Labor market search and real business cycles: reconciling Nash bargaining with the real wage dynamics

Chéron, Arnaud; Langot, François

doi:10.1016/j.red.2003.11.003

Cited by 53 publications

(56 citation statements)

References 17 publications

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“…Expression (21) is obtained from the value function of the household and the constraints (12) and (20) as shown in Cheron and Langot (2004) and Hall and Milgrom (2008) for arbitrary time-separable preferences. Moving one household member into employment affects utility of the overall household in three ways.…”

Section: Householdsmentioning

confidence: 99%

Commodity Prices and Labour Market Dynamics in Small Open Economies

Bodenstein

Kamber²,

Thoenissen

2016

SSRN Journal

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We investigate the connection between commodity price shocks and unemployment in advanced resource-rich small open economies from an empirical and theoretical perspective. Shocks to commodity prices are shown to influence labour market conditions primarily through the real exchange rate contrasting sharply with the transmission of technology shocks which are typically argued to affect the economy by changing labour productivity. The empirical impact of commodity price shocks is obtained from estimating a panel vector autoregression; a positive price shock is found to be expansionary for the components of GDP, causes the real exchange rate to appreciate, and improves labour market conditions. For every one percent increase in commodity prices, our estimates suggest a one basis point decline in the unemployment rate and at its peak a 0.3% increase in unfilled vacancies. We then match the impulse responses to a commodity price shock from a small open economy model with net commodity exports and search and matching frictions in the labour market to these empirical responses. As in the data, an increase in commodity prices raises consumption demand in the small open economy and induces a real appreciation. Facing higher relative prices for their goods, non-commodity producing firms post additional job vacancies, causing the number of matches between firms and workers to rise. As a result, unemployment falls, even if employment in the commodity-producing sector is negligible. For commodity price shocks, there is little difference between the standard Diamond (1982), Mortensen (1982), and Pissarides (1985) approach of modelling search and matching frictions and the alternating offer bargaining model suggested by Hall and Milgrom (2008).JEL classifications: E44, E61, F42.

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Section: Householdsmentioning

confidence: 99%

Commodity Prices and Labour Market Dynamics in Small Open Economies

Bodenstein

Kamber²,

Thoenissen

2016

SSRN Journal

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“…This allows to study equilibrium unemployment in a non-Walrasian economy, and to provide a rich dynamics for the formation and dissolution of employment relations. Wages and hours are assumed to be the result of an efficient Nash-bargaining process between firms and workers, as in Andolfatto (1996), Chéron and Langot (2004) …”

Section: Description Of the Modelmentioning

confidence: 99%

“…The right-to-manage setting (where only the real wage is negotiated and firms freely choose hours) is found to better reproduce persistence in wage and inflation dynamics by Christoffel and Linzert (2005) and Christoffel, Küster, and Linzert (2006). Since these are not our primary focus, we rather adopt the efficient Nash-bargaining framework, following so the large bulk of papers in the related literature (see Hairault (2002), Chéron and Langot (2004), Trigari (2004) or Campolmi and Faia (2006) among others).…”

Section: Negotiating the Labor Contractmentioning

confidence: 99%

“…The solving of the Nash-bargaining closely follows Chéron and Langot (2004). We consequently do not come into much detail in the technical solving of the optimal contract here.…”

Section: Negotiating the Labor Contractmentioning

confidence: 99%

“…As in Campolmi and Faia (2006) or Chéron and Langot (2004), we set the weight of vacant jobs V in the matching function because of data availability constraints, namely regarding the mean duration of unemployment used to get φ and s, as detailed further. 9 Nickell's database provides other benefit replacement ratios, such as "brr1" that refers to the first year of unemployment benefits, averaged over three family situations and two earnings levels.…”

Section: Capturing Divergence In Labor Market Performancesmentioning

confidence: 99%

See 2 more Smart Citations

Divergence in Labor Market Institutions and International Business Cycles

Fonseca¹,

Patureau²,

Sopraseuth³

2009

Annals of Economics and Statistics

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This paper investigates the sources of business cycle comovement within the New Open Economy Macroeconomy framework. It sheds new light on the business cycle comovement issue by examining the role of cross-country divergence in labor market institutions.We first document stylized facts supporting that heterogeneous labor market institutions are associated with lower cross-country GDP correlations among OECD countries. We then investigate this fact within a two-country dynamic general equilibrium model with frictions on the good and labor markets. On the good-market side, we model monopolistic competition and nominal price rigidity. Labor market frictions are introduced through a matching function à la Mortensen and Pissarides (1999).Our conclusions disclose that heterogenous labor market institutions amplify the crosscountry GDP differential in response to aggregate shocks. In quantitative terms, they contribute to reduce cross-country output correlation, when the model is subject to real and/or monetary shocks. Our overall results show that taking into account labor market heterogeneity improves our understanding of the quantity puzzle.

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Relative effects of labor taxes on employment and working hours: role of mechanisms shaping working hours

Chen

Lai

2015

J. Econ.

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Labor market search and real business cycles: reconciling Nash bargaining with the real wage dynamics

Cited by 53 publications

References 17 publications

Commodity Prices and Labour Market Dynamics in Small Open Economies

Commodity Prices and Labour Market Dynamics in Small Open Economies

Divergence in Labor Market Institutions and International Business Cycles

Relative effects of labor taxes on employment and working hours: role of mechanisms shaping working hours

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