A Real-Business-Cycle model with reciprocity in labor relations and a government sector

Vasilev, Aleksandar (2018) A Real-Business-Cycle model with reciprocity in labor relations and a government sector. Journal of Economics and Econometrics, 61 (2). pp. 47-76. ISSN 2032-9652

Full content URL: https://ideas.repec.org/p/eei/rpaper/eeri_rp_2017_...

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A Real-Business-Cycle model with reciprocity in labor relations and a government sector
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Abstract

In this paper we introduce reciprocity in labor relations and government sector to investigate how well the real wage rigidity that results out of that arrangement explains business cycle fluctuations in Bulgaria. The reciprocity mechanism described in this paper follows Danthine and Kurmann (2010) and is generally consistent with micro-studies, e.g. Lozev, Vladova, and Paskaleva (2011) and Paskaleva (2016). Rent-sharing considerations, and worker's own past wages turn out to be the most important aspects of how labor contracting happens. In contrast, aggregate economic conditions, as captured by the employment rate, are not found to be quantitatively important for wage dynamics. Overall, the model with reciprocity and fiscal policy performs well vis-a-vis data, especially along the labor market dimension.

Keywords:general equilibrium, reciprocity, gift exchange, fiscal policy, Bulgaria
Subjects:L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:46896
Deposited On:19 Nov 2021 12:32

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