Wage and rental rate in multi sector evonomy

General DSGE Modeling
1

Dear all,

I’m building a model with 4 sectors of production (agriculture, transport, services and industries) in perfect competition.

Since the environment is in perfect competition, wages and rental prices of capital should be the same in all sectors, right ?

One question that comes up a lot is the different labor cost of the sectors. I’m not sure I can capture that with a perfect competition set up but rather with a monopolist or a model with a labor union /searching - matching

Thank you so much.

Best regards

2

You need to be more precise. Perfect competition is about the output markets. Your question seems to be about factor markets. If they are competitive, then indeed the factor prices need to be the same.

3

Yes input markets are competitive. I only have one representative household with no labor union or what so ever.

Many thanks!