IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Dual Labor Market And Endogenous Fluctuations


We study the influence of wage differential on the emergence of endogenous fluctuations. In this way, we introduce a dual labor market, based on the Shapiro-Stiglitz efficiency wage theory in an overlapping generations model. We show that wage inequality is a source of endogenous fluctuations. Indeed, a sufficiently strong wage differentialleads to the occurrence of cycles of period two and local indeterminacy. Moreover, in contrast to several existing contributions, these results depend neither on increasing returns to scale, nor on the degree of capital-labor substitution.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: link to article abstract page
Download Restriction: no

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 9 (2005)
Issue (Month): 03 (June)
Pages: 398-411

in new window

Handle: RePEc:cup:macdyn:v:9:y:2005:i:03:p:398-411_04
Contact details of provider: Postal:
Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK

Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Albrecht, James W & Vroman, Susan B, 1992. "Dual Labor Markets, Efficiency Wages, and Search," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 438-61, October.
  2. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  3. Agenor, Pierre-Richard & Aizenman, Joshua, 1997. "Technological change, relative wages, and unemployment," European Economic Review, Elsevier, vol. 41(2), pages 187-205, February.
  4. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High Wage Workers and High Wage Firms," NBER Working Papers 4917, National Bureau of Economic Research, Inc.
  5. Nishimura, Kazuo, 1985. "Competitive equilibrium cycles," Journal of Economic Theory, Elsevier, vol. 35(2), pages 284-306, August.
  6. Jorgen Jacobsen, Hans, 2000. "Endogenous, imperfectly competitive business cycles," European Economic Review, Elsevier, vol. 44(2), pages 305-336, February.
  7. Aloi, Marta & Dixon, Huw D. & Lloyd-Braga, Teresa, 2000. "Endogenous fluctuations in an open economy with increasing returns to scale," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 97-125, January.
  8. Benhabib, Jess & Nishimura, Kazuo, 1998. "Indeterminacy and Sunspots with Constant Returns," Journal of Economic Theory, Elsevier, vol. 81(1), pages 58-96, July.
  9. Karnit Flug & Zui Hercowitz, 1996. "Equipment Investment and the Relative Demand for Skilled Labor: International Evidence," IDB Publications (Working Papers) 5878, Inter-American Development Bank.
  10. Cazzavillan, Guido, 2001. "Indeterminacy and Endogenous Fluctuations with Arbitrarily Small Externalities," Journal of Economic Theory, Elsevier, vol. 101(1), pages 133-157, November.
  11. Cazzavillan, Guido & Lloyd-Braga, Teresa & Pintus, Patrick A., 1998. "Multiple Steady States and Endogenous Fluctuations with Increasing Returns to Scale in Production," Journal of Economic Theory, Elsevier, vol. 80(1), pages 60-107, May.
  12. Jess Benhabib & Roger E.A. Farmer, 1992. "Indeterminacy and Increasing Returns," UCLA Economics Working Papers 646, UCLA Department of Economics.
  13. Robert Gibbons & Lawrence F. Katz, 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  14. James B. Rebitzer & Lowell J. Taylor, 1991. "A Model of Dual Labor Markets When Product Demand Is Uncertain," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1373-1383.
  15. Jones, Stephen R. G., 1987. "Screening unemployment in a dual labor market," Economics Letters, Elsevier, vol. 25(2), pages 191-195.
  16. Jean-Michel Grandmont & P, A, Pintus & R, De Vilder, 1997. "Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles," Working Papers 97-28, Centre de Recherche en Economie et Statistique.
  17. Kimball, Miles S, 1994. "Labor-Market Dynamics When Unemployment is a Worker Discipline Device," American Economic Review, American Economic Association, vol. 84(4), pages 1045-59, September.
  18. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  19. Koebel, Bertrand & Falk, Martin & Laisney, Francois, 2003. "Imposing and Testing Curvature Conditions on a Box-Cox Cost Function," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(2), pages 319-35, April.
  20. Reichlin, Pietro, 1986. "Equilibrium cycles in an overlapping generations economy with production," Journal of Economic Theory, Elsevier, vol. 40(1), pages 89-102, October.
  21. Woodford, Michael, 1986. "Stationary sunspot equilibria in a finance constrained economy," Journal of Economic Theory, Elsevier, vol. 40(1), pages 128-137, October.
  22. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
  23. Coimbra, Rui & Lloyd-Braga, Teresa & Modesto, Leonor, 2000. "Unions, Increasing Returns and Endogenous Fluctuations," IZA Discussion Papers 229, Institute for the Study of Labor (IZA).
  24. Harrison, Sharon G. & Weder, Mark, 2002. "Tracing externalities as sources of indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 851-867, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:9:y:2005:i:03:p:398-411_04. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.