On the use of wage curves in empirical economic equilibrium models. Review and computational introduction

Abstract

This article evaluates the sensitivity of counterfactual results provided by a general equilibrium model to changes in the wage-unemployment sensitivity, using a wage curve. It specifies, calibrates, and simulates a small economy model with imperfect substitution between the components of the added value. The model includes a government that finances its spending with taxes and makes transfers to a representative consumer. It is not an empty labor market, at least not in a Walrasian sense, so there is unemployment in the base equilibrium. Different counterfactual configurations are studied for this economy, given certain changes in the parameter sensitivity of the wage curve.