globals [average_wage ; average of wages paid in active sectors years months story ; list of unemployment rate values GDP ; total production in the economy in this month... growth ; yearly growth of GDP g ; total production in the economy in the last year employment_rate ; total employment rate in the economy unemployment_rate ; total unemployment rate in the economy mean_unemployment ; mean of unemploymentrate over time l_coefficient ; average sectoral fraction of the employment k ; patch colour definer u ; month of the year c ; sector counter for wage setting stddev ; standard deviation of sectoral employment among sectors level ; list of average wage values mean_wage ; mean of the avergaewage over time employment_stddev ; standard deviation of unemplotment rate over time ] patches-own [sector_prod ; sum of all wages paid in the sector this month... wage_level ; wage paid by the industry to each worker sector_employed ; number of people employed in the sector sector_employment ; percentage of workers of a certain sector who are currently working crisis ; number of consecutive bad performing years p ; patch that hosted a dead sector in its past receive 1 i ; 24 month-counter for wage rigidity ] turtles-own [base_wage ; wage which makes workers willing to work earned_wage ; total wage earned by the worker in his whole life life_years ; worker's life years savings ; money owned by workers after consumption t ; workers that come from a dead sector receive 1 ] ;*************************** SETUP INDUSTRIES AND WORKERS ************************************************************** to setup ; agents setting ca setup-industries setup-workers end to setup-industries set k 1 set u 0 set GDP 0 set story [0] set level [0] ask n-of n.industries patches [set pcolor k set k k + 5 ; industries are created with different colours... set sector_prod 0 ; ...that have no initial production level set, set wage_level random-normal labour_cost labour_cost / 2 ; their wage level is randomized around a determined value, set crisis 0 ; they just started so they cannot be in crisis ask neighbors [ set pcolor black ] ; industries cannot be neighbours ] end to setup-workers create-turtles n.labour_force [ setxy random-pxcor random-pycor ] ; workers are randomly disposed... ask turtles [set color white ; and are ready to any kind of job set shape "person" set life_years random (40) + 20 ; they have an initial age and... set base_wage random-normal acceptable_wage 1 ; their wanted minimum wage is randomized... set earned_wage (life_years - 20) * 12 * base_wage ; referring to the one given by user set savings 0.2 * earned_wage ; they have an initial level of earned wage... ] ; ...and savings in proportion to their age end ;****************************************** GO ************************************************************************* to go ; model development employment_dynamics wage_setting life_dynamics do-plots if halt ; if the switch is on th model stops after 100 years [if years >= 100 [stop]] end ;************* 1 ****************** EMPLOYMENT DYNAMICS OR WHAT WORKERS DO ACCORDING TO WHERE THEY ARE *********************** to employment_dynamics ; worker - sector relationship set employment_rate (count turtles-on patches with [pcolor != black] / count turtles) set story lput employment_rate story ; array of employment rate values set employment_stddev standard-deviation story ; employment rate standard deviation calculation set mean_unemployment 1 - mean story ; mean of unemployment rate set unemployment_rate (count turtles-on patches with [pcolor = black] / count turtles) set l_coefficient (employment_rate / count patches with [pcolor != black]) ; mean sector employment ask patches with [pcolor = black] [set wage_level 0 ; in the areas without industries... set sector_prod 0 ; ... there are no wage and production set sector_employed 0 set p 0 set plabel-color black ] ask turtles-on patches with [pcolor = black] ; workers close to an industry move in... [uphill wage_level] ; ...if there are more they choose the one.. ; ..which offers the higher wage ask turtles-on patches with [pcolor = black] ; workers search for job moving on the map [fd 2 set heading random 360] ask turtles-on patches with [pcolor != black] [ifelse wage_level < base_wage ; they ask for a base salary... [fd 4 ; ...when salary is lower than what they need... set heading random 360 ; ...they go seek a job somewhere else... st ; workers are shown when they go out of a sector ] [ifelse color = white or color = pcolor ;...if given, they stay to work [fd 0 set color pcolor ; ...and they become specialized in that field ht ; working people are not visible on screen set earned_wage (earned_wage + wage_level)] ; they get paid [ifelse (life_years * random-normal 3 1 < 100) and savings > wage_level * 3 [set t 0 set color pcolor ; if they are specialized in another sector set savings savings - (wage_level * 3)] ; ...they can pay for learning a different job ; ...and try to be employed [fd 4 set heading random 360 ] ; ...or, if they cannot, go away ] ]] end ;********************** 2 ********************* WAGE BARGAINING ******************************************************* to wage_setting ask patches with [pcolor != black] [ifelse any? turtles-here [set sector_employed count turtles-here with [color = pcolor] ; number of workers in the factory set plabel sector_employed ; puts on industries a label with its number of workers set plabel-color pcolor + 5 ; in a visible color relative to the patch set sector_prod (wage_level * sector_employed) ; sector production is equal to the wages paid ] [set sector_prod 0] ; ...no production with no workers ] set GDP (sum [sector_prod] of patches with [pcolor != black] ) ; GDP is calculated as sum of sector production ifelse count turtles with [color = pcolor] > 0 [set average_wage (GDP / count turtles with [color = pcolor])] ; calculation of the average wage paid to workers [set average_wage 0] set level lput average_wage level set mean_wage mean level ifelse rigidity [set c 0 while [c < 140] [set c c + 1 ; c defines the the different sector ask patches with [pcolor = c] ; wage setting depends on sectoral unemployment [if any? turtles-here with [color = c] [ifelse i < 24 ; if the switch for rigidity is on [set i i + 1] ; wages are contracted every two years [set sector_employment sector_employed / (count turtles with [color = c]) set wage_level (sector_employment * 4) + labour_cost set i 0] if centralised_bargaining ; if the switch for centralised contracts is on [set wage_level (employment_rate * 4) + labour_cost]] ; wages depend on global unemployment ]]] [set c 0 while [c < 140] [set c c + 1 ask patches with [pcolor = c] ; wage setting depends on sectoral unemployment [if any? turtles-here with [color = c] [set sector_employment sector_employed / (count turtles with [color = c]) set wage_level sector_employment * 4 + labour_cost] if centralised_bargaining ; if the switch is on it depends also on global unemployment [set wage_level employment_rate * 4 + labour_cost] ]]] set stddev standard-deviation [sector_employment] of patches with [pcolor != black] ask turtles-on patches with [pcolor != black] ; each month workers ask for better conditions... [set base_wage base_wage + 0.027] ; ...based on the experience accumulated ask turtles-on patches with [pcolor = black] ; unemployed people lower their salary requests [if color != white [if base_wage > (acceptable_wage - 1) [set base_wage base_wage - 0.05]]] ifelse (GDP != 0) ; annual growth rate calculation [if u = 0 [set g GDP] set u u + 1 if u = 12 [set u 0 set growth (GDP - g) / g * 100]] [set growth 0] end ;************ 3 *********************** LIFE DYNAMICS *************************************************************** to life_dynamics ask turtles [set life_years life_years + (1 / 12)] ; people grow old ask turtles-on patches with [pcolor != black] [set savings savings + (wage_level * 0.2)] ask turtles-on patches with [pcolor = black] [set savings savings - (earned_wage * 0.5 / ((life_years - 20) * 12))] ask patches with [pcolor != black] [ifelse any? turtles-here with [color = pcolor] [ifelse sector_employed / count turtles-on patches with [pcolor != black] < l_coefficient / 3 [set crisis crisis + 1] ; ...the industry is in crisis when it employs [set crisis 0]] ; ...less than one third of its projected slice [set crisis crisis + 1] ; ...of employment if crisis = 120 ; after 120 months of crisis in a row [set p 1 set crisis 0 set pcolor black ; ...the sector closes set wage_level 0 set plabel-color black] ] if government_benefits [ask turtles-on patches with [p = 1] [set t 1] ask turtles with [t = 1] ; workers of "dead" sectors are helped by the government [set savings savings + acceptable_wage * 0.5]] ; ...with special benefits ask turtles-on patches with [pcolor = black] ; workers go away from "dead" sectors [if sector_employed > 0 [st fd 2 set heading random 360]] ask n-of (n.industries - count patches with [pcolor != black]) patches ; creation of new industries... [if count patches with [pcolor != black] < n.industries ; ... to replace the "dead" ones [set k k + 5 if k > 139 ; they are created in different colors [set k 2] set pcolor k set p 0 set sector_prod 0 set wage_level random-normal labour_cost labour_cost / 2 set crisis 0 ask neighbors [set pcolor black set wage_level 0] ]] ask turtles [if life_years > random-normal 65 5 ; death happens, retirement sometimes [die] if savings < 0 [die] ] if count turtles < n.labour_force [create-turtles (n.labour_force - count turtles) ; every month there is new labour force [set color white ; in order to keep it constant set shape "person" setxy random-pxcor random-pycor set life_years 20 set base_wage random-normal acceptable_wage 2 ]] set months months + 1 ; one month after... set years months / 12 end ;************* 4 *************************** PLOTS *********************************************************************** to do-plots set-current-plot "employment_rate" plot (employment_rate) set-current-plot "unemployment_rate" plot (unemployment_rate) set-current-plot "average_wage" plot ( average_wage ) set-current-plot "sectoral_stddev" plot ( stddev ) set-current-plot "employment_stddev_mean" plot ( employment_stddev ) end @#$#@#$#@ GRAPHICS-WINDOW 275 10 714 470 16 16 13.0 1 10 1 1 1 0 1 1 1 -16 16 -16 16 0 0 1 ticks CC-WINDOW 5 690 941 785 Command Center 0 BUTTON 2 24 68 57 NIL setup NIL 1 T OBSERVER NIL NIL NIL NIL BUTTON 70 24 133 57 step go NIL 1 T OBSERVER NIL NIL NIL NIL BUTTON 136 24 199 57 NIL go T 1 T OBSERVER NIL NIL NIL NIL SLIDER 12 238 263 271 n.labour_force n.labour_force 100 800 500 1 1 NIL HORIZONTAL SLIDER 11 280 183 313 n.industries n.industries 1 20 12 1 1 NIL HORIZONTAL MONITOR 722 545 822 590 NIL average_wage 3 1 11 MONITOR 762 357 864 402 NIL employment_rate 5 1 11 MONITOR 715 161 820 206 NIL unemployment_rate 5 1 11 MONITOR 210 25 267 70 NIL years 2 1 11 MONITOR 208 78 268 123 NIL months 17 1 11 PLOT 715 10 915 160 unemployment_rate months NIL 0.0 1200.0 0.0 1.0 true false PENS "default" 1.0 0 -10899396 true PLOT 717 205 917 355 employment_rate months NIL 0.0 1200.0 0.0 1.0 true false PENS "default" 1.0 0 -2674135 true PLOT 721 404 920 544 average_wage months NIL 0.0 1200.0 0.0 10.0 true false PENS "default" 1.0 0 -16777216 true MONITOR 213 531 301 576 NIL l_coefficient 5 1 11 MONITOR 241 479 298 524 NIL growth 3 1 11 SLIDER 12 196 184 229 acceptable_wage acceptable_wage 1 5 3 0.5 1 NIL HORIZONTAL SWITCH 22 370 206 403 centralised_bargaining centralised_bargaining 1 1 -1000 SWITCH 21 414 124 447 rigidity rigidity 1 1 -1000 SLIDER 12 154 184 187 labour_cost labour_cost 3 10 5 1 1 NIL HORIZONTAL SWITCH 18 458 169 491 government_benefits government_benefits 0 1 -1000 PLOT 308 478 508 628 sectoral_stddev NIL NIL 0.0 1200.0 0.0 0.5 true false PENS "default" 1.0 0 -16777216 true PLOT 516 481 716 631 employment_stddev_mean NIL NIL 0.0 1200.0 0.0 1.0 true false PENS "default" 1.0 0 -16777216 true MONITOR 554 631 679 676 NIL employment_stddev 3 1 11 MONITOR 349 628 451 673 sectoral_stddev stddev 3 1 11 SWITCH 98 66 201 99 halt halt 0 1 -1000 MONITOR 821 160 932 205 NIL mean_unemployment 3 1 11 MONITOR 838 547 918 592 NIL mean_wage\n 3 1 11 @#$#@#$#@ WHAT IS IT? ----------- The model is a simulation of an economy seen from the SUPPLY SIDE, composed of a certain number of industries (or sectors) and workers who seek work. The main aim of the model is to show that WAGE BARGAINING CAN CREATE BUSINESS CYCLES in an economy, assuming that the demand perfectly fits the supply. HOW IT WORKS ------------ When the model is set up workers and industries are randomly placed. Workers move around the world and when they find themselves close to an industry they go in and compare their requested wage with the wage level offered by the industry, deciding whether to work there or not. The core of the model is the WAGE BARGAINING EQUATION. It describes a positive relation between the wage level and the sectoral (or global) employment, plus a fixed component called labour cost. After starting, the model has a 10 year period of settlement before showing the long-term trend. An important feature is the complex system of employment dynamics, which uses colors to create sectors and specialised workers. HOW TO USE IT ------------- With the "setup" button we create the world in which agents interact, and also the initial value of the variables. The button "step" moves the model for one tick (one month). The button "go" starts the simulation, and if the "halt" switch is on the model stops after 100 years (after 1200 ticks); else, it continues until user stops it. In the main window there are four sliders (i)labour_cost (sets the fixed share of salaries AND the base level of wages) (ii)acceptable_wage (sets the initial base wage level) (iii)n.labour_force (sets the number of workers) (iv)n.industries (sets the number of industries in the economy) and three switches (v)centralised_bargaining (if turned on, wage bargaining is done on the global level of unemployment instead of using separated values of sector unemployment) (vi)rigidity (if turned on, wage bargaining is made each 2 years instead of each month, i.e. nominal wage rigidity is inserted) (vii)goverment_benefits (if turned on, there are benefits for workers specialised in a dead sector) And now the monitors and graphs l_coefficient : shows the current value average share of the employment for each sector (employment rate/number of sectors) growth : shows the current value of economic growth, on an annual base sectoral_stddev : plots the evolution in time of the standard deviation between sector values of unemployment each month (the monitor shows the current value) employment_stddev_mean : plots the MEAN of the standard deviation of unemployment over time (the monitor shows the relative value), unemployment_rate : plots the course over time of the unemployment rate of the economy (the two monitors show resepectively the current value and the mean over time) employment_rate : plots the course over time of the employment rate of the economy (the relative monitor shows the current value) average wage : plots the mean of wage level of sectors over time (the two monitors show resepectively the current value and the mean over time) THINGS TO NOTICE ---------------- While the model runs, you can take a look in two different ways. The first way is to look at the world's representation (when you do, we recommand to slow down the model down a little bit) to see how the workers get a job, starting from a situation where everybody is unemployed and with no specialisation. When a worker gets a specialisation it changes his color to his sector's color, and you can follow the evolution of employment by watching the numbers on the industries (sector employed). When a worker is employed he is "hidden" inside the industry; when he is fired (because the company can't afford paying him the wage he wants) he appears on the map again and you can follow him while he's seeking a new job. The second way is to look at the graphs' evolution over time to see how the model behaves from a macroeconomic point of view. THINGS TO TRY ------------- To make experience with the model you can try different combinations of sliders and switches to change the initial settings. Interesting experiments can be made introducing one new feature while the model is already running. EXTENDING THE MODEL ------------------- A good extension of the model could be made introducing consumption and production, with each sector producing a different good and workers consuming a humper of goods in order to live. Another good idea could be creating a parameter which measures the length of a business cycle, in order to compare it in the different configurations. NETLOGO FEATURES ---------------- Uphill is used to attract workers into industries when they are on a neighboring patch. RELATED MODELS -------------- We freely took little inspiration from the work of Alberto Canuto, Federica Capanna, Stefano Cumino, whose model with trade unions can be found at http://web.econ.unito.it/terna/tesine/labour_market_trade-unions.htm CREDITS AND REFERENCES ---------------------- O.Blanchard, "Macroeconomics", Prentice Hall; W.Carlin-D.Soskice, "Macroeconomics: Imperfections, Institutions and Policies", Oxford University Press. @#$#@#$#@ default true 0 Polygon -7500403 true true 150 5 40 250 150 205 260 250 airplane true 0 Polygon -7500403 true true 150 0 135 15 120 60 120 105 15 165 15 195 120 180 135 240 105 270 120 285 150 270 180 285 210 270 165 240 180 180 285 195 285 165 180 105 180 60 165 15 arrow true 0 Polygon -7500403 true true 150 0 0 150 105 150 105 293 195 293 195 150 300 150 box false 0 Polygon -7500403 true true 150 285 285 225 285 75 150 135 Polygon -7500403 true true 150 135 15 75 150 15 285 75 Polygon -7500403 true true 15 75 15 225 150 285 150 135 Line 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