Policy Analysis in a Matching Model with Intensive and Extensive Margins
The large differences in hours of work across industrialized countries reflect large differences in both employment to population ratios and hours per worker. We imbed the canonical model of labor supply into a standard matching model to produce a model in which both the intensive and extensive margins are operative. We then assess the implications of several policies for changes along the two margins. Firing taxes and entry barriers both lead to changes in hours and employment in opposite directions, while tax and transfer policies lead to decreases in both employment and hours per worker.
An earlier version of this paper was presented at the Conference on Search and Matching, held at UQAM, July 2006. We thank conference participants for useful suggestions. Rogerson acknowledges financial support from the NSF. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Lei Fang & Richard Rogerson, 2009. "Policy Analysis In A Matching Model With Intensive And Extensive Margins," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1153-1168, November. citation courtesy of