In this paper we investigate the quantitative importance of collective bargaining agreements for the observed fluctuations in Bulgarian labor markets. Following Maffezzoli (2001), we introduce a monopoly union into a real-business-cycle model with government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2018), and compare and contrast it to a model without unions. We fi nd that the sequential bargaining procedure between the monopoly union and the stand-in rm produces an important internal propagation mechanism within the theoretical setup, which allows the monopoly model to fi t data better than the alternative framework with perfectly-competitive labor markets.
business cycles general equilibrium labor unions indivisible labor involuntary unemployment