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Non-Walrasian Labor Markets and Real Business Cycles

Author

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  • Marco Maffezzoli

    (Universita Commerciale Bocconi)

Abstract

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)

Suggested Citation

  • Marco Maffezzoli, 2001. "Non-Walrasian Labor Markets and Real Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(4), pages 860-892, October.
    • Handle: RePEc:red:issued:v:4:y:2001:i:4:p:860-892
    DOI: 10.1006/redy.2001.0139
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    More about this item

    Keywords

    Real Business Cycle; General Equilibrium; Trade Union; Indivisible Labor; Unemployment;
    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
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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