Strategic wage bargaining, labor market volatility, and persistence

Fixed search costs, that is, costs that do not vary with search duration, can amplify the cyclical volatility of the labor market. To assess the size of fixed costs, we analyze the relation between search costs and search duration using German establishment data. An instrumental variable estimation shows no relation between search duration and search costs. We conclude that search costs are mainly fixed costs. Furthermore, we show that a search and matching model, calibrated for Germany with fixed costs close to 75%, can generate labor market volatility that is consistent with the data.

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EFFICIENT SORTING IN FRICTIONAL LABOR MARKETS WITH TWO-SIDED HETEROGENEITY

Macroeconomic Dynamics ◽

10.1017/s1365100514000212 ◽

2014 ◽

Vol 20 (1) ◽

pp. 95-119 ◽

Cited By ~ 1

Author(s):

Luca Paolo Merlino

Keyword(s):

Labor Market ◽

Labor Markets ◽

High Technology ◽

Relative Strength ◽

Wage Bargaining ◽

Pigouvian Tax ◽

Skilled Workers ◽

Frictional Labor Markets ◽

Do So ◽

Search Externalities

This paper studies how search externalities and wage bargaining distort vacancy creation and the allocation of workers to jobs in markets with two-sided heterogeneity. To do so, I propose a model of a frictional labor market where heterogeneous workers decide which job to look for and firms decide which technology to adopt. At equilibrium, there is perfect segmentation across sectors, which is determined by a unique threshold of workers' productivity. This threshold is inefficient because of participation and composition externalities. The Pigouvian tax scheme that decentralizes optimal sorting shows that these externalities have opposite signs. Furthermore, their relative strength depends on the distribution of workers' skills, so that when there are many (few) skilled workers, too many (few) high-technology jobs are created.

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Capital mobility and labor market volatility

International Economics and Economic Policy ◽

10.1007/s10368-010-0146-z ◽

2010 ◽

Vol 7 (4) ◽

pp. 391-409 ◽

Cited By ~ 2

Author(s):

M. Alper Çenesiz ◽

Christian Pierdzioch

Keyword(s):

Labor Market ◽

Capital Mobility ◽

Market Volatility

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Labor-market volatility in a matching model with worker heterogeneity and endogenous separations

Labour Economics ◽

10.1016/j.labeco.2013.08.010 ◽

2013 ◽

Vol 24 ◽

pp. 217-229 ◽

Cited By ~ 7

Author(s):

Andri Chassamboulli

Keyword(s):

Labor Market ◽

Market Volatility ◽

Matching Model ◽

Worker Heterogeneity

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Wage Bargaining in the Presence of Social Services and Transfers

World Politics ◽

10.1353/wp.2005.0011 ◽

2004 ◽

Vol 57 (1) ◽

pp. 99-142 ◽

Cited By ~ 11

Author(s):

Isabela Mares

Keyword(s):

Labor Market ◽

Social Policy ◽

Social Services ◽

Full Employment ◽

Wage Bargaining ◽

Welfare States ◽

Wage Determination ◽

Labor Market Institutions ◽

National Differences ◽

The Impact

OECD economies were able to reconcile the pursuit of welfare state expansion and full employment during the first decades of the postwar period. Yet the trade-off between these two policy objectives widened in recent decades. To explore the question ofwhy this change occurred, this article extends familiar models of wage determination by adding a number of parameters that capture cross-national differences among welfare states. The model identifies the conditions under which unions deliver wage moderation in exchange for social policy benefits and transfers and explores how different labor-market institutions magnify or decrease the impact of wage choices on the equilibrium level of employment. Next, the author examines the impact of changes in the composition of social policy expenditures and in the level of the tax burden on. unions' wage choices. She shows that mature welfare states, characterized by high tax burdens and a high share of transfers devoted to labor-market outsiders, reduce the effectiveness ofwage moderation in lowering unemployment. The author tests the main propositions using OECD panel data for the period 1960–95.

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