Non-Walrasian Labor Markets and Real Business Cycles
The standard Real Business Cycle literature mainly focuses on Walrasian models designed to fit the US institutional framework. Differences between the US and Europe, mostly evident in the labor market, suggest that a purely Walrasian model may be inappropriate to study European business cycles. I present a stochastic version of the dynamic general equilibrium model in Daveri and Maffezzoli (2000), where unemployment is generated by monopolistic unions, and calibrate it to reproduce several long-run features of the Italian and US economies. The properties of our model are compared to an indivisible labor model built on Hansen (1985) and Rogerson and Wright (1988). I focus on the impulse reponse functions, the standard business cycle statistics, and the ability to reproduce the cyclical components of the main macroeconomic variables. The main results are: (i) the impulse response functions of the Monopoly Union (MU) model show a higher degree of overall persistence; (ii) the business cycle statistics are similar; (iii) the MU model enjoys a statistically significative advantage in reproducing the Italian business cycles, while its alternative seems to better explain the US business cycles. (Copyright: Elsevier)
Volume (Year): 4 (2001)
Issue (Month): 4 (October)
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