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Shirking in a monetary business cycle model

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  • Michelle Alexopoulos

Abstract

This paper investigates whether a limited participation model with imperfectly observed effort can reproduce the economy's responses to a monetary policy shock without appealing to high labour supply elasticities or high markups. The results demonstrate that the presence of imperfectly observed effort, in combination with the limited participation assumption, allows the model to account for the presence of involuntary unemployment, nominal wage rigidity, and the observed responses to monetary policy shocks. Ce mémoire enquête pour établir si un modèle de participation limitée où le niveau d'effort est imparfaitement observé peut reproduire les réponses d'une économie à un choc de politique monétaire sans avoir à postuler des élasticités élevées d'offre de travail ou des fortes marges bénéficiaires. Les résultats montrent que la présence d'un effort imparfaitement observé, combinée au postulat de participation limitée, permet au modèle de rendre compte de la présence de chômage involontaire, de rigidité du salaire nominal, et des réponses observées aux chocs de la politique monétaire.

Suggested Citation

  • Michelle Alexopoulos, 2006. "Shirking in a monetary business cycle model," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(3), pages 689-718, August.
    • Handle: RePEc:wly:canjec:v:39:y:2006:i:3:p:689-718
    DOI: 10.1111/j.1540-5982.2006.00365.x
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    Cited by:

    1. Andrea Vaona, 2013. "The Most Beautiful Variations on Fair Wages and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1069-1084, September.
    2. Gregory E. Givens, 2022. "Unemployment, Partial Insurance, And The Multiplier Effects Of Government Spending," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 571-599, May.
    3. Andrea Vaona, 2015. "Inflation gifts restrictions for structural VARs: evidence from the US," Working Papers 16/2015, University of Verona, Department of Economics.
    4. Andrea Vaona, 2015. "The price-price Phillips curve in small open economies and monetary unions: theory and empirics," International Economics and Economic Policy, Springer, vol. 12(2), pages 281-307, June.
    5. Akwasi Ampofo & Firmin Doko Tchatoka, 2019. "Reducing Public‐Private Sector Pay Differentials: The Single Spine Pay Policy As A Natural Experiment In Ghana," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 283-315, January.
    6. Miquel Faig, 2001. "A search theory of money and commerce with Neoclassical production," Economics Working Papers 567, Department of Economics and Business, Universitat Pompeu Fabra.
    7. Jean-Pierre Danthine & Andre Kurmann, 2004. "Fair Wages in a New Keynesian Model of the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 107-142, January.
    8. Erkki Koskela & Ronnie Schöb, 2009. "A note on internal and external reference in efficiency wage models," Journal of Economics, Springer, vol. 96(1), pages 79-86, January.
    9. Vaona, Andrea, 2011. "Four variations on fair wages and the Phillips curve," Kiel Working Papers 1713, Kiel Institute for the World Economy (IfW Kiel).
    10. Givens, Gregory E., 2011. "Unemployment insurance in a sticky-price model with worker moral hazard," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1192-1214, August.
    11. Katarzyna Budnik, 2012. "Do those who stay work less? On the impact of emigration on the measured TFP in Poland," NBP Working Papers 113, Narodowy Bank Polski.
    12. Richard A. Brecher & Zhiqi Chen & Ehsan Choudhri, 2007. "Optimal Taxation in a Dynamic Model of Shirking and Unemployment: Shapiro and Stiglitz Meet Chamley," Carleton Economic Papers 07-07, Carleton University, Department of Economics, revised Aug 2010.
    13. Campbell III, Carl M., 2006. "A model of the determinants of effort," Economic Modelling, Elsevier, vol. 23(2), pages 215-237, March.
    14. Brecher, Richard A. & Chen, Zhiqi & Choudhri, Ehsan U., 2010. "A dynamic model of shirking and unemployment: Private saving, public debt, and optimal taxation," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1392-1402, August.
    15. Andrea Vaona, 2013. "Inflation gifts and endogenous growth through learning-by-doing," Working Papers 09/2013, University of Verona, Department of Economics.

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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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