Propagation of aggregate demand, firm specific and policy shocks in an economy with labour flows within and between firms of different sizes

Frank A. G. den Butter and Edwin van Gameren
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Frank A. G. den Butter: Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics

No 19, Serie Research Memoranda from VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics

Abstract: This paper illustrates the propagation at the macro level of various types of shocks in a multifirm model representing a miniature economy which consists of firms of 4 different sizes. Our modelling exercise focuses on the interaction between internal and external labour flows. These flows are driven by the strategic behaviour of the firms with respect to fires, labour hoarding and internal versus external hires in case of opening of vacancies. The impulse response effects of our simulations show the mechanisms behind some findings of VAR-analyses, and of theoretical models of labour flows and the business cycle. Examples are the cleansing role of recessions and the larger spread of firm sizes due to technological change.

Keywords: labour market flows; hierarchical models of firms; interaction between internal and external labour markets; model simulations; impulse response effects; propagation of shocks (search for similar items in EconPapers)
JEL-codes: E17 E32 (search for similar items in EconPapers)
Date: 2000
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