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Modelling the sectoral allocation of labour in open economy models

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  • Povoledo, Laura

Abstract

This paper presents an open economy model with tradeable and nontradeable sectors in which households cannot supply labour in both sectors at the same time. In this economy, the Frisch elasticity of labour supply is infinite. I analyse how the infinite labour supply elasticity interacts with the Producer Currency Pricing (PCP) and Local Currency Pricing (LCP) assumptions, and I find that it does not significantly alter the empirical performance of the model with respect to a broad range of statistics.

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  • Povoledo, Laura, 2012. "Modelling the sectoral allocation of labour in open economy models," MPRA Paper 40344, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40344
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    More about this item

    Keywords

    New open economy models; Tradeable and nontradeable sectors; International business cycles; Labour supply elasticity;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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