This paper is motivated by the lack of any obvious relationship between aggregate poverty and unemployment in Great Britain. We derive a framework based on individuals’ risks of unemployment and poverty, and how these vary over the economic cycle. Analysing the British Household Panel Survey for 1991-96, we are able to square the micro evidence that unemployment matters for poverty with the mac...

Extensions of unemployment insurance (UI) benefits have been implemented in response to the Great Recession. This paper measures the effect of these extensions on the unemployment rate using a calibrated structural model featuring job search and consumption-saving decisions, skill depreciation, and UI eligibility. The ongoing UI benefit extensions are found to have raised the unemployment rate ...

Aggregate hours worked per working-age person decreased in Austria by 25% from 1970 to 2005. During the same time period, taxes increased, particularly the effective marginal tax rate on labor income. Using a standard general equilibrium growth model with taxes, I quantitatively assess the role played by the evolution of taxes on the evolution of hours worked in Austria. The model accounts for ...

Unemployment in the OECD: Models and Mysteries This paper compares models used to explain OECD unemployment. The models suggest that the “natural rate of unemployment” has been driven up mainly by wage push factors. Panel data on twenty-two OECD countries are used to investigate the explanatory power of these models over the past two decades. Our estimates reveal that coefficients on key variab...

The question of why the unemployment rate takes a long time before it reverts back to its natural-rate following a negative exogenous shock has been the subject of unremitting interest in macroeconomics. This paper shows that the speed of adjustment to the steady-state unemployment and the degree of risk-aversion in firms are positively related. The reason is that risk-aversion in firms creates...

We incorporate a wage-bargaining structure in a dynamic general equilibrium model and show how this feature changes shortand long-run properties of equilibria compared with a perfectly competitive setting. We discuss how employment, capital and income shares respond to wage-setting shocks and show that adjustment dynamics depend decisively on the magnitude of the elasticity of substitution betw...

We develop a model of retirement and human capital investment to study the effects of tax and retirement policies. Workers choose the supply of raw labor (career length) and also the human capital embodied in their labor. Our model explains a significant fraction of the US-Europe difference in schooling and retirement. The model predicts that reforms of the European retirement policies modeled ...

Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We propose a new calibration strategy of the standard model that uses data on the cost of vacancy creation and cyclicality of wages to identify the two key parameters the value of non...

Idiosyncratic productivity shocks induce larger adjustments to hiring than aggregate shocks, because general equilibrium effects on search frictions and wages partially offset the latter. When firms cannot disentangle the two shocks, they attribute aggregate disturbances partly to idiosyncratic factors and to that extent, respond more aggressively. This translates into increased aggregate volat...

We provide empirical evidence on the nature of spatial externalities in a matching model for the UK. We use a monthly panel of outflows, unemployment and vacancy stocks data from the registers at Jobcentres in the UK; these are mapped on to travel-to-work areas. We find evidence of significant spill-over effects that are generally in line with the predictions of theory. For example, we find tha...