A Response of the Economy to Changes in Employment Structure

Alexander Shapoval and Goncharenko Vasily ()

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: This paper examines the response of economies to shocks in demand. The analysis is performed by using a general equilibrium model with monopolisti ompetition in hi-tech sectors, perfect ompetition in a traditional sector, labor market frictions, and bargaining that determines wages. We posit that labor market frictions result in unemployment in the equilibrium. Under a positive shock in demand, new individuals become unemployed. If the elasticity of substitution between varieties of dierentiated goods is a decreasing/increasing function, then the intersector wage inequality enlarges/falls. In the first case, all individuals gain but those who lost their jobs.

JEL-codes: D11 E2 J31 L11 (search for similar items in EconPapers)
Date: 2016-07-22
New Economics Papers: this item is included in nep-lma and nep-mac
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