The cyclical behavior of real wages has evolved from mildly countercyclical during the interwar period to modestly procyclical in the postwar era. This paper presents a general-equilibrium business-cycle model that helps explain the evolution. In the model, changes in the real wage cyclicality...

Economic models are meant to provide a framework to describe real-world economic activities. In principle, how well a model performs this task can be evaluated by how close the model's simulated activities track the observed ones. A necessary first step in simulating a model is to choose values...