Optimal Wage Re-Negotiation

22 Pages Posted: 22 Jun 2004 Last revised: 1 Jan 2023

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics

Date Written: February 1984

Abstract

This paper investigates an economy in which there are short-term wage contracts that are re-negotiated under certain conditions. This paper determines the optimal frequency of wage re-negotiation and shows that it depends positively on measures of aggregate variability and Phillips curve slope. The role of optimal wage re-negotiation is to mitigate the output effects of various shocks. In the context of an open economy, it is shown that the desirable exchange rate regime in an economy with optimal wage re-negotiation depends on the stochastic structure of the economy.

Suggested Citation

Aizenman, Joshua, Optimal Wage Re-Negotiation (February 1984). NBER Working Paper No. w1279, Available at SSRN: https://ssrn.com/abstract=321326

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall 300
Los Angeles, CA 90089
United States

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