I want to know how to set calvo pricing separately in the two intermediate product departments? Is there a classic DSGE model that includes two sectors?
G1.mod (4.1 KB)
This is my model. When I shortened the model to only one intermediate manufacturer, the model can run normally. But when my model had two manufacturers, he reminded me that the B-K condition was not met.
Does a flex price version work?
Dear Professor jpfeifer, thank you for your reply. I now simplify the model to two intermediate product manufacturers. The difference between the two manufacturers is the share of capital in production. But I found that my model cannot set two wage levels, because there are 32 variables and 31 equations. I must not set the same salary level for both manufacturers. Excuse me, how should two wage levels be set? Thank you.This is my model.G5.mod (3.5 KB)
I am not sure I understand. If labor is mobile, then wages cannot be different across sectors. Otherwise, nobody would be willing to work in the sector with the lower wage.