Arnaud Chéron

The Phillips and Beveridge curves revisited

This paper studies the cyclical labor market properties of a model wich aims to account for the Phillips and Beveridge curves. Monopolistic competition and sticky prices on the goods market are introduced in a labor market search model disturbed by both technological and money supply shocks. We explain the specific propagation mechanisms on the labor market related to money supply shocks and show that they help to understand aggregate labor market dynamics.

Age-Dependent Employment Protection

This paper examines the age-related design of firing taxes by extending the theory of job creation and job destruction to account for a finite working life-time. We first argue that the potential employment gains related to employment protection are high for older workers, but higher firing taxes for these workers increase job destruction rates for the younger generations. On the other hand, age-decreasing firing taxes can lead to lower job destruction rates at all ages. Furthermore, from a normative standpoint, because firings of older (younger) workers exert a negative (positive) externality on the matching process, we find that the first best age-dynamic of firing taxes and hiring subsidies is typically hump-shaped. Taking into account distortions related to unemployment benefits and bargaining power shows the robustness of this result, in contradiction with the existing policies in most OECD countries.

Wealth effect on labor market transitions

Does wealth matter for labor market transitions? This paper aims at giving a quantitative answer to this question. Econometric reduced-form estimates on French panel data provide evidence of a significant wealth effect on the extensive margin of labor supply. Both unemployment duration and job quits rise with holdings of short-term liquid assets. This evidence gives support to the recent development of quantitative dynamic equilibrium search models incorporating precautionary savings. We consider such a model calibrated on French data and focus on the role of the option value of search and the disutility of working. In addition, we pay attention to the important interaction between the intensive and the extensive margins of labor supply. (Copyright: Elsevier)

Life-Cycle Equilibrium Unemployment

This paper extends the job creation–job destruction approach to the labor market to take into account a deterministic finite horizon. As hirings and separations depend on the time over which investment costs can be recouped, the life-cycle setting implies age-differentiated labor-market flows. While search by the unemployed falls with age, the separation rate is rather U-shaped over the life cycle. Worker heterogeneity in the context of undirected search implies an intergenerational externality, which is not eliminated by the Hosios condition. We show that age-specific policies are required to attain the first-best allocation.

Sunspots and the Business Cycle in a Finance Constrained Economy

Abstract This paper examines the cyclical properties of a finance constrained economy populated by two classes of households with heterogeneous preferences and featuring social increasing returns-to-scale. The model exhibits indeterminacy for externalities mild enough so that the labor demand curve is downward sloping. Furthermore, simulation results show that endogenous fluctuations driven by expectations are quantitatively relevant. In opposition to standard Real Business Cycles and sunspot models with single-type of households, our finance constrained economy reveals to be able to mimic both an acyclical pattern of the real wage and strong procyclical movements of aggregate consumption. Journal of Economic Literature Classification Numbers: E2, E32.

Labor–market search and real business cycles: Nash bargaining vs. fair wage

Abstract This paper modifies the standard labor market search model with Nash bargaining for a wage determination scheme which relies on efficiency wage theories. More precisely, the equilibrium wage rests on the gift-exchange motivation. It is shown that the combination of search frictions and fair wage hypothesis allows a business cycle model to replicate the Dunlop–Tarshis observation without requiring a second source of impulses.

Labour Market Institutions and Technological Employment

Our paper seeks to gain insights into the effect of labour market institutions on the dynamics of the labour market during the diffusion process of new technologies. We develop an endogenous job destruction matching framework, with heterogeneous workers, where the segmentation of the labour market between workers having the required ability to do a technological job and the rest of the workers is endogenous. The dynamics of this segmentation may follow a monotonous decreasing path or a non-monotonous U-shaped path depending on the unemployment benefit system. If benefits are generous, we are in the U-shaped case.

Inefficient Job Destructions and Training with Hold‐up

This paper develops an equilibrium search model with endogenous job destructions and where firms decide at the time of job entry how much to invest in match-specific human capital. We first show that job destruction and training investment decisions are strongly complementary. It is possible that there are no firings at equilibrium. Further, training investments are confronted to a hold-up problem making the decentralized equilibrium always inefficient. We show therefore that both training subsidies and firing taxes must be implemented to bring back efficiency.

The Role of Institutions in Transatlantic Employment Differences: A Life-Cycle View

Our objective in this paper is to show, by adopting a life-cycle unemployment equilibrium approach, that labor market institutions such as unemployment benefits, employment protection and mandatory retirement age have an age-differentiated impact which can explain age-differentiated employment gaps between the US and French economies. Whereas the employment rates are quite similar for middle-aged workers, weaker rotations on the labor market lead to lower employment rates for younger workers. Moreover, the closer to 60 the retirement age, the lower the employment rate for workers aged between 50 and 59.

LIQUIDITY CONSTRAINTS, HETEROGENEOUS HOUSEHOLDS AND SUNSPOT FLUCTUATIONS

This paper is concerned with the empirical relevance of indeterminacy and sunspots in explaining the business cycle. It argues that financial constraints provide a propagation mechanism able to generate business cycle facts observed in data in response to sunspot shocks. This point is demonstrated using an equilibrium business cycle model featuring heterogeneous households, endogenous labor supply and liquidity constraints. We first show that the model exhibits indeterminacy for roughly constant returns to scale. We then establish that our model accounts for stylized facts that neither the standard RBC model nor previous sunspots models have been able to capture. More specifically, the model driven purely by sunspots matches the procyclical movements in aggregate consumption, and the positively correlated forecastable changes of basic macroeconomic variables.