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A Real-Business-Cycle Model with Efficiency Wages and a Government Sector: The Case of Bulgaria

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  • Aleksandar Vasilev

Abstract

In this paper we investigate the quantitative importance of efficiency wages of no-shirking type in explaining business cycle fluctuations in Bulgarian labor markets. This is done by augmenting a relatively standard real business cycle model with unobservable workers effort by employers and efficiency wage contracts, as well as through the inclusion of a detailed government sector. This imperfection in labor markets introduces a strong internal transmission mechanism that allows the model framework to capture the business cycles in Bulgarian data better than earlier models, and setups assuming perfectly-competitive labor markets in particular.

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  • Aleksandar Vasilev, 2017. "A Real-Business-Cycle Model with Efficiency Wages and a Government Sector: The Case of Bulgaria," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 9(4), pages 359-377, December.
  • Handle: RePEc:psc:journl:v:9:y:2017:i:4:p:359-377
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    More about this item

    Keywords

    general equilibrium; shirking; efficiency wages; unemployment; Bulgaria;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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