Real Business Cycles with Involuntary Unemployment

Jordi Galí

No 1206, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop and analyse a real business cycle model in which both goods and labour markets are characterized by imperfect competition. In equilibrium, unemployment emerges as the result of the market power exercised by insiders at the firm level. We show that a calibrated version of the model is capable of generating both a procyclical labour supply and a countercyclical unemployment rate, in a way qualitatively consistent with US data.

Keywords: Endogenous Mark-ups; Insider-Outsider Models; Real Business Cycles; Unemployment (search for similar items in EconPapers)
JEL-codes: E32 J64 (search for similar items in EconPapers)
Date: 1995-06
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Citations: View citations in EconPapers (2)

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Working Paper: Real Business Cycles with Involuntary Unemployment (1995)
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