Henri Sneessens

Nominal Wage Rigidities in a New Keynesian Model with Frictional Unemployment

In this paper, we propose a search and matching model with nominal stickiness a la Calvo in the wage bargaining. We analyze the properties of the model, first, in the context of a typical real business cycle model driven by stochastic productivity shocks and second, in a fully specified monetary DSGE model with various real and nominal rigidities and multiple shocks. The model generates realistic statistics for the important labor market variables.

Theory and estimation of macroeconomic rationing models

1. The Received Econometric Formulation of 2-Market Rationing Models.- 2. Statement of the Problem.- 3. Contents.- I : Theoretical Foundations.- 1. The Structure of Quantity Rationing Models.- a. Institutional setting : the rationing scheme.- b. Information structure of the consumer : the perceived rationing scheme.- c. Equilibrium analysis.- 2. Effective Demand Theory.- II : Econometric Formulation of a 2-Market Macroeconomic Model.- 1. First Generation Models.- a. Underlying assumptions.- b. Indeterminate effective trade offers.- c. On the necessity of accounting explicitly for uncertainty and disequilibrium.- 2. A Disequilibrium Rationing Model.- a. Number of regimes in a disequilibrium rationing model.- b. Assumptions ensuring a 4-regime model with well-defined trade offers.- c. Analysis of the linear disequilibrium rationing model.- d. Towards more general assumptions.- 3. Estimation Methods.- a. The Maddala-Nelson stochastic specification.- b. The Ginsburgh-Tishler-Zang stochastic specification.- c. Which specification : MN or GTZ ?.- Appendix 1 : Proof of Proposition 2.2.- Appendix 2 : Proof of Proposition 2.3.- Appendix 3 : Proof of Lemma 2.5.- III : A Macroeconomic Rationing Model of the Belgian Economy.- 1. A Modified Cobb-Douglas Model.- 2. Labor Hoarding.- 3. Demand for Goods and Labor Supply.- 4. Solvability of the Model.- 5. The Stochastic Model and the Estimation Procedure.- 6. Empirical Results : the Output-Employment Trade-Off.- 7. Estimation of the employment equation.- Appendix 1 : Solvability of a QRM with Labor Hoarding.- Appendix 2 : Data Definitions and Sources.- Conclusion.- References.

Real wages, skill mismatch and unemployment persistence France, 1962-1989

We develop a model of equilibrium unemployment with endogenous real wages and productivity. We use a framework with explicit quantity constraints and aggregation over micromarkets to derive a Beveridge curve and discuss the relationship between shifts in the Beveridge curve and equilibrium unemployment. We also distinguish skilled and unskilled labor, so that shifts in the aggregate UV-curve can be the outcome of either frictions on the skilled labor market or skill mismatch. Frictions are assumed to be exogenous and are estimated by a linear trend. Skill mismatch is endogenous and depends, a.o., on the skilled/unskilled relative wage. There is a tight relationship and interaction between skill mismatch and equilibrium unemployment. We estimate the model on French annual data, over the period 1962-89. We exploit these results to propose tentative explanations of observed unemployment rises and Beveridge curve shifts, and to discuss a few economic policy options.

Real Wages, Quantity Constraints and Equilibrium Unemployment: Belgium 1955-1988

This paper examines the determinants of equilibrium wage and unemployment rates in Belgium within the framework of a quantity rationing, right-to-manage model with decentralised wage-setting. Empirical results are obtained by first using the Johansen maximum-likelihood procedure for the analysis of cointegration among the variables of interest. The information from this stage is then used to estimate a three equation econometric model explaining the wage share, the unemployment rate and the capital gap. The slowdown in world trade is depicted as the most important factor explaining the rise in unemployment in Belgium, with dampening effects due to wage control policies imposed in the eighties. Because we obtain only two cointegrating relations, for three endogenous variables, our results are compatible with the hypothesis of path dependency and multiple equilibria.

Structural problems and quantity constraints in macroeconomic models

The purpose of this paper is to illustrate how structural problems can be modelled in the framework of models with quantity constraints.

Biased Technological Shocks, Relative Wage Rigidities and Low-Skilled Unemployment

The contrast between the evolution over the last decades of the European Union (EU) and the US unemployment rates, especially for the low-skilled, is well known. A consensus view is that these different outcomes can be explained by the interactions between common shocks and specific institutional setups. In this paper, we emphasize the interactions between technological changes and wages rigidities. We construct a fully calibrated general equilibrium model with two types of jobs and two types of workers, and with search unemployment. Our simulations show that with wage rigidities, technological changes suffice to generate a continuous rise in the low-skilled unemployment rate and an almost unchanged high-skilled unemployment rate. Without wage rigidities, the unemployment rates remain unchanged but the wage dispersion widens.

Rationing Macroeconomics: A Graphical Exposition

The paper provides a graphical exposition of the most significant results of comparative statics obtained in a four-market macroeconomic model with fixed commodity prices and wages. The main tool of analysis remains the usual IS-LM apparatus modified to account for the possibility of rationing on the goods as well as on the labour market.

Investment, Sales Constraints and Profitability in France, 1957-1985

This paper is devoted to the analysis of the investment behavior of the firm in the context of a quantity rationing (or disequilibrium) model with monopolistic competition on the goods market. Investment is entirely profit-driven as in the q-theory of investment. The profit variable is however decomposed into three components: the markup rate on variable costs, the capacity utilization rate and the discrepancy between the optimal and the actual-labor ratios. The model has the same long run implication as an accelerator model if and only if the optimal capacity utilization rate is constant in the long run. The suggested quantity rationing model is estimated on French data, over the period 1956-1985. The emphasis is on the investment equation. The parameter estimates are shown to have remained fairly stable over time.

Structural Changes in the Labor Market and the Rise of Early Retirement in France and Germany

Abstract The rise of early retirement in Europe is typically attributed to the European system of taxes and transfers. A model with an imperfectly competitive labor market allows us to consider also the effects of bargaining power and of matching efficiency on pre-retirement. We find that lower bargaining power of workers and declining matching efficiency have been important determinants of early retirement in France and Germany. These structural changes, combined with early retirement transfers and population aging, are also consistent with the employment and unemployment rates, labor share and seniority premia.

Growth and Welfare: Shifts in Labour Market Policies

The burst of the housing market bubble in the USA in 2007 ignited a long-lasting worldwide economic crisis, now known as ‘the Great Recession’. For the first time since the Great Depression of the 1930s, financial markets played a key role both in generating and propagating the crisis across countries. Both the European Union (EU) and the USA were hit by the recession, although with differences. Differences may stem from different economic ‘institutions’—that is, differences in the set of rules and norms that govern the functioning of specific markets. Differences may also reflect different economic policy responses. The Great Recession was followed in 2011 by the sovereign debt crisis that hit debt-ridden countries and produced a widening gap between the core and the periphery countries of the Euro area (EA).