A Real-Business-Cycle model with efficiency wages and fiscal policy: the case of Bulgaria

Aleksandar Vasilev

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: In this paper we investigate the quantitative importance of efficiency wages in explaining fluctuations 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 effort 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; efficiciency wages; unemployment (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cta, nep-dge and nep-mac
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Citations: View citations in EconPapers (3)

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Working Paper: A Real-Business-Cycle Model with Efficiency Wages and Fiscal Policy: The Case of Bulgaria (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:148413

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