Using Non-technological Factors to Explain Changes in Unemployment

by Lukas Reiss

Institution: Vienna University of Economics and Business
Year: 2012
Keywords: RVK QC 300, QV 200 ; JEL E32, E24, C52, J64, F16, F11; Unemployment / Search and Matching / DSGE / Business Fluctuations / Trade / Outsourcing
Record ID: 1031746
Full text PDF: http://epub.wu.ac.at/3685/1/LukasReiss_Using_Non%2Dtechnological_Factors_to_Explain_Changes_in_Unemployment.pdf


The main research question of this dissertation is whether factors other than labor productivity can help to explain short-run fluctuations and medium-run trends in unemployment in Austria respectively Western Continental Europe. In the part on analyzing short-term-fluctuations I will set up a New Keynesian DSGE model with a richly specified labor market. This model will be used to compare how different labor market specifications fit to Austrian quarterly data. Most importantly, the Bayesian model comparison indicates an important role for nominal wage rigidities and for a timely response of employment to changes in vacancies. Furthermore, models with consensual determination of working hours ('efficient bargaining') tend to perform relatively well. The best model can reproduce the relative volatility of labor market tightness compared to labor productivity comparatively well. Moreover, shock decompositions show that fluctuations in Austrian labor market tightness are mainly driven by demand shocks and to a much smaller extent by productivity shocks. In the part on explaining medium-term-trends in unemployment I will set up a theoretical model and demonstrate that certain stylized facts can also be generated by an increase in international trade (and not only by skill-biased technological change). Furthermore I will show that a differential response of different industrial economies ('US' versus 'Continental Europe') might be due to characteristics of sectors which are not directly exposed to globalization. (author's abstract)