In this paper we introduce reciprocity in labor relations and government sector to investigate how well the real wage … rigidity that results out of that arrangement ex- plains business cycle fluctuations in Bulgaria. The reciprocity mechanism … be quantitatively important for wage dynamics. Overall, the model with reciprocity and fiscal policy performs well vis …

The purpose of this note is to explore the problem of a non-convex labor supply decision in an economy with reciprocity …