Dual Labor Market and Endogenous Fluctuations

Francesco de Palma () and Thomas Seegmuller ()
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Francesco de Palma: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique
Thomas Seegmuller: EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: We study the influence of wage differential on the emergence of endogenous fluctuations. In this way, we introduce a dual labor market, based on the Shapiro-Stiglitz efficiency wage theory in an overlapping generations model. We show that wage inequality is a source of endogenous fluctuations. Indeed, a sufficiently strong wage differentialleads to the occurrence of cycles of period two and local indeterminacy. Moreover, in contrast to several existing contributions, these results depend neither on increasing returns to scale, nor on the degree of capital-labor substitution.

Keywords: Endogenous fluctuations; dual labor market; wage inequality; efficiency wage (search for similar items in EconPapers)
Date: 2005-06
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00194165v1
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Published in Macroeconomic Dynamics, 2005, 9 (3), pp.398-411. ⟨10.1017/S1365100505040265⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00194165

DOI: 10.1017/S1365100505040265

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