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Long-Run Inflation-Unemployment Dynamics: The Spanish Phillips Curve And Economic Policy, Marika Karanassou, Hector Sala, Dennis Snower
Long-Run Inflation-Unemployment Dynamics: The Spanish Phillips Curve And Economic Policy, Marika Karanassou, Hector Sala, Dennis Snower
Dennis Snower
This paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call “frictional growth”, i.e. the interaction between money growth and nominal frictions. After presenting theoretical models of this phenomenon, we construct an empirical model of the Spanish economy and, in this context, we evaluate the long-run in‡ation-unemployment tradeo¤ for Spain and examine how recent policy changes have a¤ected it.
Can Insider Power Affect Employment?, Dennis Snower, Pilar Diaz-Vazquez
Can Insider Power Affect Employment?, Dennis Snower, Pilar Diaz-Vazquez
Dennis Snower
Do firms reduce employment when their insiders (established, incumbent employees) claim higher wages? The conventional answer in the theoretical literature is that insider power has no in‡uence on employment, provided that the newly hired employees (entrants) receive their reservation wages. The reason given is that an increase in insider wages gives rise to a countervailing fall in reservation wages, leaving the present value of wage costs unchanged. Our analysis contradicts this conventional answer. We show that, in the context of a stochastic model of the labor market, an increase in insider wages promotes firing in recessions, while leaving hiring in …
Labor Market Institutions And Macroeconomic Shocks, Yu-Fu Chen, Dennis Snower, Gylfi Zoega
Labor Market Institutions And Macroeconomic Shocks, Yu-Fu Chen, Dennis Snower, Gylfi Zoega
Dennis Snower
Macroeconomic shocks and labour-market institutions jointly determine employment growth and economic performance. The effect of shocks depends on the nature of these institutions and the effect of institutional change depends on the macroeconomic environment. It follows that a given set of institutions may be appropriate in one epoch and not in another. We derive a dynamic model of labour demand in which the effect of firing costs on labour demand depends on the macroeconomic environment: When the level of macroeconomic activity is expected to drop and/or the trend rate of productivity growth is small, a rise in firing costs affects …
Unemployment In The European Union: A Dynamic Reappraisal, Marika Karanassou, Hector Sala, Dennis Snower
Unemployment In The European Union: A Dynamic Reappraisal, Marika Karanassou, Hector Sala, Dennis Snower
Dennis Snower
This paper examines the movements in EU unemployment from two perspectives: (a) the NRU/NAIRU perspective, in which unemployment movements are attributed largely to changes in the long-run equilibrium unemployment rate and (b) the chain-reaction perspective, in which unemployment movements are viewed as the outcome of the interplay between labor market shocks and prolonged lagged adjustment processes. We present an empirical analysis that distinguishes between unemployment movements arising from long-run equilibrium changes and those arising from lagged intertemporal adjustments. This analysis has far-reaching policy implications. Our analysis shows that the rise in EU unemployment over the 1970s and first part of …