A Real-Business-Cycle model with efficiency wages and a government sector: the case of Bulgaria

Aleksandar Vasilev

EconStor Open Access Articles and Book Chapters, 2017, issue 4, 359-377

Abstract: In this paper we investigate the quantitative importance of e fficiency wages in explaining fluctuations in Bulgarian labor markets. This is done by augmenting an otherwise standard real business cycle model a la Long and Plosser (1983) with unobservable workers e ort by employers and wage contracts as in Shapiro and Stiglitz (1984), as well as a detailed government sector. This imperfection in labor markets introduces a strong propagation mechanism that allows the model to capture the business cycles in Bulgaria better than earlier models. The model performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market framework featured in the standard RBC model, e.g Vasilev (2009).

Keywords: general equilibrium; shirking; efficiency wages; unemployment; Bulgaria (search for similar items in EconPapers)
JEL-codes: E24 E32 J41 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (44)

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Journal Article: A Real-Business-Cycle Model with Efficiency Wages and a Government Sector: The Case of Bulgaria (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:170575

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