The Employment Effects of Low-Wage Subsidies Low-wage subsidies are often proposed as a solution to the unemployment problem among the low skilled. Yet the empirical evidence on the effects of low-wage subsidies is surprisingly scarce. This paper examines the employment effects of a Finnish payroll tax subsidy scheme, which is targeted at the employers of older, full-time, low-wage workers. The...

I extend a simple model with on-the-job-search in the labor market by monopolistic competition in the goods market. It is well known that the simple on-the-job-search model predicts a wage distribution which is convex where empirical evidence suggests that it is humpshaped. My model is able to predict a hump-shaped wage distribution. The intuition for the decline of the density function at the ...

A major puzzle in the open economy literature is why some countries have persistently higher real exchange rates than others. Even more puzzling is the fact that countries with high real exchange rates are strong export performers. We solve both puzzles with a model that integrates two central debates in the comparative political economy of advanced economies: one linking wage bargaining, incom...

The paper studies simple strategies of labor tax reform in a search and matching model of the labor market featuring endogenous labor supply. Changing the composition of the tax wedge—that is, reducing a payroll tax and increasing a progressive wage tax such that the marginal tax wedge remains unaffected—increases employment, reduces the equilibrium unemployment rate, and increases public reven...

This paper analyses the interaction between internal agency problems within firms and external search frictions when workers have private information. We show that the allocation of resources is determined by a modified Hosios Rule. We then analyze the effect of changes in the macro economic variables on the wage contract and the unemployment rate. We find that private information may increase ...

We specify a model of labour supply with job offer restrictions. A job offer is defined by a wage rate and working hours. The number of job offers is restricted, and follows a Poisson distribution. Individuals choose the alternative with the highest utility level. Three specifications are estimated: a basic specification, a specification in which the number of job offers depends on characterist...

This paper analyses the interaction between internal agency problems within firms and external search frictions when workers have private information. We show that the allocation of resources is determined by a modified Hosios Rule. We then analyze the effect of changes in the macro economic variables on the wage contract and the unemployment rate. We find that private information may increase ...

This paper examines the evolution of immigrant earnings in the United States between 1970 and 2010. There are cohort effects not only in wage levels, with more recent cohorts having lower entry wages through 1990, but also in the rate of wage growth, with more recent cohorts experiencing less economic assimilation. The slowdown in assimilation is partly related to a concurrent decline in the ra...

This paper shows that a small open economy, which suffers from involuntary unemployment, should levy a positive source-based tax on capital income. A revenue-neutral tax reform, which increases the capital tax rate and reduces the labour tax rate will induce firms to substitute labour for capital. Such a tax reform will lower marginal cost of production, increase output, reduce unemployment, an...

The standard derivation of the accelerationist Phillips curve relates expected real wage innation to the unemployment rate and invokes a constant price markup and adaptive expectations to generate the accelerationist price innation formula. Blanchhower and Oswald (1994) argue that microeconomic evidence of a low autoregression coeecient in real wage regressions invalidates the macroeconomic Phi...