Sequential Bargaining in a New-Keynesian Model with Frictional Unemployment and Staggered Wage Negotiation
32 Pages Posted: 30 Mar 2009
There are 2 versions of this paper
Sequential Bargaining in a New Keynesian Model with Frictional Unemployment and Staggered Wage Negotiation
Abstract
We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers' bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility.
Keywords: DSGE, search and matching, nominal wage rigidity, monetary policy
JEL Classification: E31, E32, E52, J64
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Real Wage Rigidities and the New Keynesian Model
By Olivier J. Blanchard and Jordi Galí
-
Real Wage Rigidities and the New Keynesian Model
By Olivier J. Blanchard and Jordi Galí
-
Real Wage Rigidities and the New Keynesian Model
By Jordi Galí and Olivier J. Blanchard
-
Labor Market Search, Sticky Prices, and Interest Rate Policies
-
A New Keynesian Model with Unemployment
By Olivier J. Blanchard and Jordi Galí
-
The (Ir)Relevance of Real Wage Rigidity in the New Keynesian Model with Search Frictions
By Michael U. Krause and Thomas A. Lubik
-
Labor Markets and Monetary Policy: A New-Keynesian Model with Unemployment
By Olivier J. Blanchard and Jordi Galí