Downward Wage Rigidity in a Model of Equal Treatment Contracting
AbstractFollowing insights by Bewley (1999a) , this paper analyses a model with downward rigidities in which firms cannot pay discriminately based on year of entry to the firm, and develops an equilibrium model of wages and unemployment. We solve for the dynamics of wages and unemployment under conditions of downward wage rigidity, where forward-looking firms take into account these constraints. We show that there is a frontloading incentive that leads to a simple solution in the case of certainty. Using productivity data from the postwar US economy, we analyse the ability of the model to match certain stylised labour market facts. Copyright © The editors of the "Scandinavian Journal of Economics" 2010 .
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 112 (2010)
Issue (Month): 4 (December)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
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- Pedro S. Martins, 2014. "30,000 minimum wages: The economic effects of collective agreement extensions," Working Papers 51, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
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