Macroeconomists have for some time been aware that the New Keynesian Phillips curve, though highly popular in the literature, cannot explain the persistence observed in actual inflation. We argue that one of the more prominent alternative formulations, the Fuhrer and Moore (1995) relative...

How do the complex institutions involved in wage setting affect wage changes? The International Wage Flexibility Project provides new microeconomic evidence on how wages change for continuing workers. We analyze individuals’ earnings in 31 different data sets from sixteen countries, from which...

How do the complex institutions involved in wage setting affect wage changes? The International Wage Flexibility Project provides new microeconomic evidence on how wages change for continuing workers. We analyze individuals' earnings in thirty-one different data sets from sixteen countries, from...

Within a simple formal model, we show that there is a link between workers' consumption patterns and their preferred real wage. A large budget share of illiquid durable consumption goods (such as houses and cars) makes workers more willing to accept a low wage in order to reduce the probability...

Consider a contract between two players, describing the payment an agent obtains from the principal, in exchange for a good or service supplied. At each point in time, either player may unilaterally demand a renegotiation of the contract, involving renegotiation costs for both players....

The paper provides a short and simplified overview of important deviations from the economic man assumption that have been documented in research by cognitive psychologists and experimental economists. After the overview, I proceed to look at one specific topic within macroeconomics – the...

Inflation can “grease” the wheels of economic adjustment in the labor market by relieving the constraint imposed by downward nominal wage rigidity, but not if there is also substantial downward real wage rigidity. At the same time, inflation can throw “sand” in the wheels of economic...

Most wage-contracting models with rational expectations fail to replicate the persistence in inflation observed in the data. We argue that coordination problems and multiple equilibria are the keys to explaining inflation persistence. We develop a wage-contracting model in which workers are...

When a large group of people is affected by a bargaining outcome, practical reasons often require that the group be represented by an agent in the bargaining. This paper addresses the issue of how the group ensures that the agent reaches an agreement that satisfies the group. The authors show...