TY - JOUR
T1 - When more flexibility yields more fragility: The microfoundations of Keynesian aggregate unemployment
AU - Dosi, G.
AU - Pereira, M. C.
AU - Roventini, A.
AU - Virgillito, M. E.
PY - 2017
Y1 - 2017
N2 - Wages are an element of cost crucially affecting the competitiveness of individual firms. But the wage bill is also a crucial element of aggregate demand. Hence it could be that more âflexibleâ and âfluidâ labour markets, while allowing for faster inter-firm reallocation of labour, may also render the whole economic system more fragile, more prone to recession, and more volatile. In this work, we investigate some conditions under which such a conjecture applies. The paper presents an agent-based model that investigates the effects of two âarchetypes of capitalismâ â in terms of regimes of labour governance defined by the mechanisms of wage determination, firing, labour protection and productivity gains sharing â upon (i) labour market regularities and (ii) macroeconomic dynamics (long-term rates of growth, GDP fluctuations, unemployment rates, inequality, etc.). The model is built upon the âKeynes meets Schumpeterâ family of models (Dosi et al., 2010), explicitly incorporating different microfounded labour market regimes. Our results show that seemingly more rigid labour markets and labour relations are conducive to coordination successes leading to higher and smoother growth.
AB - Wages are an element of cost crucially affecting the competitiveness of individual firms. But the wage bill is also a crucial element of aggregate demand. Hence it could be that more âflexibleâ and âfluidâ labour markets, while allowing for faster inter-firm reallocation of labour, may also render the whole economic system more fragile, more prone to recession, and more volatile. In this work, we investigate some conditions under which such a conjecture applies. The paper presents an agent-based model that investigates the effects of two âarchetypes of capitalismâ â in terms of regimes of labour governance defined by the mechanisms of wage determination, firing, labour protection and productivity gains sharing â upon (i) labour market regularities and (ii) macroeconomic dynamics (long-term rates of growth, GDP fluctuations, unemployment rates, inequality, etc.). The model is built upon the âKeynes meets Schumpeterâ family of models (Dosi et al., 2010), explicitly incorporating different microfounded labour market regimes. Our results show that seemingly more rigid labour markets and labour relations are conducive to coordination successes leading to higher and smoother growth.
KW - Agent-based models
KW - Aggregate demand
KW - Applied Mathematics
KW - Control and Optimization
KW - Economics and Econometrics
KW - Involuntary unemployment
KW - Keynesian coordination failures
KW - Labour market regimes
KW - Wage determination
KW - Agent-based models
KW - Aggregate demand
KW - Applied Mathematics
KW - Control and Optimization
KW - Economics and Econometrics
KW - Involuntary unemployment
KW - Keynesian coordination failures
KW - Labour market regimes
KW - Wage determination
UR - https://publicatt.unicatt.it/handle/10807/114471
U2 - 10.1016/j.jedc.2017.02.005
DO - 10.1016/j.jedc.2017.02.005
M3 - Article
SN - 0165-1889
VL - 81
SP - 162
EP - 186
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - August
ER -