several OECD countries over the period 1980-2013. The model distinguishes between hours worked per employee (intensive margin) and the employment rate (extensive margin) and includes a tax/benefit system. This allows us to assess the impact of the observed time-varying heterogeneity of taxes, unemployment benefits, and workers’ bargaining power on the two margins. Our method is based on an accounting procedure. Once it has been calibrated, we find that, for the ten countries of the sample, our search economy is able to explain the patterns of the two margins of aggregate hours worked over the 1980-2013 period, when it includes the cross-country heterogeneity of the labor market institutions.

Jel code: E23
Jel code: J21
Jel code: J22
Jel code: J23
Jel code: J64
In case of problems please write an e-mail to secretariat.ejce@liuc.it
Supplemento a LIUC Papers
Direttore Responsabile: Piero Cavaleri
Università Carlo Cattaneo - LIUC
C.so Matteotti, 22
21053 Castellanza (Va) - Italia
Registro stampa Tribunale di Busto Arsizio n. 11/93 del 11.06.93