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Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation

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Author Info
Gregory de Walque
Olivier Pierrard
Henri Sneessens
Raf Wouters ()

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Abstract

We build a model with frictional unemployment and staggered wage bargaining and we assume that hours worked are negotiated every period. We analyze the role of workers? bargaining power in the hours negotiation on unemployment volatility and inflation persistence. The closer to zero is this parameter, (i ) the more firms adjust on the intensive margin, reducing employment volatility, (ii ) the lower the effective workers? bargaining power for wages and (iii ) the more important is the hourly wage in the marginal cost determination. Combining staggered wage bargaining with some degree of workers? bargaining power in the hours negotiation, we produce realistic labor market statistics together with inflation persistence.

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Paper provided by Central Bank of Luxembourg in its series BCL working papers with number 33.

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Length: 34 pages
Date of creation: Jul 2008
Date of revision:
Publication status: forthcoming in, Annals of Economics and Statistics, forthcoming
Handle: RePEc:bcl:bclwop:cahier_etude_33

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Web page: http://www.bcl.lu/

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Related research
Keywords: DSGE; Search and Matching; Nominal Wage Rigidity; Monetary Policy;

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Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

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