What do information frictions do? (Q2569175)

In the paper, the multiple credit and labor market frictions in a neoclassical growth model are studied. The model is a two-period overlapping generations one. It is analyzed how the two frictions interact and affect stationary and non-stationary equilibria. This analysis bridges the gap between the credit and labor frictions investigations. The model is examined under various assumptions, concerning capitalists or workers, for different types of utility functions. Under such assumptions, the discrete time model is studied, and dynamic equilibria are expressed as a second order difference equation in the capital-labor ratio. The presented model is suitable for quantitative studies of the corresponding phenomena.