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Accounting for Labor GAPS

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  • François Langot
  • Alessandra Pizzo

Abstract

We develop a balanced growth model with labor supply and search and matching frictions in the labor market to study the impact of economic policy variables on the two margins which constitute the (total) labor input: the extensive one (the rate of employment) and the intensive one (the hours worked per worker). We show that the dynamics of the taxes have an impact mainly on the hours worked while labor market institutions have a large influence on the rate of employment. However, our findings underline that there is an interaction between the two margins. The model is tested on four countries (US, France, Germany and UK) which experiment different tax and labor market dynamics since the sixties. Using this structural approach, we can then perform counterfactual experiments about the evolution of the policy variables and to compare welfare levels implied by policy changes.

Suggested Citation

  • François Langot & Alessandra Pizzo, 2015. "Accounting for Labor GAPS," Working Papers Central Bank of Chile 757, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:757
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    3. Alessandra Pizzo, 2023. "The welfare effects of tax progressivity with frictional labor markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 49, pages 123-146, July.
    4. Julien Albertini & Xavier Fairise & Arthur Poirier & Anthony Terriau, 2022. "Short-Time Work Policies During the Covid-19 Pandemic," Annals of Economics and Statistics, GENES, issue 146, pages 123-172.
    5. Kandoussi, Malak & Langot, François, 2022. "Uncertainty shocks and unemployment dynamics," Economics Letters, Elsevier, vol. 219(C).
    6. Charlot, Olivier & Fontaine, Idriss & Sopraseuth, Thepthida, 2024. "Job polarization and non-standard work: Evidence from France," Labour Economics, Elsevier, vol. 88(C).
    7. Josué Diwambuena & Raquel Fonseca & Stefan Schubert, 2023. "Labor Market Institutions, Productivity, and the Business Cycle: An Application to Italy," Cahiers de recherche / Working Papers 2302, Chaire de recherche sur les enjeux économiques intergénérationnels / Research Chair in Intergenerational Economics.

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    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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