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How important are shocks to the elasticity of aggregate labor supply for business cycle fluctuations? Lessons from Bulgaria

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  • Vasilev, Aleksandar

Abstract

Stochastic shocks to aggregate labor supply elasticity are introduced into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2018). The quantitative importance of a stochastic aggregate labor supply elasticity parameter is investigated for the magnitude of the cyclical fluctuations in Bulgaria. The quantitative effect of such a stochasticity increases the variability of hours, and lowers the correlation between hours and wages, and thus is found to be quantitatively important for the labor market aspect of business cycles.

Suggested Citation

  • Vasilev, Aleksandar, 2022. "How important are shocks to the elasticity of aggregate labor supply for business cycle fluctuations? Lessons from Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 65(2), pages 48-67.
    • Handle: RePEc:zbw:espost:254264
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    References listed on IDEAS

    as
    1. Di Nola Alessandro & Kocharkov Georgi & Vasilev Aleksandar, 2019. "Envelope wages, hidden production and labor productivity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 19(2), pages 1-30, June.
    2. Vasilev, Aleksandar, 2009. "Business cycles in Bulgaria and the Baltic countries: an RBC approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(2), pages 148-170.
    3. Vasilev, Aleksandar, 2017. "A Real-Business-Cycle model with efficiency wages and a government sector: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 4, pages 359-377.
    4. Vasilev, Aleksandar, 2020. "Search and matching frictions and business cycle fluctuations in Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(3), pages 319-340.
    5. Aleksandar Vasilev, 2016. "Progressive taxation and (in)stability in an endogenous growth model with human capital accumulation," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 59(2), pages 1-15.
    6. Vasilev, Aleksandar, 2017. "A Real-Business-Cycle model with reciprocity in labor relations and fiscal policy: the case of Bulgaria," EconStor Preprints 156164, ZBW - Leibniz Information Centre for Economics.
    7. Vasilev, Aleksandar, 2016. "Progressive taxation and (in)stability in an endogenous growth model with human capital accumulation: the case of Bulgaria," EconStor Preprints 144212, ZBW - Leibniz Information Centre for Economics.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    business cycles; stochastic aggregate labor supply elasticity; Bulgaria;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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