Only savers and debtors supply differentiated labour services to unions which maximise a joint utility function for each type of labour i. It is assumed that types of labour are distributed equally over the two household types. Nominal rigidity in wage setting is introduced by assuming that the household faces adjustment costs for changing wages. These adjustment costs are borne by the household.
to the 
which is the sum of bonds to 
. They also own the stock of land (
) and