Endogenous Labor Supply, Heterogeneous Firms and International Business Cycles

Daniel Farhat ()
Additional contact information
Daniel Farhat: Department of Economics, University of Otago

No 909, Working Papers from University of Otago, Department of Economics

Abstract: This paper examines employment dynamics and international business cycle transmission within a two-country dynamic stochastic general equilibrium model featuring an endogenously determined trade pattern. In contrast to existing literature, this model allows for the household's labor supply to be determined endogenously, producing fluctuations in employment as business cycles are transmitted from one country to another. The model is able to generate pro-cyclical domestic employment as well as positive correlations of employment and output across countries. In addition, previous studies have difficulty generating international correlations of consumption and investment. This model replicates these stylized facts by strengthening frictions in international asset markets. The structure of labor supply is shown to be vital for the transmission of business cycles through trade linkages.

Keywords: International Real Business Cycles; Labor Supply; Imperfect Competition; International Trade (search for similar items in EconPapers)
JEL-codes: F12 F16 F21 F4 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2009-09, Revised 2009-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.otago.ac.nz/economics/research/otago077124.pdf First version, 2009 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:otg:wpaper:0909

Access Statistics for this paper

More papers in Working Papers from University of Otago, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Janet Bryant ().