Preprint

A Real-Business-Cycle model with reciprocity in labor relations and fiscal policy: the case of Bulgaria

In this paper we introduce reciprocity in labor relations and government sector to investigate how well the real wage rigidity that results out of that arrangement ex- plains business cycle fluctuations in Bulgaria. The reciprocity mechanism described in this paper follows Danthine and Kurmann (2010) and is generally consistent with micro-studies, e.g. Lozev et all. (2011) and Paskaleva (2016), while at the same time comes into contrast with models with efficiency wages of no-shirking type that empha- size the importance of aggregate labor market conditions as the main determinant in wage setting, e.g. Vasilev (2017). Rent-sharing considerations, and worker's own past wages turn out to be the most important aspects of how labor contracting happens. In contrast, aggregate economic conditions, as captured by the employment rate, are not found to be quantitatively important for wage dynamics. Overall, the model with reciprocity and fiscal policy performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market frame- work featured in the standard RBC model, e.g Vasilev (2009).

Language
Englisch

Classification
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Labor Contracts
Subject
reciprocity
efficiency wages
general equilibrium
gift exchange
fiscal policy
Bulgaria

Event
Geistige Schöpfung
(who)
Vasilev, Aleksandar
Event
Veröffentlichung
(who)
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
(where)
Kiel und Hamburg
(when)
2017

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Preprint

Associated

  • Vasilev, Aleksandar
  • ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft

Time of origin

  • 2017

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