Are "fair" wages quantitatively important for business cycle fluctuations in Bulgaria?

Artikel

We introduce "fair" wages in a general-equilibrium model where worker's effort is unobservable and investigate whether such a mechanism can quantitatively account for the degree of real wage rigidity in the Bulgarian labor markets, as documented in Lozev, Vladova, and Paskaleva (2011) and Paskaleva (2016). In contrast to Danthine and Kurmann (2004), we internalize the effect that past wages have on the current effort level. We calibrate the model to Bulgarian data (1999-2016), and quantify the effect of technological shocks on hours and wages in the theoretical setup. Overall, the calibrated model with "fair" wages performs poorly when it comes to the relative volatilities of labor market variables. This is because aggregate labor market conditions, as proxied by the employment rate and past aggregate wages, turn out not to be quantitatively important for business cycles in Bulgaria.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Review of Economic Perspectives ; ISSN: 1804-1663 ; Volume: 20 ; Year: 2020 ; Issue: 1 ; Pages: 91-105 ; Warsaw: De Gruyter

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Business Fluctuations; Cycles ; Labor Contracts
• Subject: Business cycles ; unobservable effort ; fair wages ; unemployment ; Bulgaria

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Vasilev, Aleksandar
• Event: Veröffentlichung
• (who): De Gruyter
• (where): Warsaw
• (when): 2020

Further information

• DOI: doi:10.2478/revecp-2020-0005
• Handle: http://hdl.handle.net/10419/227542
• Last update: 10.03.2025, 11:44 AM CET