Unemployment Benefits and Financial Leverage in an Agent Based Macroeconomic Model

Riccetti, Luca; Russo, Alberto; Gallegati, Mauro

doi:10.5018/economics-ejournal.ja.2013-42

“…Simulation results also show that more rigid labor markets and labour relations lead to higher productivity and GDP growth, as well as to lower inequality, unemployment and output volatility. In line with the intuitions of Stiglitz (2011Stiglitz ( , 2015, the negative effects of wage flexibility on macroeconomic dynamics are found also in Napoletano et al (2012) and Seppecher (2012), while Riccetti et al (2013b) find that unemployment benefits stabilize output fluctuations.…”

Section: Labor Market Policysupporting

confidence: 72%

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

Fagiolo

¹

,

Roventini

²

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe Great Recession seems to be a natural experiment for economic analysis, in that it has shown the inadequacy of the predominant theoretical framework -the New Neoclassical Synthesis (NNS) -grounded on the DSGE model. In this paper, we present a critical discussion of the theoretical, empirical and political-economy pitfalls of the DSGE-based approach to policy analysis. We suggest that a more fruitful research avenue should escape the strong theoretical requirements of NNS models (e.g., equilibrium, rationality, representative agent, etc.) and consider the economy as a complex evolving system, i.e. as an ecology populated by heterogenous agents, whose far-from-equilibrium interactions continuously change the structure of the system. This is indeed the methodological core of agent-based computational economics (ACE), which is presented in this paper. We also discuss how ACE has been applied to policy analysis issues, and we provide a survey of macroeconomic policy applications (fiscal and monetary policy, bank regulation, labor market structural reforms and climate change interventions). Finally, we conclude by discussing the methodological status of ACE, as well as the problems it raises.

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“…Different results emerge when the vintage of the CATS model developed in Riccetti et al (2014) is employed to study the impact of unemployment benefits on the short-run dynamics of the economy. They find that unemployment subsidies stabilize aggregate demand and in turn improve the financial conditions of firms (Riccetti et al, 2013b). Finally, given the negative impact of inequality on economic dynamics (as in Dosi et al, 2013), more progressive tax regimes can improve the short-and long-run performance of the economy (see the stock-flow consistent model in Caiani et al, 2017).…”

Section: Policy Analysismentioning

confidence: 99%

Agent-Based Macroeconomics and Classical Political Economy: Some Italian Roots

Dosi

¹

,

Roventini

²

2017

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Terms of use: Documents in EconStor mayIn this work, we discuss how the rich academic milieu left by different Italian political economy traditions after WWII paved the way to the development of a new generation of macroeconomic agent-based models. The K+S (Dosi et al., 2010(Dosi et al., , 2016a, CATS (Delli Gatti et al., 2005, 2011 and EURACE (Cincotti et al., 2010;Teglio et al., 2012) families of agentbased models are at the frontier of an alternative macroeconomic research paradigm which considers the economy as a complex evolving system. The three families of models are presented in details and their empirical performance and policy exercises discussed.

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“…Built on previous works as Russo et al (2007) and Riccetti et al (2013a), Riccetti et al (2015) proposes a macroeconomic model with heterogeneous agents, that directly interact in different markets according to a common decentralized matching mechanism, showing that business cycles as well as extended crises endogenously emerge due to the interplay between real and financial factors; the model has been employed to analyze the role of unemployment benefits (Riccetti et al, 2013b), the effects of the financialization of non-financial corporations , the effectiveness of financial regulation (Riccetti et al, 2017), the consequences of growing inequality , and the relationship between household debt, financial fragility and crisis episodes triggered by income and wealth distribution dynamics .…”

Section: Agent Based Modelling In Macroeconomicsmentioning

confidence: 99%

An Agent Based Macroeconomic Model with Social Classes and Endogenous Crises

Russo

¹

2016

SSRN Journal

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This paper proposes an agent based macroeconomic model in which income distribution and wealth accumulation depend on the role that agents play in productive activities, that is capitalists or workers. In this framework, social class dynamics underlie the endogenous process of firm formation. The focus is on the interplay between the evolution of social structure and macroeconomic dynamics and on how business cycles and crises may endogenously emerge as the result of the interaction between financial and real factors underlying the process of capitalist production.

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Unemployment Benefits and Financial Leverage in an Agent Based Macroeconomic Model

Cited by 24 publications

References 70 publications

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

Agent-Based Macroeconomics and Classical Political Economy: Some Italian Roots

An Agent Based Macroeconomic Model with Social Classes and Endogenous Crises

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