Shocks and Frictions under Right-to-Manage WageBargaining: A Transatlantic Perspective

This paper introduces staggered right-to-manage wage bargaining into a NewKeynesian business cycle model. Our key result is that the model is able to generatepersistent responses in output, inflation, and total labor input to both neutraltechnology and monetary policy shocks. Furthermore, we compare the model’s dynamicbehavior when calibrated to the US and to an European economy. We findthat the degree of price rigidity explains most of the differences in response to amonetary policy shock. When the economy is hit by a neutral technology shock,both price and wage rigidities turn out to be important.