Non-Walrasian Unemployment Fluctuations

Jordi Galí

No 5337, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We modify the standard real business cycle model by assuming that wages are set by a monopoly union at the firm level. In the context of such a model, we introduce a measure of unemployment and analyze its equilibrium behavior. We show that a calibrated version of the model is capable of generating both a procyclical labor supply and a countercyclical unemployment rate, in a way qualitatively consistent with the evidence. The model stresses the role of countercyclical markups in the goods market as a key mechanism underlying the countercyclical behavior of unemployment.

JEL-codes: E32 J64 (search for similar items in EconPapers)
Date: 1995-11
Note: EFG
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Citations: View citations in EconPapers (18)

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