Calvo wages in a search unemployment model
RBC models with search unemployment and wage renegotiation generate too much wage volatility and too stable unemployment rate. Shimer (2004) shows that it is possible to reproduce a volatility of unemployment similar to that observed in actual economies by imposing full real wage rigidity. We use a similar model but with Calvo wage contracts and we obtain a microfounded equation of real wage rigidities. The models with full wage flexibility or full wage rigidity are obtained as particular cases. We show that a contract length of about six quarters fits best the observed cyclical properties of wages and unemployment.
Year of publication: |
2006
|
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Authors: | Bodart, Vincent ; Pierrard, Olivier ; Sneessens, Henri R. |
Publisher: |
Bonn : Institute for the Study of Labor (IZA) |
Saved in:
freely available
Series: | IZA Discussion Papers ; 2521 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 541565982 [GVK] hdl:10419/34127 [Handle] |
Source: |
Persistent link: https://www.econbiz.de/10010269241
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