This paper presents a non-equilibrium, agent-based model of workers and firms, with on-the-job searching, endogenous entrepreneurial decisions and endogenous wage and income determination. Workers and firms are heterogeneous, and learn their strategy in the labor market. The model is able to reproduce a number of stylized facts generally accepted in labor economics and industrial organization, such as the Wage, Beveridge and Okun curve, and the skewness of wage, income and firm size distribution. Most interestingly, important stylized facts such as a negatively sloped Wage Curve and a constant returns to scale matching function emerge only out-of-equilibrium, during the adjustment processes toward the stationary state. The results stress three points. First, the use of non-equilibrium computational models allows for a more comprehensive investigation of the labor market, by considering the endogenous character of many relevant variables. Second, it may be the case that (some) of the stylized facts upon which many equilibrium models have been built may be just out-of-equilibrium properties of the real economies. Third, the joint determination of all aggregate relationships and their dependence on the equilibrium or non-equilibrium state of the system suggest to move from the investigation of empirical regularities in isolation one from the other to a joint analysis.
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Find related papers by JEL classification: J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
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David Card, 1995.
"The Wage Curve: A Review,"
Working Papers
722, Princeton University, Department of Economics, Industrial Relations Section..
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David G. Blanchflower & Andrew J. Oswald, 1990.
"The Wage Curve,"
NBER Working Papers
3181, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
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Blanchflower, D. & Oswald, A., 1989.
"The Wage Curve,"
Papers
340, London School of Economics - Centre for Labour Economics.
Albrecht, James W. & Gautier, Pieter A. & Vroman, Susan B., 2003.
"Matching with multiple applications,"
Economics Letters,
Elsevier, vol. 78(1), pages 67-70, January.
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