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Dynamic analysis of a disequilibrium macroeconomic model with dual labor markets
Author(s) -
Ogawa Shogo
Publication year - 2019
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12255
Subject(s) - disequilibrium , economics , unemployment , wage , dual (grammatical number) , wage bargaining , business cycle , term (time) , duality (order theory) , general equilibrium theory , microeconomics , keynesian economics , labour economics , macroeconomics , medicine , art , physics , literature , mathematics , discrete mathematics , quantum mechanics , ophthalmology
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 expenditure, 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.