Introduction section IGEM II

IGEM II

A recent variant of IGEM (IGEM II) extends the original model along three dimensions. First, the final good sector is characterized by imperfect competition. This new feature allows to undertake a more comprehensive study of the macroeconomic impact of liberalization policies. Second, the model incorporates involuntary unemployment as in Galí (2011). Notably this approach represents a parsimonious way of introducing unemployment into a dynamic general equilibrium model. Yet with this simple extension the model is now able to determine the behavior of unemployment conditional on the shocks and on the policy interventions put in place. Third, in this variant of IGEM the labor market of atypical workers is further complicated by the presence of nominal and real frictions. Finally, a business tax is introduced so as to map the IRAP and allows for a wider range of tax reform simulation scenarios.

Galí, J. (2011). The Return Of The Wage Phillips Curve, Journal of the European Economic Association, 9(3), 436-461.

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