replacement rates or initial tax rates are high, while no increase in unemployment occurs when institutions are ‘employment …This Paper explains the divergent behaviour of European and US unemployment rates using a job market-matching model of … the labour market with an interaction between shocks and institutions. It shows that a reduction in TFP growth rates, an …

This Paper develops a model with multiple steady states (low tax and low unemployment versus high tax and high … unemployment) in which equilibrium selection is not conditioned on a sunspot variable. Instead, large temporary shocks initiate … possible that the transition to the high-unemployment steady state after a negative shock can be avoided if the government …

According to Ljungqvist and Sargent (1998), high European unemployment since the 1980s can be explained by a rise in … to high unemployment benefits. In this Paper we reassess the turbulence unemployment relationship using a matching model … Ljungqvist and Sargent (1998, 2004) are reversed, and higher turbulence leads to a reduction in unemployment. Thus, changes in …