TY  - JOUR
AU  - Haan,Wouter Den
AU  - Haefke,Christian
AU  - Ramey,Garey
TI  - Shocks and Institutions in a Job Matching Model
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8463
PY  - 2001
Y2  - September 2001
UR  - http://www.nber.org/papers/w8463
L1  - http://www.nber.org/papers/w8463.pdf
N1  - Author contact info:
Wouter J. den Haan
Department of Economics
University of Amsterdam
Roetersstraat
1017 RS  Amsterdam
Netherlands
Tel: +31(0)205255237
E-Mail: wjdenhaan@gmail.com

Christian Haefke
Institute for Advanced Studies
Department of Economics
Stumpergasse 56
A-1060 Vienna
Austria
Tel: +34 653 248 298
Fax: +34 93 542 1925
E-Mail: christian.haefke@ihs.ac.at

Garey Ramey
Department of Economics, 0508
University of California, San Diego
La Jolla, CA   92093-0508
Tel: 619/534-5721;  gramey@weber.ucsd.edu
E-Mail: gramey@ucsd.edu
AB  - This paper explains the divergent behavior of European and US unemployment rates using a job market matching model of the labor market with an interaction between shocks and institutions. It shows that a reduction in TFP growth rates, an increase in real interest rates, and an increase in tax rates leads to a permanent increase in unemployment rates when the replacement rates or initial tax rates are high, while no increase in unemployment occurs when institutions are 'employment friendly.' The paper also shows that an increase in turbulence, modeled as an increased probability of skill loss, is not a robust explanation for the European unemployment puzzle in the context of a matching model with both endogenous job creation and job destruction.
ER  -