A Real-Business-Cycle Model with Efficiency Wages and Fiscal Policy: The Case of Bulgaria
Bulgarian Economic Papers (www.bep.bg) from St Kliment Ohridski University of Sofia, Faculty of Economics and Business Administration / Center for Economic Theories and Policies
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)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2017-01, Revised 2017-01
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Working Paper: A Real-Business-Cycle model with efficiency wages and fiscal policy: the case of Bulgaria (2016)
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