Search, Nash bargaining and rule-of-thumb consumers

Boscá, José E.; Doménech, Rafael; Ferri, Javier

doi:10.1016/j.euroecorev.2011.03.002

Cited by 29 publications

(36 citation statements)

References 36 publications

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“…The Nash bargain process maximises the weighted product of the parties' surpluses from employment, max w t, l 1t (λ ht ) λ w λ f t 1 λ w , where λ w 2 [0, 1] reflects workers' bargaining power. The solution of the Nash maximisation problem gives the optimal real wage and hours worked (Boscá et al, 2011):…”

Section: Trade In the Labour Market: The Labour Contractmentioning

confidence: 99%

Household Leverage and Fiscal Multipliers

2012

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We study the size of government spending multipliers in a general equilibrium model with search and matching frictions in which we allow for different levels of household indebtedness. The main results of the paper are: (a) the presence of impatient households and private debt helps generate government spending multipliers greater than 1; (b) as financial conditions worsen and impatient consumers find it more difficult to borrow (i.e. in a credit crunch), the size of the government spending multiplier falls; (c) conversely, employment, vacancies and unemployment multipliers are larger when access to credit becomes more difficult; and (d) the model explains the observed pattern of responses of labour market variables, housing prices and private debt to a fiscal shock reasonably well. On these grounds it outperforms the standard model with RoT (Hand-to-Mouth) consumers whose predictions for the labour market are at odds with the data. As a side point, our framework makes it clear why RoT households' lack of asset holdings is responsible for the extremely high fiscal multipliers that they produce.

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Section: Trade In the Labour Market: The Labour Contractmentioning

confidence: 99%

Household Leverage and Fiscal Multipliers

2012

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“…As in Boscá et al (2011) and Moyen and Stähler (forthcoming), consumers of type i each live in a type-i family and pool their income to insure themselves against individual unemployment risk. The elasticity of consumption σ c can be interpreted as a risk-aversion parameter.…”

Section: Householdsmentioning

confidence: 99%

“…The remaining fraction (1−μ) shifts consumption intertemporally. Our simultaneous integration of a search labor market and RoT households follows Boscá et al (2011) and Moyen and Stähler (forthcoming). 4 All households consume and work; optimizing households additionally save in non-state contingent securities.…”

Section: The Modelmentioning

confidence: 99%

Structural and Cyclical Effects of Tax Progression

Kremer¹,

Stähler²

2016

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Tax progression is a major attribute of current tax systems and a major element of redistribution policy. Theoretically, there is no clear answer to the question of how progressive taxes should be. In practice, approaches have differed both over time and from country to country. While top rates of income taxes have declined since the 1980s and the number of tax brackets has decreased in many countries, the overall progressivity of public tax and transfer systems has not necessarily been on a downward trend. Furthermore, top rates have been raised again as part of a number of recent consolidation packages, which has been seen as a new tendency towards higher tax progression. Besides implications for structural unemployment and income distribution, the dynamic properties of tax progression is attracting renewed interest. Given stronger calls for countercyclical fiscal policy and the shortcomings of ad hoc fiscal interventions in practice, it might be asked what role tax progression can play in the game of "timely, targeted and temporary" automatic stabilization.In this paper, we discuss distributional aspects of tax progression only very briefly and in a highly stylized manner. Instead, we focus on two other issues: the structural and cyclical consequences of a progressive tax system when labor markets are imperfect. In such economies, tax progression may curb workers' wage claims and, thus, decrease structural unemployment. Furthermore, changes in average tax rates over the business cycle induced by tax progression may dampen net income fluctuations. By combining these two issues in a real business cycle model with labor market frictions and creditconstrained consumers, we are able to assess, in particular, the relative importance of the structural and cyclical impact of tax progression on welfare.We find that a more progressive tax schedule reduces structural unemployment as it decreases wages and, thus, fosters long-run incentives for job creation. However, since the costs of filling a vacancy increase when unemployment falls, there exists an optimal level of unemployment ("Hosios condition"). Therefore, tax progression improves steady-state welfare up to a certain threshold and harms it beyond that. We also show that tax progression always increases the costs of business cycles for consumers who can shift consumption intertemporally through saving and borrowing (optimizers), while it always reduces the business cycle costs for credit constrained households (rule-of-thumb consumers). The latter is due to less volatile net wages, while the former follows from progressivity-induced tax rate volatility and an income effect resulting from employment stabilization. Our analysis suggests that the business cycle effect dominates the steadystate effect. Overall, tax progression seems welfare-enhancing up to a certain threshold and always shifts relative utility from optimizers to rule-of-thumb consumers. Nicht-technische Zusammenfassung AbstractIn a real business cycle model with labor market frictions, we find that a...

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“…Following Boscá et al (2009Boscá et al ( , 2010Boscá et al ( , 2011, we assume that a union, which takes into account (aggregate) utility of optimizing and RoT households, undertakes the bargaining. 5 Furthermore, we assume staggered bargaining of nominal wages similar to Gertler et al (2008).…”

Section: Asset Value Of Jobs Wage Bargaining and Job Creationmentioning

confidence: 99%

German labor market and fiscal reforms 1999–2008: Can they be blamed for intra-euro area imbalances?

Gadatsch¹,

Stähler

Weigert

2016

Journal of Macroeconomics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn this paper, we assess the impact of major German structural reforms from 1999 to 2008 on key macroeconomic variables within a two-country monetary union DSGE model. By many, these reforms, especially the Hartz reforms on the labor market, are considered to be the root of thereafter observed imbalances in the Euro Area. We find that, in terms of German GDP, consumption, investment and (un)employment, the reforms were a clear success albeit the impact on the German trade balance and the current account was only minor. Most importantly, the rest of the Euro Area benefited from positive spillover effects. Hence, our analysis suggests that the reforms cannot be held responsible for the currently observed macroeconomic imbalances within the Euro Area.

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Search, Nash bargaining and rule-of-thumb consumers

Cited by 29 publications

References 36 publications

Household Leverage and Fiscal Multipliers

Household Leverage and Fiscal Multipliers

Structural and Cyclical Effects of Tax Progression

German labor market and fiscal reforms 1999–2008: Can they be blamed for intra-euro area imbalances?

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