Following Farmer’s micro-foundation of the General Theory, I build a competitive search model in which agents are divided in two categories, i.e. wage and profit earners. Within this framework, I show that the model economy has a continuum of equilibria that might be consistent with a certain degree of endogenous real stickiness. Moreover, calibrating and simulating the model in order to fit US first-moment data, I show that this setting can provide a rationale for the Shimer puzzle, i.e. the relative stability of labor productivity in spite of the large volatility of labor market tightness.
Search And Stochastic Dynamics In The Old Keynesian Economics: A Rationale For The Shimer Puzzle
GUERRAZZI, MARCO
2011
Abstract
Following Farmer’s micro-foundation of the General Theory, I build a competitive search model in which agents are divided in two categories, i.e. wage and profit earners. Within this framework, I show that the model economy has a continuum of equilibria that might be consistent with a certain degree of endogenous real stickiness. Moreover, calibrating and simulating the model in order to fit US first-moment data, I show that this setting can provide a rationale for the Shimer puzzle, i.e. the relative stability of labor productivity in spite of the large volatility of labor market tightness.
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