A Business Cycle Model with Private Information

Bruce Smith

Journal of Labor Economics, 1989, vol. 7, issue 2, 210-37

Abstract: A real business cycle model is constructed in which workers are heterogeneous and privately informed about their own productive abilities. The model is structured so that interesting cycles cannot arise in the absence of their informational asymmetry. In the presence of this asymmetry, the model produces cyclical fluctuations that are consistent with features of observed business cycles. Hours behavior of individuals is also consistent with micro evidence. In addition, the model gives rise to equilibrium unemployment and labor. The determination of equilibrium unemployment rates, hours levels, and output are integrally related in the analysis. Copyright 1989 by University of Chicago Press.

Date: 1989
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Working Paper: A BUSINESS CYCLE MODEL WITH PRIVATE INFORMATION (1988)
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlabec:v:7:y:1989:i:2:p:210-37

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