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Propagation of aggregate demand, firm specific and policy shocks in an economy with labour flows within and between firms of different sizes

Author

Listed:
  • Butter, Frank A. G. den

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Gameren, Edwin van

Abstract

This paper illustrates the propagation at the macro level of various types of shocks in a multifirm model representing a miniature economy which consists of firms of 4 different sizes. Our modelling exercise focuses on the interaction between internal and external labour flows. These flows are driven by the strategic behaviour of the firms with respect to fires, labour hoarding and internal versus external hires in case of opening of vacancies. The impulse response effects of our simulations show the mechanisms behind some findings of VAR-analyses, and of theoretical models of labour flows and the business cycle. Examples are the cleansing role of recessions and the larger spread of firm sizes due to technological change.

Suggested Citation

  • Butter, Frank A. G. den & Gameren, Edwin van, 2000. "Propagation of aggregate demand, firm specific and policy shocks in an economy with labour flows within and between firms of different sizes," Serie Research Memoranda 0019, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:2000-19
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    References listed on IDEAS

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    7. Butter, Frank A.G. den & Montfort, Kees van & Weitenberg, Gerben T.J., 1999. "Unemployment dynamics, and the propagation of aggregate and reallocation shocks using flow data for the Netherlands," Serie Research Memoranda 0024, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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    10. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-265, April.
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    More about this item

    Keywords

    labour market flows; hierarchical models of firms; interaction between internal and external labour markets; model simulations; impulse response effects; propagation of shocks;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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