Are “fair” wages quantitatively important for business cycle fluctuations in Bulgaria?

Vasilev, Aleksandar (2020) Are “fair” wages quantitatively important for business cycle fluctuations in Bulgaria? Review of Economic Perspectives, 20 (1). pp. 91-105. ISSN 1804-1663

Full content URL: https://doi.org/10.2478/revecp-2020-0005

Documents
Are “fair” wages quantitatively important for business cycle fluctuations in Bulgaria?
Published Open Access manuscript
[img]
[Download]
[img]
Preview
PDF
[18041663 - Review of Economic Perspectives] Are “fair” wages quantitatively important for business cycle fluctuations in Bulgaria_.pdf - Whole Document
Available under License Creative Commons Attribution-NonCommercial 4.0 International.

380kB
Item Type:Article
Item Status:Live Archive

Abstract

We introduce ”fair” wages in a general-equilibrium model where worker’s
effort is unobservable and investigate whether such a mechanism can quantitatively
account for the degree of real wage rigidity in the Bulgarian labor markets, as documented in Lozev, Vladova, and Paskaleva (2011) and Paskaleva (2016). In contrast to
Danthine and Kurmann (2004), we internalize the effect that past wages have on the
current effort level. We calibrate the model to Bulgarian data (1999-2016), and quantify
the effect of technological shocks on hours and wages in the theoretical setup. Overall,
the calibrated model with ”fair” wages performs poorly when it comes to the relative
volatilities of labor market variables. This is because aggregate labor market conditions,
as proxied by the employment rate and past aggregate wages, turn out not to be quantitatively important for business cycles in Bulgaria

Keywords:Business cycles, unobservable effort, fair wages, unemployment, Bulgaria
Subjects:L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:40982
Deposited On:08 Jul 2020 08:36

Repository Staff Only: item control page