Vasilev, Aleksandar
(2022)
How important are shocks to the elasticity of aggregate labor supply for business cycle fluctuations?
Journal of Economics and Econometrics, 65
(2).
pp. 48-67.
ISSN 2032-9652
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Item Type: | Article |
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Item Status: | Live Archive |
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Abstract
Stochastic shocks to aggregate labor supply elasticity are introduced into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2018). The quantitative importance of a stochastic aggregate labor supply elasticity parameter is investigated for the magnitude of the cyclical fluctuations in Bulgaria. The quantitative effect of such a stochasticity increases the variability of
hours, and lowers the correlation between hours and wages, and thus is found to be
quantitatively important for the labor market aspect of business cycles.
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