What drives endogenous growth in the United States?

This paper estimates whether learning-by-doing effects or cleansing effects of recessions drive the endogenous component of productivity in the United States. Using Bayesian estimation techniques we find that external and internal learning-by-doing effects dominate. We find no evidence for cleansing effects of recessions. Furthermore, the exogenous component of productivity growth is close to the two percent pace

Extensive vs. Intensive Margin in Germany and the United States: Any Differences?

This paper analyzes the role of the extensive vis-à-vis the intensive margin of labor adjustment in Germany and in the United States. The contribution is twofold. First, we provide an update of older U.S. studies and confirm the view that the extensive margin (i.e., the adjustment in the number of workers) explains the largest part in the overall variability in aggregate hours. Second, although the German labor market structure is very different from its U.S. counterpart, the quantitative importance of the extensive margin is of similar magnitude.variance decomposition, extensive and intensive margin, business cycle

Firing costs in a New Keynesian model with endogenous separations

This paper introduces productivity dependent firing costs in an endogenous separation New Keynesian model. By strictly respecting the bonding critique, we show that firing costs tend to increase the performance of the model along the labor market dimension but fail along the persistence dimension. Furthermore, we show that on the one hand the model needs high - unrealistic high - values of the firing costs to generate the Beveridge curve while on the other hand we are not able to find this relation in the data

Firing costs in a business cycle model with endogenous separations

This paper introduces productivity-dependent firing costs into an otherwise standard endogenous separations matching model. We suggest an alternative to the standard fix cost approach and account for empirical evidence emphasizing that firing costs vary across workers. We show that the model with firing costs outperformes the model without firing costs and replicates the empirical facts fairly well. Furthermore, we present cross-country evidence that countries with stricter employment protection have a weaker Beveridge curve relation and surprisingly more volatile job flow rates

Price bargaining, the persistence puzzle, and monetary policy

In the recent New Keynesian literature a standard assumption is that the price for which an intermediate good is sold to the final good firm is equal to the marginal costs of the intermediate good firm. However, there is empirical evidence that this need not to hold. This paper introduces price bargaining into an otherwise standard New Keynesian DSGE model and show that this model performs reasonably well in replicating the observed persistence values. We further discuss the role of those product market imperfections for monetary policy and find a trade-off between stabilizing intermediate or final good inflation. In addition, the Ramsey optimal monetary policy can be approximated reasonably well with a Taylor-type interest rate rule with weights on both inflation rates and output

The intensive margin puzzle and labor market adjustment costs

This paper documents a puzzling fact, namely that there is a significant negative relation between employment protection legislation and the usage of the intensive margin of labor market adjustments. We then make use of a Real Business Cycle model and introduce search and matching frictions as well as adjustment costs along the extensive and the intensive labor market margins. We show that the model is able to replicate the observed pattern, if we assume low firing costs and relatively large hours adjustment costs. Furthermore, the model requires those values to replicate the U.S. business cycle statistics

Reciprocity and matching frictions

We build a RBC endogenous separation matching model and introduce efficiency wages along the lines of Akerlof (1982). While the standard endogenous separation matching model reveals shortcomings in explaining correlations and volatilities jointly, this approach performs reasonably well along both dimensions. The proper introduction of real rigidities can consistently enhance the performance of the (endogenous separation) matching model

Sector-specific productivity shocks in a matching model

Endogenous separation matching models have the shortcoming that they are barely able to replicate the Beveridge curve (i.e. the negative correlation between unemployment and vacancies) and business cycle statistics jointly. This paper builds upon the sectoral shock literature and combines its insights with the standard endogenous separation matching approach. We show that sectoral shocks can generate an aggregate Beveridge curve and perform reasonably well in explaining business cycle facts, especially compared to the one-sector baseline model

Sector-specific productivity shocks in a matching model

Shocks driving the business cycle have different effects on low-skilled and high-skilled workers. This paper studies the effects of temporary and permanent sector-specific shocks in a New Keynesian matching model. We show that temporary sector-specific shocks have reallaction and aggregate effects. Permanent shocks explain wedges in real wages and different performances in labor markets. Furthermore, the model is able to replicate an aggregate Beveridge curve