Anglo-Saxon countries have been successful in the 1990s concerning labor market performance compared to the former role models Germany and Japan. This reversal in relative economic performance might be related to idiosyncracies in financial markets with bank-based financial markets as in Germany...

We reconsider the central role of the natural rate of unemployment (NRU) in forming policy decisions. We show that the unemployment rate does not gravitate towards the NRU due to frictional growth, a phenomenon that encapsulates the interplay between lagged adjustment processes and growth in...

This paper studies the impact of financialization on unemployment in the U.S. We estimate a dynamic multi-equation macro labor model including labor demand, labor supply, wage-setting and capital accumulation equations. Financialization appears as a key determinant of capital accumulation which,...

We distinguish and assess three fundamental views of the labor market regarding the movements in unemployment: (i) the frictionless equilibrium view; (ii) the chain reaction theory, or prolonged adjustment view; and (iii) the hysteresis view. While the frictionless view implies a clear...

How does the asymmetry of labor market institutions affect the adjustment of a currency union to shocks? To answer this question, this paper sets up a dynamic currency union model with monopolistic competition and sticky prices, hiring frictions and real wage rigidities. In our analysis, we...

Based on a model with imperfectly competitive labor and product markets the real consequences of labor market shocks for economies with either an earnings-related or flat-rate unemployment compensation system are considered. A distinctive feature of the analysis is the comparison of both...

Based on a two-country model it is scrutinized how the structure of the unemployment benefit system affects the consequences of idiosyncratic labor market shocks on real wages and unemployment in other countries. International spillover effects are caused by changes in world real income. The...

The paper contributes to the globalization debate by scrutinizing the international spillover effects which are provoked if a single country reduces the generosity of the unemployment compensation system or weakens labor union power. For this purpose a two-country model with imperfect...

We develop a growth model with unemployment due to imperfections in the labor market. In this model, wage inertia and balanced budget rules cause a complementarity between capital and employment capable of explaining the existence of multiple equilibrium paths. Hysteresis is viewed as the result...

This paper estimates the impact of fiscal consolidation on unemployment and job market flows across EU countries using a recent database of consolidation episodes built on the basis of a “narrative” approach (Devries et al., 2011). Results show that the impact of fiscal consolidation on...