labor market institutions and inflation volatility in the euro area despite having had the same currency for many years emu countries still have quite different inflation dynamics in this paper we explore one possible reason country specific labor market institutions giving rise to different inflation volatilities when unemployment insurance schemes differ as they do in emu reservation wages react differently in each country to area wide shocks this implies that real marginal costs and inflation also react differently we report evidence for emu countries supporting the existence of a cross country link over the cycle between labor market structures on the one side and real wages and inflation on the other we then build a dsge model that replicates the data evidence the inflation volatility differentials produced by asymmetric labor markets generate welfare losses at the currency area level of approximately 0 3 of steady state consumption

statistical discrimination and the early career evolution of the black white wage gap this article develops and tests a simple dynamic model of statistical discrimination the model improves on earlier static models both by allowing ex ante uncertainty about worker productivity to be resolved as on the job performance is observed and by generating several testable empirical implications these predictions are tested using a sample of young men from the national longitudinal survey of youth producing mixed evidence for the model the main empirical result is that no black white wage gap exists at labor force entry but that one develops as experience accumulates mainly because blacks reap smaller gains from job mobility

black white differences in schooling investment and human capital production in segregated schools the lower level of school quality available for blacks relative to whites in the segregated era is frequently cited as a primary cause for the currently observed gap in black white average wages the inferior education provided to black children is argued to have caused lower levels of human capital production in black schools than white schools the gap in black white wages can be traced to this gap in human capital similarly the convergence in black and white average wages during the 1960 s and 1970 s may be explained by the steady convergence in black and white school quality and attendance which began in the 1940 s this abstract was borrowed from another version of this item

the ir relevance of real wage rigidity in the new keynesian model with search frictions we explore the role of real wage dynamics in a new keynesian business cycle model with search and matching frictions in the labor market both job creation and destruction are endogenous we show that the model generates counterfactual inflation and labor market dynamics in particular it fails to generate a beveridge curve vacancies and unemployment are positively correlated introducing real wage rigidity leads to a negative correlation and increases the magnitude of labor market flows to more realistic values however inflation dynamics are only weakly affected by real wage rigidity this is because of the presence of labor market frictions which generate long run employment relationships the measure of real marginal cost that is relevant for inflation dynamics via the phillips curve contains a dynamic component that does not necessarily move with real wages

monetary union price level convergence and inflation how close is europe to the usa abstract the pattern of price dispersion across european and us cities from 1990 to 2004 is documented there is a striking decline in dispersion for traded goods prices in europe most of which took place prior to the launch of the euro dispersion in the euro area is now quite close to that of the usa this evidence provides useful facts for future work assessing the importance of various developments in europe harmonization of tax rates convergence of incomes and labor costs liberalization of trade and factor markets and increased coherence of monetary policy

racial discrimination in the labor market theory and empirics we review theories of race discrimination in the labor market taste based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread but no existing model explains the unemployment rate differential models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment at their current state of development models of statistical discrimination based on rational stereotypes have little empirical content it is plausible that models combining elements of the search models with statistical discrimination could fit the data we suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy jel j15 j31 j64 j71

race and human capital while human capital has been used with some success to analyze recent changes in racial income differences scholars have repeatedly pointed to a major empirical problem that appears to severely limit the historical relevanlce and scope of skill based theories as applied to racial questions the challenge they raise is legitimate put simply if measured skill disparities between the races narrowed throughout the twentieth century why did income ratios first begin to converge in the 1960 s in this paper i address this question relying on some unexploited census data by race on education literacy occupations and income using these data that begin with the 1890 census i present new estimates of agespecific relative income positions of black men for all postslavery birth cohorts in addition to reconciling the apparently inconsistent skill and income series these income ratios offer a very different historical record than many economists believe to have been the case to cite a prominent example gunnar myrdal s classic work 1944 saw the economic position of his contemporary black america not only as dismal but made even more so by its sense of hopelessness given the absence of any hint of progress or change while myrdal s pessimism is understandable it appears that even in his day seeds had long been sown that were already permanently altering and improving the relative economic status of black men

job destruction and propagation of shocks this paper considers propagation of aggregate shocks in a dynamic general equilibrium model with labor market matching and endogenous job destruction cyclical fluctuations in the job destruction rate magnify the output effects of shocks as well as making them much more persistent interactions between capital adjustment and the job destruction rate play an important role in generating persistence propagation effects are shown to be quantitatively substantial when the model is calibrated using job flow data incorporating costly capital adjustment leads to significantly greater propagation

fiscal expansions unemployment and labor force participation theory and evidence structural vars indicate that for many oecd countries labor force participation employment and the unemployment rate significantly increase following increases in government expenditures under a variety of specifications and identification schemes fiscal expansions also tend to increase real wages existing models have difficulties in generating such responses we show that the empirical regularities can be reproduced with two additions into a standard new keynesian model with matching frictions a a labor force participation choice and b workers heterogeneity

search frictions real wage rigidities and the optimal design of unemployment insurance abstract in this paper we study the optimal unemployment benefits financing scheme when the economy is subject to labor market imperfections characterized by real wage rigidities and search frictions the us unemployment insurance financing is such that firms are taxed proportionately to their layoffs to finance unemployment benefits using dsge methodology we investigate how policy instruments should interact with labor market imperfections it is shown that wage rigidities in a search and matching environment cause welfare costs especially in the absence of an incentive based unemployment insurance this cost is mainly due to the distorting effect of wage rigidities which generate inefficient separations we show that the optimal unemployment benefits financing scheme corresponding to the ramsey policy offsets labor market imperfections and allows implementation of the pareto allocation the second best allocation brings the economy close to the ramsey allocation the implementation of the optimal policies clearly highlights the role of labor market institutions for short run stabilization

segregated schools and the mobility hypothesis a model of local government discrimination around the turn of the century southern blacks lost the right to vote and discrimination against them by local government officials intensified this paper argues that in the case of the de jure segregated public schools attended by black children the ability of southern blacks to vote with their feet placed limits on local government discrimination

prejudice and wages an empirical assessment of becker s the economics of discrimination we test the predictions from becker s 1957 seminal work on employer prejudice and find that relative black wages a vary negatively with the prejudice of the marginal white in a state b vary negatively with the prejudice in the lower tail of the prejudice distribution but are unaffected by the prejudice of the most prejudiced persons in a state and c vary negatively with the fraction of a state that is black our estimates suggest that one quarter of the racial wage gap is due to prejudice with nontrivial consequences for black lifetime earnings

municipal housekeeping the impact of women s suffrage on public education gains in 20th century real wages and reductions in the black white wage gap have been linked to the midcentury ascent of school quality with a new data set uniquely appropriate to identifying the impact of female voter enfranchisement on education spending we attribute up to one third of the 1920 40 rise in public school expenditures to the nineteenth amendment yet the continued disenfranchisement of black southerners meant white school gains far outpaced those for blacks as a result women s suffrage exacerbated racial inequality in education expenditures and substantially delayed relative gains in black human capital observed later in the century

the role of shocks and institutions in the rise of european unemployment the aggregate evidence two key facts about european unemployment must be explained the rise in unemployment since the 1960s and the heterogeneity of individual country experiences while adverse shocks can potentially explain much of the rise in unemployment there is insufficient heterogeneity in these shocks to explain cross country differences alternatively while explanations focusing on labour market institutions explain current heterogeneity well many of these institutions pre date the rise in unemployment based on a panel of institutions and shocks for 20 oecd nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts

examining asymmetries in the transmission of monetary policy in the euro area evidence from a mixed cross section global var model abstract i estimate the transmission of a common euro area monetary policy shock across individual euro area economies to do so i develop a global var model in which all euro area economies are included individually while at the same time their common monetary policy is modelled as a function of euro area aggregate output growth and inflation the results suggest that the transmission of monetary policy across euro area economies displays asymmetries and that in line with economic theory these are driven by differences in economies structural characteristics in particular euro area economies in which a higher share of aggregate output is accounted for by sectors servicing interest rate sensitive demand exhibit a stronger transmission of monetary policy to real activity similarly even though the evidence is less conclusive euro area economies which feature more real wage and or fewer unemployment rigidities also appear to display a stronger transmission of monetary policy to real activity

performance pay and the white black wage gap we show that the reported tendency for performance pay to be associated with greater wage inequality at the top of the earnings distribution applies only to white workers this results in the white black wage differential among those in performance pay jobs growing over the earnings distribution even as the same differential shrinks over the distribution for those not in performance pay jobs we show that this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks we explore reasons behind our finding focusing on the interactions between discrimination unmeasured ability and selection

inflation persistence and optimal monetary policy in the euro area in this paper we present an optimizing agent model for the euro area to emphasize how the existence of heterogeneity in inflation persistence across regions matters for the design of monetary policy we find supporting evidence of the existence of such a heterogeneity in inflation dynamics across euro area countries in particular based on the estimation of new keynesian phillips curves for five major countries of the euro area we find that inflation in germany has a dominant forward looking component while in the other group of countries inflation show a significant inertial backward looking behavior under this circumstance we study the welfare implications of four monetary policy rules following terms of trade shocks fully optimal optimal inflation targeting hicp targeting and output gap stabilization

vacancy durations a model for employer s search this paper investigates a dutch data set on vacancy durations and numbers of applicants to enquire employers search strategies a nonsequential search process assumes that most vacancies are filled from a pool of applicants which is formed shortly after the posting of the vacancy the time spent on recruiting applicants and the duration of the selection process are estimated with a proportional hazard model via the arrival and attrition rates of applicants

a neoclassical model of the phillips curve relation this paper integrates the modern theory of unemployment with a limited participation model of money and asks whether such a framework can produce correlations like those associated with the phillips curve as well as realistic labor market dynamics the model incorporates both monetary and real shocks the response of the economy to monetary policy shocks is consistent with recent evidence about the impact of these shocks on the economy

separate and unequal in the labor market human capital and the jim crow wage gap competing explanations for the long standing gap between black and white earnings attribute different weight to wage discrimination and human capital differences using new data on local school quality we find that human capital played a predominant role in determining 1940 wage and occupational status gaps in the south despite entrenched racial discrimination in civic life and the lack of federal employment protections the resulting wage gap coincides with the higher end of the range of estimates from the post civil rights era we estimate that truly separate but equal schools would have reduced wage inequality by 29 48

economic value competition and financial distress in the european banking system abstract in this paper we examine the impact of a large number of factors at the bank level liquidity and credit risks asset size income diversification and market power at the industry level banking concentration and macro level real gdp growth on bank financial distress using an unbalanced panel of 308 european commercial banks between 1996 and 2009 the observations falling below a given threshold of the empirical distribution of the shareholder value ratio proxy bank financial distress we employ a panel probit regression and given the presence of overlapping data giving rise to residual autocorrelation we use the bertschek and lechner 1998 robust estimator of the covariance matrix of parameters we show that credit risk liquidity risk and bank market power are the most influential determinants of distressed shareholder value ratio finally we evaluate the model out sample forecasting performance over the 2008 2009 crisis period

finance and international business cycles abstract business cycles are more correlated among countries that have similar financial structures we first document this empirical regularity using oecd data and then build a two country dsge model with financial frictions that replicates it alternative monetary policy regimes and parameter values are explored output co movements increase when the countries involved are linked by a credible exchange rate peg and when they open up to trade they decrease when their financial openness increases the model also accounts for a number of stylized facts of international business cycles such as the positive international correlation of output investment and employment

monetary policy and automatic stabilizers the role of progressive taxation we study the effects of progressive labor income taxation in an otherwise standard new keynesian nk model we show that progressive taxation i introduces a trade off between output and inflation stabilization and affects the slope of the phillips curve ii acts as automatic stabilizer changing the responses to technology shocks and demand shocks and iii alters the prescription for the optimal monetary policy the welfare gains from commitment decrease as labor income taxes become more progressive quantitatively the model reproduces the observed negative correlation between the volatility of output hours and inflation and the degree of progressivity of labor income taxation

non atomistic wage setters and monetary policy in a new keynesian framework this paper extends an otherwise standard new keynesian nk model to allow for the presence of large wage setters building on monetary models from an earlier generation i contribute to the nk literature by adding some new insight it is shown that once the presence of large wage setters is taken into account the degree of wage setting centralization and the aggressiveness of the central bank in stabilizing inflation jointly affect steady state employment because of this interaction the benefits associated with inflation stabilization increase in the centralization of the wage bargaining process

competition and inflation differentials in emu in a monetary union inflation rate differentials may be substantial over the business cycle this paper parameterizes a two country monetary union in which different economic structures in the two countries generate temporary inflation differentials cross country differences are introduced in i the elasticity of demand in the goods markets which cause producers to discriminate prices ii the degree of price inertia and iii the degree of openness or preference for foreign goods in consumption the model is calibrated to reproduce two average large emu countries and it is able to generate such inflation differentials we find the mechanism of price discrimination quantitatively more important than the differences in price inertia moreover under asymmetric shocks differences in the degree of openness such as those observed within the emu can have sizeable effects on the dispersion of inflation rates

do labor market institutions matter for business cycles using panel data of 19 oecd countries observed over 40 years and data on specific labor market reform episodes we conclude that labor market institutions matter for business cycle fluctuations spearman partial rank correlations reveal that more flexible institutions are associated with lower business cycle volatility turning to the analysis of reform episodes wage bargaining reforms increase the correlation of the real wage with labor productivity and the volatility of unemployment employment protection reforms increase the volatility of employment and decrease the correlation of the real wage with labor productivity reforms reducing replacement rates make labor productivity more procyclical

evidence on discrimination in employment codes of color codes of gender there is substantial racial and gender disparity in the american economy as we will demonstrate discriminatory treatment within the labor market is a major cause of this inequality the evidence is ubiquitous careful research studies that estimate wage and employment regressions help wanted advertisements audit and correspondence studies and discrimination suits that are often reported by the news media yet there appear to have been periods of substantial reductions in economic disparity and discrimination for example donohue and heckman provide evidence that racial discrimination declined during 1965 1975 1 gottschalk has produced statistical estimates that indicate that discrimination against black males dropped most sharply between 1965 and 1975 and that discrimination against women declined during the interval 1973 1994 2 but some unanswered questions remain why did the movement toward racial equality stagnate and eventually decline after the mid 1970s what factors are most responsible for the remaining gender inequality what is the role of the competitive process in the elimination or reproduction of discrimination in employment

business cycles unemployment insurance and the calibration of matching models this paper theoretically and empirically documents a puzzle that arises when an rbc economy with a job matching function is used to model unemployment the standard model can generate sufficiently large cyclical fluctuations in unemployment or a sufficiently small response of unemployment to labor market policies but it cannot do both variable search and separation finite ui benefit duration efficiency wages and capital all fail to resolve this puzzle however either sticky wages or match specific productivity shocks can improve the model s performance by making the firm s flow of surplus more procyclical which makes hiring more procyclical too

short term pain for long term gain market deregulation and monetary policy in small open economies abstract this paper explores the effects of labor and product market reforms in a new keynesian small open economy model with labor market frictions and endogenous producer entry we show that it takes time for reforms to pay off typically at least a couple of years this is partly because the benefits materialize through firm entry and increased hiring both of which are gradual processes while any reform driven layoffs are immediate some reforms such as reductions in employment protection increase unemployment temporarily implementing a broad package of labor and product market reforms minimizes transition costs importantly reforms do not have noticeable deflationary effects suggesting that the inability of monetary policy to deliver large interest rate cuts in their aftermath either because of the zero bound on policy rates or because of the membership in a monetary union may not be a relevant obstacle to reform alternative simple monetary policy rules do not have a large effect on transition costs

job finding and separation rates in the oecd abstract we provide a set of comparable estimates of average monthly job finding and separation rates for over 20 oecd countries that can be used for the cross country analysis of labor markets

search and matching frictions and optimal monetary policy abstract a recent literature has merged the new keynesian and the search and matching frameworks which has allowed the former to analyze the joint dynamics of unemployment and inflation this paper analyzes optimal monetary policy in this kind of hybrid framework i show that zero inflation is optimal when all wages are nash bargained in every period and the economy s steady state is efficient in the more realistic case in which nominal wage bargaining is staggered a case against price stability arises in response to real shocks the central bank should use price inflation so as to avoid excessive unemployment volatility and excessive dispersion in hiring rates for a plausible calibration the welfare loss under the zero inflation policy is about three times as large as under the optimal policy

optimal monetary policy rules with labor market frictions abstract this paper studies optimal monetary policy rules in a framework with sticky prices matching frictions and real wage rigidities optimal policy is given by a constrained ramsey plan in which the monetary authority maximizes the agents welfare subject to the competitive economy relations and the assumed monetary policy rule i find that the optimal rule should respond to unemployment alongside with inflation this is so since models with matching frictions unlike standard new keynesian models feature a congestion externality that makes unemployment inefficiently high a strong response to inflation remains optimal while a response to output is always welfare detrimental

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

labor market institutions and aggregate fluctuations in a search and matching model abstract this paper explores the influence of labor market institutions on aggregate fluctuations it uses a dynamic stochastic general equilibrium model characterized by search and matching frictions in the labor market and nominal rigidities in the goods market it finds that firing costs and unemployment benefits can have substantial effects on aggregate fluctuations increasing firing costs decreases the volatility of output employment and job flows due to the reduction in the mass of jobs sensitive to disturbances and lower incentives for firms to hire and fire workers hence firms adjust to shocks mainly through prices causing inflation to become more volatile raising unemployment benefits has the reverse effect on aggregate fluctuations

asymmetric labor market institutions in the emu and the volatility of inflation and unemployment differentials how does the asymmetry of labor market institutions affect the adjustment of a currency union to shocks to answer this question this paper sets up a dynamic currency union model with monopolistic competition and sticky prices hiring frictions and real wage rigidities in our analysis we focus on the differentials in inflation and unemployment between countries as they directly reflect how the currency union responds to shocks we highlight the following three results first we show that it is important to distinguish between different labor market rigidities as they have opposite effects on inflation and unemployment differentials second we find that asymmetries in labor market structures tend to increase the volatility of both inflation and unemployment differentials finally we show that it is important to take into account the interaction between different types of labor market rigidities overall our results suggest that asymmetries in labor market structures worsen the adjustment of a currency union to shocks

understanding black white wage differentials 1960 1990 understanding black white wage differentials 1960 1990 author s james j heckman thomas m lyons petra e todd source the american economic review vol 90 no 2 papers and proceedings of the one hundred twelfth annual meeting of the american economic association may 2000 pp 344 349 published by american economic association stable url http www jstor org stable 117248 accessed 16 08 2008 00 56

german wage moderation and european imbalances feeding the global var with theory german labor market reforms in the 1990s and 2000s are generally believed to have driven the large increase in the dispersion of current account balances in the euro area we investigate this hypothesis quantitatively we develop a 3 region open economy new keynesian model with search and matching frictions from which we derive robust sign restrictions for wage bargaining and matching efficiency shocks which we term wage moderation shocks we impose these restrictions on a global var consisting of germany and 8 emu countries to identify a wage moderation shock in germany our results show that although the german current account was significantly affected by wage moderation shocks their contribution to european current account imbalances was negligible we conclude that the german labor market reforms cannot be the lone driver of european imbalances

education and labor market discrimination using a model of statistical discrimination and educational sorting we explain why blacks get more education than whites of similar cognitive ability and we explore how the armed forces qualification test afqt wages and education are related the model suggests that one should control for both afqt and education when compar ing the earnings of blacks and whites in which case a substantial black white wage differential emerges we reject the hypothesis that differences in school quality between blacks and whites explain the wage and education differentials our findings support the view that some of the black white wage differential reflects the operation of the

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

valuing the vote the redistribution of voting rights and state funds following the voting rights act of 1965 the voting rights act of 1965 called one of the most effective pieces of civil rights legislation in u s history generated dramatic increases in black voter registration across the south we ask whether the increase in black voting rights was accompanied by an increase in blacks share of public spending we exploit a key provision of the act removal of literacy tests at registration for identification employing a triple difference framework over a 20 year period we find that counties with higher black population shares in former literacy test states saw greater increases in both voter turnout and state transfers than comparison counties in non literacy test states a finding that is consistent with models of distributive politics jel codes d72 h7 i2 j15 n32 copyright 2014 oxford university press

divergent inflation rates in emu inflation divergence inflation rates have diverged much more widely than expected among the member states of the emu we show that much of this is attributable to the differential impact on different member states of the weakness of the euro on international currency markets in the early months of the union the balassa samuelson productivity growth effect has not yet played an important role even in respect of the outlier ireland although it will likely be more significant over a longer run especially as the accession countries join patrick honohan and philip lane