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Unemployment, Factor Substitution and Capital Formation
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Leo Kaas
Veröffentlicht/Copyright:
30. November 2019
Abstract
We incorporate a wage-bargaining structure in a dynamic general equilibrium model and show how this feature changes short- and long-run properties of equilibria compared with a perfectly competitive setting.We discuss how employment, capital and income shares respond to wage-setting shocks and show that adjustment dynamics depend decisively on the magnitude of the elasticity of substitution between labour and capital. Values of the elasticity below unity add persistence, tend to preserve stability and lead to empirically plausible adjustment patterns. By contrast, values above unity introduce additional volatility, thereby making steady states potentially unstable.
Published Online: 2019-11-30
Published in Print: 2003-12-01
© 2019 by Walter de Gruyter Berlin/Boston
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Artikel in diesem Heft
- The Regime-Dependent Determination of Credibility: A New Look at European Interest Rate Differentials
- Interest Rate Volatility Prior to Monetary Union under Alternative Pre-Switch Regimes
- The Biological Standard of Living in the Two Germanies
- Unemployment, Factor Substitution and Capital Formation
- Buyer Subsidies in an Equilibrium Model of Price Dispersion
Artikel in diesem Heft
- The Regime-Dependent Determination of Credibility: A New Look at European Interest Rate Differentials
- Interest Rate Volatility Prior to Monetary Union under Alternative Pre-Switch Regimes
- The Biological Standard of Living in the Two Germanies
- Unemployment, Factor Substitution and Capital Formation
- Buyer Subsidies in an Equilibrium Model of Price Dispersion
