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- Title
DUAL LABOR MARKET AND ENDOGENOUS FLUCTUATIONS.
- Authors
FRANCESCO DE PALMA; THOMAS SEEGMULLER
- Abstract
We study the influence of wage differential on the emergence of endogenous fluctuations. In this way, we introduce a dual labor market, based on the Shapiro–Stiglitz efficiency wage theory in an overlapping generations model. We show that wage inequality is a source of endogenous fluctuations. Indeed, a sufficiently strong wage differential leads to the occurrence of cycles of period 2 and local indeterminacy. Moreover, in contrast to several existing contributions, these results depend neither on increasing returns to scale nor on the degree of capital–labor substitution.
- Subjects
BUSINESS research; WAGE differentials; EFFICIENCY wage theory; LABOR market; INCOME inequality
- Publication
Macroeconomic Dynamics, 2005, Vol 9, Issue 3, p398
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100505040265