Dynamic Analysis of a Disequilibrium Macroeconomic Model with Dual Labor Markets

Ogawa, Shogo (2018): Dynamic Analysis of a Disequilibrium Macroeconomic Model with Dual Labor Markets.

Abstract

We extend the general disequilibrium model of Malinvaud(1980) by using dual labor market theory. By considering two tiers of workers, we find that while the duality of the labor market expands an equilibrium regime in the short term, it does not always keep an equilibrium in the medium term. In the medium term, the business cycle converges toward a disequilibrium regime unless the goods market is potentially in equilibrium. Employment and wages at the steady state are affected by the size of the government, and the stability of wage bargaining is only a sufficient condition of the local stability of our dynamic system. Therefore, involuntary unemployment can be remedied only when goods demand is sufficiently large.

• Item Type: MPRA Paper
• Language: English
• Keywords: Disequilibrium macroeconomics; Non-Walrasian analysis; Segmented labor markets; Business cycles
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J42 - Monopsony ; Segmented Labor Markets

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