Modelling the sectoral allocation of labour in open economy models

Povoledo, Laura (2012): Modelling the sectoral allocation of labour in open economy models.

Abstract

This paper presents an open economy model with tradeable and nontradeable sectors in which individuals cannot supply labour in both sectors at the same time. In this economy, the Frisch elasticity of labour supply is infinite. I analyse how the infinite labour supply elasticity interacts with the Producer Currency Pricing (PCP) and Local Currency Pricing (LCP) assumptions, and I find that it does not significantly alter the empirical performance of the model with respect to a broad range of statistics.

• Item Type: MPRA Paper
• Language: English
• Keywords: New open economy models; Tradeable and nontradeable sectors; International business cycles; Labour supply elasticity
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles; E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

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