Silvio Donato, Daniela Pisarro

Computer Science and Simulation for Economics

Project work on

"Wages and unemployment."

 

The applet requires Java 1.4.1 or higher. It will not run on Windows 95 or Mac OS 8 or 9. Mac users must have OS X 10.2.6 or higher and use a browser that supports Java 1.4. (Safari works, IE does not. Mac OS X comes with Safari. Open Safari and set it as your default web browser under Safari/Preferences/General.) On other operating systems, you may obtain the latest Java plugin from Sun's Java site.


created with NetLogo

view/download model file: wages_unemployment.nlogo

WHAT IS IT?

The model shows workers and firms interacting among them in the job market. The firms have a product function and will assume new workers according to this function. Also workers have ties that are characterized, in particular, from the reserve wage.


HOW IT WORKS

The agents are workers and firms. Workers are finding a job and during this research they have to consider their reserve wage. Only when they find a firm that offers at least that wage they'll be hired. The workers' patience can reduce when they had to compare with a high unemployemt rate, and when the patience decrease, also the reserve wage decrease.


HOW TO USE IT

The observer can choose the number of firms and the number of workers by sliders. The switches allow to render the world of the job unionized through the introduction of a collettive ageement.
If the observer decides that the workers aren't patient this reduce their reserve for every step.

The simulation starts by clicking "setup".
By clicking the button "go", the turtles start moving randomly

The button setup resets everything to the random-beginning values and releases in the simulated world a number of turtles which can be chosen by the "firms-number" and "workers-number" slider.

Plot: wage
this plot shows the trend of wages

Plot: unemployement
this plot indicates the trend of unemployment rate.


THINGS TO NOTICE

we can observe that setting up the switch of "unionized" on the state on, the workers find job easilier because the firms can't offer wages minor than the wages comed out of collective agreements.
When the workers have hurry in a few second they will find a job and only a little part of them remains unemployed.
The minimun number of firms has been set up to 2 in order to avoid errors in the calculation of the divisions and the representation of the plot.
Moreover wages depend negatively on the unemployment rate, how much more elevated are the unemployment rate, more low will be the salaries.


THINGS TO TRY

The more meaningful things to try are to set up the numbers of the enterprises and the workers with high values and then with very low values. After this to have observed the effects that these choices produce on the model, it is interesting to observe the effects of the introduction of a collective contract.
If it is curious of knowing workers' response when they are not patients can be set up on on the switch hurry.


EXTENDING THE MODEL

The model could be extended in this way:
- the introduction of a collective contract only for a little group of workers.
- to establish a maximum and minimum level of wage;
- to introduce other categories of firms with other function production;


CREDITS AND REFERENCES

The theory used in the simulation refers to the book:
O. Blanchard "Macroeconomics", 3rd edition..
On the web itís possibile to find one NetLogo model which we have used as a reference:
"Job market and esogenous variables by "Consuelo Nava, Claudio Rendinella, Francesco Vercelli
----site http://web.econ.unito.it/terna/tesine.