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When more flexiility yields more fragility : the microfoundations of keynesian aggregate unemployment

Listed author(s):
  • G; Dosi

    (Scuola Superiore Sant'Anna)

  • M.C. Pereira

    (University of Campinas)

  • A. Roventini

    (OFCE, Sciences Po, Scuola Superiore Sant'Anna)

  • M.E. Virgillito

    (Scuola Superiore Sant'Anna)

Wages are an element of cost crucially a ecting the competitiveness of individual rms. Butthe wage bill is also a crucial element of aggregate demand. Hence it could be that more flexible"and fluid labour markets, while allowing for faster inter-firm reallocation of labour, may also render the whole economic system more fragile, more prone to recession, more volatile. In this work we investigate some conditions under which such a conjecture applies. The paper presents an agent-based model that investigates the e ects of two \archetypes of capitalism", in terms of regimes of labour governance { defined by the mechanisms of wage determination, ring, labour protection and productivity gains sharing upon (i) labour market regularities and (ii) macroeconomic dynamics (long-term rates of growth, GDP fluctuations, unemployment rates, inequality, etc..). The model is built upon the \Keynes meets Schumpeter" family of models (Dosi et al.,2010), explicitly incorporating di erent microfounded labour market regimes. Our results show that seemingly more rigid labour markets and labour relations are conducive to coordination successes with higher and smoother growth

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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2016-07.

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Date of creation: Mar 2016
Handle: RePEc:fce:doctra:1607
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