We propose a theory of low-frequency movements in unemployment based on downward real wage rigidities. The theory generates two main predictions: long-run unemployment increases with (i) a fall in long-run productivity growth and (ii) a rise in the variance of productivity growth. Evidence based...

The paper presents a new empirical regularity between the volatility of productivity growth and long-run unemployment, for a given level of long-run productivity growth. A theoretical framework based on asymmetric real wage rigidities is shown to have the potential to rationalize this finding....

We propose a theory of low-frequency movements in unemployment based on downward real wage rigidities. The theory generates two main predictions: long-run unemployment increases with (i) a fall in long-run productivity growth and (ii) a rise in the variance of productivity growth. Evidence based...

In the presence of downward nominal wage rigidities, wage setters take into account the future consequences of their current wage choices, when facing both idiosyncratic and aggregate shocks. We derive a closed-form solution for a long-run Phillips curve which relates average output gap to...

We propose a theory of low-frequency movements in unemployment based on asymmetric real wage rigidities. The theory generates two main predictions: long-run unemployment increases with (i) a fall in long-run productivity growth and (ii) a rise in the variance of productivity growth. Evidence...

The paper presents a new empirical regularity between the volatility of productivity growth and long-run unemployment, for a given level of long-run productivity growth. A theoretical framework based on asymmetric real wage rigidities is shown to have the potential to rationalize this finding....

consequences of their current wage choices, when facing both idiosyncratic and aggregate shocks. We derive a closed-form solution for a long-run Phillips curve which relates average output gap to average wage inflation: it is virtually vertical at high inflation and flattens at low inflation....

We propose a theory of low-frequency movements in unemployment based on asymmetric real wage rigidities. The theory generates two main predictions: long-run unemployment increases with (i) a fall in long-run productivity growth and (ii) a rise in the variance of productivity growth. Evidence...