10 research outputs found
Cross-country differences in unemployment : fiscal policy, unions, and household preferences in general equilibrium
We develop a five period overlapping generations model with individuals who differ by ability and with an imperfect labour market (union wage setting) for the individuals of lower ability. The model explains human capital formation, hours
worked and unemployment within one coherent framework. Its predictions match the differences in the unemployment rate across 12 OECD countries remarkably well. A Shapley decomposition of these differences reveals an almost equal role
for fiscal policy variables and union preferences. As to fiscal policy, differences in unemployment benefits play a much more important role than tax differences. Differences in households’ taste for leisure are unimportant