A Real-Business-Cycle Model with Efficiency Wages and Fiscal Policy: The Case of Bulgaria

Aleksandar Vasilev

Bulgarian Economic Papers from Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski

Abstract: In this paper we investigate the quantitative importance of efficiency wages in explaining uctuations in Bulgarian labor markets. This is done by augmenting an otherwise standard real business cycle model a la Long and Plosser (1983) with unobservable workers efort by employers and wage contracts as in Shapiro and Stiglitz (1984). This imperfection in labor markets introduces a strong propagation mechanism that allows the model to capture the business cycles in Bulgaria better than earlier models. The model performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market framework featured in the standard RBC model, e.g Vasilev (2009).

Keywords: general equilibrium; shirking; eciency wages; unemployment; Bulgaria (search for similar items in EconPapers)
JEL-codes: E24 E32 J41 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2017-01, Revised 2017-01
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: A Real-Business-Cycle model with efficiency wages and fiscal policy: the case of Bulgaria (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:sko:wpaper:bep-2017-01

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