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Labour supply, wages and prices in the BOF4 quarterly model of the Finnish economy

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  • Tarkka, Juha
  • Willman, Alpo
  • Rasi, Chris-Marie

Abstract

This paper describes the supply of labour and the determination of wages and prices in the BOF4 model. Labour supply is modelled as a function of real wage, income and discouraged worker effects. Wages are a functi on of the unemployment rate. Besides that they respond to the deviation of actual wages from equilibrium wages dictated by nominal marginal productivity. Expected inflation and taxation are entered through the separate treatment of negotiated wages. Manufacturing is assumed to be the wage leader in the economy so that developments in other sectors are affected by the wage drift in manufacturing and are tied to manufacturing wages also in the long-run.

Suggested Citation

  • Tarkka, Juha & Willman, Alpo & Rasi, Chris-Marie, 1989. "Labour supply, wages and prices in the BOF4 quarterly model of the Finnish economy," Bank of Finland Research Discussion Papers 6/1989, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp1989_006
    as

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    References listed on IDEAS

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    1. repec:bla:econom:v:50:y:1983:i:199:p:221-33 is not listed on IDEAS
    2. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, September.
    3. Dreze, Jacques H., 1987. "Underemployment equilibria : From theory to econometrics and policy," European Economic Review, Elsevier, vol. 31(1-2), pages 9-34.
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    5. Michael Abbott & Orley Ashenfelter, 1976. "Labour Supply, Commodity Demand and the Allocation of Time," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(3), pages 389-411.
    6. Tarkka, Juha & Willman, Alpo, 1988. "Exports and imports in the BOF4 quarterly model of the Finnish economy," Research Discussion Papers 3/1988, Bank of Finland.
    7. Tarkka, Juha, 1985. "Monetary policy in the BOF3 quarterly model of the Finnish economy," Economic Modelling, Elsevier, vol. 2(4), pages 298-306, October.
    8. Michael Abbott & Orley Ashenfelter, 1979. "Labour Supply, Commodity Demand and the Allocation of Time: Correction," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 567-569.
    9. Tarkka, Juha & Willman, Alpo, 1988. "Exports and imports in the BOF4 quarterly model of the Finnish economy," Bank of Finland Research Discussion Papers 3/1988, Bank of Finland.
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