TY - JOUR
T1 - Macroeconomic policy lessons of labor market frictions
AU - Yashiv, Eran
N1 - Funding Information:
I have benefited from useful conversations with Jordi Gali and from comments by two anonymous referees, Dani Tsiddon, Michel Strawcyznski and seminar participants at the Hebrew University and Tel Aviv University. I thank Michael Ornstein for able research assistance. I gratefully acknowledge research support by the Israel Science Foundation (grant 786) Any errors are my own.
PY - 2004/4
Y1 - 2004/4
N2 - The paper explores the consequences of macroeconomic policy for labor market outcomes in the presence of frictions. It shows how policy may be useful in over-riding frictions, as well as how it might generate adverse outcomes. A partial-equilibrium, empirically grounded model is used to simulate policy effects. The key results are that policy has effects on the stochastic behavior of key variables - measures that reduce unemployment also reduce its persistence and increase the volatility of vacancies. Hiring subsidies and unemployment benefits have substantial effects on labor market outcomes, while employment subsidies or wage tax reductions are not very effective policy instruments.
AB - The paper explores the consequences of macroeconomic policy for labor market outcomes in the presence of frictions. It shows how policy may be useful in over-riding frictions, as well as how it might generate adverse outcomes. A partial-equilibrium, empirically grounded model is used to simulate policy effects. The key results are that policy has effects on the stochastic behavior of key variables - measures that reduce unemployment also reduce its persistence and increase the volatility of vacancies. Hiring subsidies and unemployment benefits have substantial effects on labor market outcomes, while employment subsidies or wage tax reductions are not very effective policy instruments.
KW - Beveridge curve
KW - Business cycles
KW - Labor market frictions
KW - Macroeconomic policy
KW - The natural rate of unemployment
UR - http://www.scopus.com/inward/record.url?scp=1542435451&partnerID=8YFLogxK
U2 - 10.1016/S0014-2921(03)00071-0
DO - 10.1016/S0014-2921(03)00071-0
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AN - SCOPUS:1542435451
SN - 0014-2921
VL - 48
SP - 259
EP - 284
JO - European Economic Review
JF - European Economic Review
IS - 2
ER -