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This paper presents a theory of the labor market matching process in terms of incentive-based, two-sided search among heterogeneous agents. The matching process is decomposed into its two component stages: the contact stage, in which job searchers make contact with employers, and the selection stage, in which they decide whether to match. We construct a theoretical model explaining two-sided selection through microeconomic incentives. Firms face adjustment costs in responding to heterogeneous variations in the characteristics of workers and jobs. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. Our calibrated model for the United States can account for important empirical regularities, such as the large volatilities of labor market variables, that the conventional matching model cannot.

Facing the recent German debate on the minimum wage, this paper analyses theoretical effects of minimum wages on employment and wage distribution under a frictional setting. I??review new developments in search theory and discuss the influence of the minimum wage on wages and employment under each setting. Therefore, a major theoretical focus of the paper is the integration of heterogeneity on both sides of the market in equilibrium search models. In frictional models, minimum wages are generally binding and redistribute rents from firms to workers. Employment effects are more diverse. In the homogeneous case where workers and firms are identical, minimum wages do not affect employment, while in the heterogenous case theoretical results are mixed. There is no unique connection between unemployment and minimum wages, and the effect can be negative, zero or even positive. A positive effect can arise from a reaction in labor supply. However, the most advanced models, integrating heterogeneity on both sides of the market, seem to support the hypothesis that an increase in the minimum wage generally leads to an increase in unemployment as well. In this case, a social planner faces a trade off between redistribution of rents and unemployment.

This paper constructs a theory of the coexistence of fixed-term and permanent employment contracts in an environment with ex-ante identical workers and employers. Workers under fixed-term contracts can be dismissed at no cost while permanent employees enjoy labor protection. In a labor market characterized by search and matching frictions, firms find it optimal to discriminate by offering some workers a fixedterm contract while offering other workers a permanent contract. Match-specific quality between a worker and a firm determines the type of contract offered. We analytically characterize the firm’s hiring and firing rules. Using matched employer-employee data from Canada, we estimate the model’s parameters. Increasing the level of firing costs increases wage inequality and decreases the unemployment rate. The increase in inequality results from a larger fraction of temporary workers and not from an increase in the wage premium earned by permanent workers., Les auteurs élaborent un cadre théorique pour expliquer la coexistence de contrats à durée déterminée et de contrats de travail permanents dans un milieu où travailleurs et employeurs sont a priori identiques. Les travailleurs temporaires sont licenciables sans frais, alors que les employés permanents jouissent d’une protection d’emploi. Sur un marché du travail caractérisé par des frictions dans la prospection et l’appariement, les entreprises jugent optimal d’opérer des distinctions en proposant à certains travailleurs un contrat à durée déterminée et à d’autres un contrat permanent. La qualité intrinsèque de l’appariement entre le travailleur et l’entreprise motive le choix du contrat offert. Les auteurs définissent par analyse les règles d’embauche et de congédiement des entreprises. Les paramètres du modèle sont estimés à l’aide de données canadiennes relatives au jumelage employeurs-salariés. La hausse des coûts de licenciement accroît l’inégalité des salaires et réduit le chômage. Cette montée de l’inégalité est causée par la présence d’une plus grande proportion de travailleurs temporaires et non par la majoration du surplus de rémunération octroyé aux travailleurs permanents.

Globalization has entered a new stage, with new and varying constellations of winners and losers and thus, calls for a new policy paradigm. In contrast to the traditional way of thinking - the welfare state redistributes purchasing power to the disadvantaged to support them in the event of adverse shocks - now workers must be made more adaptable and be encouraged to stabilize themselves if hurt from globalization. This dissertation examines several labour market policies with various incentive models of the labour market, which explain the microeconomic decisions relevant to the transitions in the labour market in terms of the incentives that economic agents face. To fulfil its new role the following three reform policies for the welfare state are analysed: Unemployment accounts, employment subsidies and flexicurity. Finally, a new modelling strategy of two-sided search with frictions and heterogeneities, which is able to account for empirical stylized facts, is proposed for future policy analysis and prediction. Die neue Phase der Globalisierung, die immer neue und wechselnde Konstellationen von Gewinnern und Verlierern der Globalisierung hervorbringt, fordern nach einem neuen Politikmuster. Im Gegensatz zum traditionellen Denkansatz - der Wohlfahrtsstaat verteilt Kaufkraft an die benachteiligten um - müssen Arbeitnehmer jetzt anpassungsfähiger werden und deart unterstützt werden, dass sie sich selbst stabilisiern können, wenn sie zu Globalisierungsverlierern werden. Diese Dissertation behandeln verschiedene Arbeitsmarktpolitiken mit mehreren anreizbasierten Arbeitsmarktmodellen, die die mikroökonomischen Entscheidungen der Agenten in Bezug auf ihre Übergänge zwischen Abreitsmarktzuständen durch die Beschäftigungsanreize erklären. Es werden drei Reformmaßnahmen analysiert, die der neuen Rolle des Wohlfahrtsstaates gerecht werden: Beschäftigungskonten, Beschäftigungssubventionen und Flexicurity. Abschließend wird ein neuer Modellierungsansatz mit beidseitigem Suchverhalten, Friktionen und Heterogenitäten für zukünftige Politikanalyse und Vorhersage präsentiert, der empirische Fakten replizieren kann.

A labor matching model with nominal rigidities can match short-run movements in labor's share with some success. However, it cannot explain much of the behavior of employment, vacancies, and job flows in postwar US data without resorting to additional shocks beyond monetary policy and productivity shocks. In particular, the model suggests that monetary policy shocks can account for only a small portion of postwar fluctuations, except for the Volcker and late-1940s episodes. Productivity shocks can account for some of the pattern in labor's share and in employment between the late 1960s and the early 1980s. Based on the timing of observed fluctuations in interest rates, inflation, and productivity, it appears that the vast majority of observed fluctuations in the real economy remain unexplained by standard real and nominal shocks.

We introduce search and matching unemployment into a model of trade with differentiated goods and heterogeneous firms. Countries may differ with respect to size, geographical location, and labor market institutions. Contrary to the literature, our single-sector perspective pays special attention to the role of income effects and shows that bad institutions in one country worsen labor market outcomes not only in that country but also in its trading partners. This spill-over effect is conditioned by trade costs and country size: smaller and/or more centrally located nations suffer less from inefficient policies at home and are more heavily affected from spill-overs abroad than larger and/or peripheral ones. We offer empirical evidence for a panel of 20 rich OECD countries. Carefully controlling for institutional features and for business cycle comovements between countries, we confirm our qualitative theoretical predictions. However, the magnitude of spill-over effects is larger in the data than in the theoretical model. We show that introducing real wage rigidity can remedy this problem.

"While previous research on temporary employment has shown that certain labour market groups are more likely than others to enter this kind of inferior employment, there has been only little research on the question to what extent these allocation patterns have changed over time. Against the background of pervasive structural and institutional changes that affected the German labour market since the beginning of the 1990s there are reasons to believe that allocation patterns have changed as well. However, on a theoretical level there are different views regarding the quality of these changes. Whereas some scholars argue that social inequality is enhanced along the existing lines of social division, others maintain that risks are less and less socially structured. To evaluate this question empirically we use data from the German Mikrozensus for the period from 1989 to 2005. The analysis reveals that, first, on the aggregate level the overall share of temporary employment has only slightly increased during that time period. Second, as indicated by the results, particularly those individuals belonging to groups that already have had a weak labour market position were increasingly allocated to temporary jobs. Third, contrary to the thesis of a de-structuration of social inequality, the findings reveal no decline in the overall importance of 'classical' determinants of temporary employment relationships." (author's abstract)

This paper characterizes the optimal redistributive taxation when individuals are heterogeneous in two exogenous dimensions: their skills and their values of non-market activities. Search-matching frictions on the labor markets create unemployment. Wages, labor demand and participation are endogenous. The government only observes wage levels. Under a Maximin objective, if the elasticity of participation decreases along the distribution of skills, at the optimum, the average tax rate is increasing, marginal tax rates are positive everywhere, while wages, unemployment rates and participation rates are distorted downwards compared to their laissez-faire values. A simulation exercise confirms some of these properties under a general utilitarian objective. Taking account of the wage-cum-labor demand margin deeply changes the equity-efficiency trade-off.

This paper combines matching frictions with e¢ ciency wages to deter shirking in a model that is estimated for the USA and the UK to derive the underlying structural parameters. Methods robust to weak instruments are used to show that, for both countries, both matching frictions and efficiency wages play a significant role in enabling the model to fit the data even with non-prescriptive formulations for wage determination. The results indicate that adding an efficiency wage element to matching frictions may be a better way to fit the data than simply searching for an alternative wage formulation.

The thesis analyzes monetary and labor policies under different market frictions. In the first part several versions of a microfounded dynamic general equilibrium model with monopolistic competitors in the product and/or labor market are derived and simulated. First of all, the monetary persistence of a pure price staggering economy is compared to a pure wage staggering economy under different labor market structures (by means of a newly proposed persistence measure) and interactions are explored. Secondly, the thesis simulates the effects of real wage rigidities in a disinflation experiment non-linearly. Thereby, caveats of the conventionally used log-linearization are shown. The second part of the thesis develops a dynamic microfounded labor market framework with insider wage bargaining, labor turnovers costs and tax distortions. The calibrated model is used in order to analyze different labor market policies. The addressed questions include the labor market development in East Germany after unification, the existence of unemployment traps, their influence on labor market persistence and policy effectiveness, and the optimal targeting of employment subsidies in terms of their employment, equity and welfare implications.

Assuming that job search efficiency decreases with distance to jobs, workers' location in a city depends on spatial elements such as commuting costs and land prices and on labour elements such as wages and the matching technology. In the absence of moving costs, we show that there exists a unique equilibrium in which employed and unemployed workers are perfectly segregated but move at each employment transition. We investigate the interactions between the land and the labour market equilibrium and show under which condition they are interdependent. When relocation costs become positive, a new zone appears in which both the employed and the unemployed co-exist and are not mobile. We demonstrate that the size of this area goes continuously to zero when moving costs vanish. Finally, we endogeneize search effort, show that it negatively depends on distance to jobs and that long and short-term unemployed workers coexist and locate in different areas of the city. J.E.L. Classification: E24, J41, R14

Die Kritik an der Arbeitsmarkt- und Beschäftigungspolitik in der Bundesrepublik Deutschland steht im Mittelpunkt des Beitrags. Aus soziologischer Sicht wird hinterfragt, was die Bilanz des Arbeitsmarktes aussagt und ob vom Ende der Arbeitsgesellschaft gesprochen werden kann. Es wird aufgezeigt, dass die Kraft der Arbeitsmarktpolitik zur Entlastung des Marktes schwindet und somit das Ausmaß der Arbeitslosigkeit sichtbarer wird. Die Unterbeschäftigung in Ost- und Westdeutschland bleibt in etwa gleich, da sich das Erwerbspersonenpotenzial in Ostdeutschland sich in umgekehrter Richtung entwickelt zu der im Westen. Es wird postuliert, dass 'apokalyptische Konzepte vom Ende der Arbeitsgesellschaft' ihre Ursache überwiegend in der mangelnden Wahrnehmung empirischer Arbeitsmarktdaten haben. Es wird dargelegt, dass in Deutschland eine lange Tradition der Geringschätzung von Kopfarbeit besteht, die es zu verändern gilt. Zudem wird der Debatte um den 'angeblich niedergehenden Standort Deutschland' nachgegangen, die als Machtkampf um die Verteilung des gemeinsam erwirtschafteten Reichtums rekonstruiert wird. Es wird kritisiert, das die Beschäftigungspolitik der Bundesregierung in weiten Teilen einer rein angebotsorientierten Wirtschaftspolitik folgt, die alle Kraft darauf richtet, die Unternehmen bei ihren Kosten zu entlasten, in der Hoffnung, dass diese mehr Arbeitsplätze bereit stellen werden. Dieses Konzept wird als Perspektive ohne Vision verworfen. (IAB)

This paper provides a simple matching model in which unemployed workers and employers in large firms can be matched together through social networks or through more "formal" methods of search. We show that networks do not necessarily add new externalities and that some results previously obtained in the literature are questionable. Nevertheless, social networks can, in some case, substitute for labor market and this crowding-out effect may be socially costly. We show that a policy increasing the number of workers embedded in the social networks can increase the unemployment rate and decrease workers welfare. Since it is mostly the firms which benefit from larger social networks, transfers from the firms to the workers are necessary to make larger access to the social networks efficient.

"Dem neu-keynesianischen langfristigen Gleichgewichtskonzept einer durch Strukturfaktoren des Arbeitsmarktes, der Lohnverhandlungen und der sozialen Sicherungssysteme bestimmten inflationsstabilen Arbeitslosenquote (NAIRU) wird in diesem Beitrag eine post-keynesianische Interpretation der NAIRU gegenübergestellt. In den neu-keynesianischen Modellen müssen wirksame Realkasseneffekte oder symmetrische Reaktionen und Wirkungen der Geldpolitik angenommen werden, damit sich die Güternachfrage langfristig an das mit der NAIRU kompatible Niveau des Güterangebots anpasst. Diese Annahmen sind für eine Geldwirtschaft unhaltbar, in der Geld über Gläubiger-Schuldner-Kontrakte entsteht und in der von Zinssatz und Profiterwartungen gesteuerte Investitionen die wesentliche Determinante von Produktion und Beschäftigung sind. In einem post-keynesianischen Modell stellt die NAIRU daher lediglich eine kurzfristige Beschäftigungsgrenze dar, die durch inflationsauslösende Verteilungsansprüche gegeben ist und durch die Geldpolitik erzwungen wird. Liegt die durch die effektive Güternachfrage bestimmte Arbeitslosenquote oberhalb der NAIRU, so existieren kurzfristig keine Anpassungsmechanismen. Langfristig folgt die NAIRU jedoch der tatsächlichen Arbeitslosenquote und wird damit durch die Entwicklung der effektiven Nachfrage bestimmt. Hierfür werden verschiedene Kanäle identifiziert. Es wird zudem gezeigt, dass effektiv koordinierte Lohnverhandlungssysteme sehr viel besser als restriktive Geldpolitiken in der Lage sind, die Inflationsrate bei hoher Beschäftigung zu stabilisieren. Effektiv koordinierte Tarifverhandlungssysteme haben zudem den großen Vorteil, dass sie eine Stabilisierung der Inflationsrate auch bei sinkender Beschäftigung ermöglichen und so ein unmittelbares Abgleiten der Ökonomie in makroökonomisch schädliche Deflationsprozesse verhindern können." (Autorenreferat) "In this paper the New-Keynesian long run equilibrium view of a non-accelerating-inflation-rate-of-unemployment (NAIRU) determined by structural characteristics of the labour market, wage bargaining institutions and social benefit systems is challenged by a Post-Keynesian view. New-Keynesian models have to assume real balance effects or symmetric reactions and effects of monetary policies in order to make effective demand for goods adjust to a level of supply compatible with the NAIRU. These effects, however, cannot be taken for granted in a monetary production economy in which money derives from creditor-debtor relations and in which investment determined by profit expectations and a monetary interest rate is the main force of effective demand. Therefore, in a Post-Keynesian model the NAIRU can only be interpreted as a short run barrier to employment arising from inflation fuelled by distribution conflict, which is enforced by monetary policies. When actual unemployment exceeds the NAIRU there are no adjustment mechanisms in the short run. In the long run, however, the development of the NAIRU follows actual unemployment and hence effective demand. Different adjustment channels are identified. It is also shown that effective coordination of wage bargaining is a better means to stabilise inflation rates in the face of high and rising employment compared to restrictive monetary policies. Whenever employment decreases in periods of economic downturns, effective wage bargaining coordination also allows for stabilisation of inflation and may therefore prevent the economy from sliding into deep deflationary recessions." (author's abstract)

This paper investigates the effects of labor market integration, in the form of worker mobility, in a model with long-term labor contracts that lead to wage rigidities and unemployment. Reflecting the interdependence of regional labor markets, we develop a general-equilibrium framework where the contract structure is simultaneously determined in all regions. It is shown that increased mobility leads to more flexible labor market institutions in which firms can more easily vary the level of employment in response to fluctuations in demand. Economic integration is potentially Pareto-improving but, in the absence of a system of compensation, workers are harmed by greater labor mobility while the owners of firms benefit from higher profits.

We analyse labor market dynamics with an agent based model, which replicates a set of stylized facts in the labor market as well as aggregate regularities. We are able to reproduce the Beveridge curve, job creation and destruction flows, a persistent unemployment level, and wages stickiness. On the aggregate level, we observe a self-enforcing process of real income growth and average productivity growth. Model simulations allow us study the role of dynamic interactions among agents -individuals and firms- in a changing environment shaped by institutions. The key features are the microfoundations of the processes governing the labor market, such as job search by individuals, and matching and bargaining among firms and potential employees.

This paper provides a critique of the ?unemployment invariance hypothesis,? according to which the behavior of the labor market ensures that the long-run unemployment rate is independent of the size of the capital stock, productivity, and the labor force. Using Solow growth and endogenous growth models, we show that the labor market need not contain all the equilibrating mechanisms to ensure unemployment invariance and that other markets may perform part of the equilibrating process as well. By implication, policies that stimulate investment and R&D and policies that affect the size of the labor force may influence the long-run unemployment rate. Layard-Nickell-Jackman ?invariance condition? for labor market systems. This condition is meant to ensure that unemployment is not trended in response to growth in the capital stock, the labor force, or productivity.

Consider a labour market with heterogeneous workers. Firms recruit workers by fixing a hiring standard and a wage offer simultaneously. A more demanding hiring standard necessitates a better wage offer in order to attract enough qualified applicants. As a result, an efficiency wage effect is obtained. An equilibrium emerges which does not clear the labour market. The wage level depends on structural characteristics of labour supply, such as heterogeneity and mobility of the workers. The model is contrasted with prevailing efficiency wage theories, and policy implications are also discussed.

We examine wage bargaining when employers and labor unions do not always take all general equilibrium effects into account but learn a steady state. If agents do hardly consider general equilibrium effects, low real wages and low unemployment results. With an intermediate view, when partial equilibrium effects are taken into account, high real wages and unemployment results, which may explain the persistence of high unemployment in Europe. If all general equilibrium effects are incorporated at once, again low real wages and low unemployment results. We thus obtain a hump-shaped relationship between the extend of feedback effects incorporated by the bargaining parties and real wages or unemployment.

We examine wage-bargaining in a two-sector economy when employers and labor unions in each sector are not always aware of all general equilibrium feedback effects. We show analytically that if agents only consider labor demand effects, low real wages and low unemployment result. With an intermediate view, i.e. when partial equilibrium effects within a sector are taken into account, high real wages and unemployment result. If all general equilibrium effects are considered at once, low real wages and low unemployment again result. The assumption that unions and employers? federations are not able to incorporate all feedback effects from other sectors may explain the persistence of high unemployment in Europe.

Based on a model with imperfectly competitive labor and product markets the real consequences of labor market shocks for economies with either an earnings-related or flatrate unemployment compensation system are considered. A distinctive feature of the analysis is the comparison of both unemployment compensation systems in a two-country setting. It is demonstrated that the performance of a system with earnings-related or flat-rate unemployment benefits depends on whether the labor market shock is provoked in the home country or originates from abroad. We also point out how our results extend to two-tier unemployment compensation systems which differ with respect to the relative importance of earnings-related and flat-rate benefits.

Standard economic wisdom generally stresses the benefits of increased competition on the product market. This paper proposes a model of monopolistic competition with an endogenous determination of workers flows in and out of unemployment, where wages are determined according to an efficiency wage mechanism. We show that an increase in product market competition boosts the hiring rate as well as the separation rate. Hence, the efficiency wage schedule compatible with more competition shifts upward. An adverse effect on workers? incentive is at work which pushes real wages up to the point that increased competition may indeed generate employment losses rather than gains.

We formulate an efficiency wage model with on-the-job search where wages depend on turnover and employers may use information on whether the searching worker is employed or unemployed as a hiring criterion. We show theoretically that ranking of job applicants by employment status affects both the level and the persistence of unemployment and numerically that these effects may be substantial. More prevalent ranking in Europe compared to the US (because of more rigid wage structures etc.) could potentially help to explain the high and persistent unemployment in Europe.

Labor market frictions are not the only possible factor responsible for high unemployment. Credit market imperfections, driven by microeconomic frictions and impacted upon by macroeconomic factors such as monetary policy, could also be to blame. This paper shows that labor and credit market imperfections interact in a complementary way - which may explain why European and US unemployment differ so much when labor markets have become more similar at the margin in Europe and the US. To develop this idea, we build a search model that treats credit and labor market imperfections in a symmetrical way. We introduce specificity in credit relationships, and assume that credit to potential entrepreneurs is rationed due to endogenous search frictions, in the spirit of Diamond (1990). These imperfections mirror the job search frictions that we introduce, – la Mortensen- Pissarides (1994), in the labor market.

It is frequently argued that pure government-mandated severance transfers by the employer to the worker have neither employment nor welfare effect because they can be offset by private transfers from the worker to the employer. In this paper, using a dynamic search and matching model a la Mortensen and Pissarides (1994), we show that it may be not any more the case if labor contracts are incomplete and can be renegotiated by mutual agreement only. Indeed, we show that increases in high severance payments are likely to decrease unemployment but systematically decrease welfare and raise inequality. Moreover, it can be understood that insiders try to get high severance payments through political channels, although they do not fight for such a type of advantage at the firm level.

Der Band enthält die Referate des Kontaktseminars 1978 des IAB, das unter der wissenschaftlichen Leitung des Instituts für sozialwissenschaftliche Forschung, ISF München, an der Universität München durchgeführt wurde. "Die Veröffentlichung bringt im ersten Teil eine theoretische Darstellung des Segmentationsansatzes, im zweiten die mit ihm konkurrierenden Theoriestücke und empirischen Befunde, um dann im dritten Teil die arbeitspolitischen Folgerungen zu ziehen, die erst die Tragfähigkeit und die Abhilfeleistung der Segmentationssicht erweisen können." (IAB)