Dynamic Analysis of a Disequilibrium Macroeconomic Model with Dual Labor Markets
MPRA Paper from University Library of Munich, Germany
We extend the general disequilibrium model of Malinvaud(1980) by using dual labor market theory. By considering two tiers of workers, we find that while the duality of the labor market expands an equilibrium regime in the short term, it does not always keep an equilibrium in the medium term. In the medium term, the business cycle converges toward a disequilibrium regime unless the goods market is potentially in equilibrium. Employment and wages at the steady state are affected by the size of the government, and the stability of wage bargaining is only a sufficient condition of the local stability of our dynamic system. Therefore, involuntary unemployment can be remedied only when goods demand is sufficiently large.
Keywords: Disequilibrium macroeconomics; Non-Walrasian analysis; Segmented labor markets; Business cycles (search for similar items in EconPapers)
JEL-codes: E12 E24 E32 J42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-iue, nep-lma and nep-mac
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