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Towards an Evolutionary Interpretation of Aggregate Labor Market Regularities

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  • Gabriele R.
  • Fagiolo G.
  • Dosi G.

Abstract

In this paper, we present an agent-based, evolutionary, model of output- and labor-market dynamics. Firms produce a homogeneous, perishable, good under constant returns to scale using labor only. Workers are skill-homogeneous and buy the good spending all their wage. Labor productivities are firm-specific and change stochastically due to technical progress. Both firms and workers hold wage expectations which are adaptively revised on the base of observed market dynamics. A key feature of the model is an explicit microfoundation of the processes of: (i) matching between firms and workers; (ii) worker search; (iii) wage setting; (iv) endogenous formation of aggregate demand; (v) endogenous price formation. We also allow for selection of firms on the basis of their revealed competitiveness. Montecarlo simulations show that the model is able to jointly reproduce Beveridge, Wage and Okun's curves under quite broad behavioral and institutional settings. The system generates endogenously Okun's coefficients greater than one even if individual firms employ constant returns to labor technologies. Simulations also indicate that statistically detectable shifts in Okun's and Beveridge curves emerge as the result of changes in institutional, behavioral, and technological parameters. Finally, the model generates sharp predictions about how system parameters affect aggregate performance and its volatility

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 84.

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Date of creation: 11 Aug 2004
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Handle: RePEc:sce:scecf4:84

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Keywords: Labor Markets; Dynamics; Aggregate Regularities; Beveridge Curve; Okun Curve; Wage Curve; Matching Models;

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Cited by:
  1. Sandra Tavares Silva & Aurora A.C. Teixeira, 2006. "An evolutionary model of firms' institutional behavior focusing on labor decisions," FEP Working Papers 227, Universidade do Porto, Faculdade de Economia do Porto.
  2. Peter Hans Matthews, 2004. "Who is Post-Walrasian Man?," Middlebury College Working Paper Series 0412, Middlebury College, Department of Economics.
  3. Dan Farhat, 2011. "Bookworms versus Party Animals: An Artificial Labor Market with Human and Social Capital Accumulation," Working Papers 1103, University of Otago, Department of Economics, revised May 2011.
  4. Moreno Baruffini, 2013. "An agent-based simulation of the Swiss labour market : an alternative for the labour market policy evaluation," ERSA conference papers ersa13p216, European Regional Science Association.

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