Non-Walrasian Unemployment Fluctuations

57 Pages Posted: 20 Jul 2000 Last revised: 24 Sep 2010

See all articles by Jordi Galí

Jordi Galí

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: November 1995

Abstract

We modify the standard real business cycle model by assuming that wages are set by a monopoly union at the firm level. In the context of such a model, we introduce a measure of unemployment and analyze its equilibrium behavior. We show that a calibrated version of the model is capable of generating both a procyclical labor supply and a countercyclical unemployment rate, in a way qualitatively consistent with the evidence. The model stresses the role of countercyclical markups in the goods market as a key mechanism underlying the countercyclical behavior of unemployment.

Suggested Citation

Gali, Jordi, Non-Walrasian Unemployment Fluctuations (November 1995). NBER Working Paper No. w5337. Available at SSRN: https://ssrn.com/abstract=225401

Jordi Gali (Contact Author)

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain
+34 93 542 2754 (Phone)
+34 93 542 1746 (Fax)

HOME PAGE: http://www.econ.upf.es/~gali

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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