JADE: a model for the Joint Analysis of Dynamics and Equilibrium

Novel features are a disaggregation of the labor market by skill level and an endogenous equilibrium rate of unemployment. High and low skilled labor are separately distiguished in the production functions and in wage formation. Hence, policies targetted at the low skilled labor can be explored. Error correction mechanisms estimated with cointegration techniques link dynamics and long-run equilibrium. Simulation exercises show how these novel features operate within the larger model.