Dual Labor Markets and Business Cycles

Business Cycles and Labor-Market Search

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Is Labor Supply Important for Business Cycles?

We build a general equilibrium model that features uninsurable idiosyncratic shocks, search frictions and an operative labor supply choice along the extensive margin. The model is calibrated to match the average levels of gross flows across the three labor market states: employment, unemployment, and non-participation. We use it to study the implications of two kinds of aggregate shocks for the...

An incomplete markets model of business cycles

This paper explores the effects of incomplete markets and positive spillovers on aggregate and industry output behavior. We consider an economy composed of a fixed set of infinitely-lived industries. When industries coordinate production decisions they jointly improve their productivity. Markets are missing, however, in the sense that industries cannot automatically form the most productive coa...

Dual Labor Markets: A Theory of Labor Market Segmentation

Business Cycles , Wage Stickiness and Labor Market Disequilibrium

Real Business Cycles are often studied in the context of the general equlibrium framework with competitive markets, flexible wages and prices. This restricts the effective application of intertemporal models to the real world business cycles. Stickiness of wages and prices have been considered in recent monopolistic competition models. In this paper, we go a step further and separate labor supp...