Wage bargaining, labor market institutions and business cycles

This dissertation investigates the impacts of labor market institutions on the business cycles. The first chapter builds a DSGE search and match model that can capture the labor market facts and explain the business cycle facts within a tractable framework. The basic framework incorporates labor market frictions to the standard new Keynesian model and extends it with staggered wage contracts. The empirical performance of the model is tested by the impulse responses of the key macroeconomic variables to a monetary policy shock. It shows that incorporating search and matching frictions and a bargaining framework into the baseline new Keynesian model can generate a lower response for inflation and the real wage to a monetary policy shock and can explain some of the labor market facts simultaneously.;The second chapter analyzes the effects of alternative labor market institutions on the responses of key macroeconomic variables. It considers severance payments, unemployment benefits and worker's bargaining power. The impulse responses of key macroeconomic variables are derived under alternative parameterizations for these institutions. It finds that the severance payments do not have an impact on the responses. Increasing the unemployment benefits makes key macroeconomic variables less responsive to disturbances where increasing worker's bargaining power makes output more responsive and inflation less responsive to macroeconomic shocks.;Third chapter explores the differences between the characteristics of the business cycles in the US and the euro area. It first compares the features of the business cycles dated by the NBER and CEPR; then, it looks at the characteristics of the business cycles derived from the real GDP and industrial production. It finds that although the results of a comparison of the features of the business cycles of the US and the euro area differ depending on the time period considered and data used in the analysis, the business cycles have very different characteristics in the two areas. Thus, the model in the second chapter can be used to answer a question of to what extent the labor market institutions are responsible for the differences in the features of business cycles in different economies.