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Welfare Costs of Sticky Wages When Effort Can Respond

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Author Info
Yongsung Chang (University of Pennsylvania)
Mark Bils (University of Rochester)

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Abstract

We examine the impact of wage stickiness when employment has an effort as well as hours dimension. Despite wages being predetermined, the labor market clears through the effort margin. Consequently, welfare costs of wage stickiness are potentially much, much smaller.

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Paper provided by EconWPA in its series Macroeconomics with number 0204003.

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Date of creation: 01 May 2002
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Handle: RePEc:wpa:wuwpma:0204003

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Related research
Keywords: Sticky Wage Endogenous Effort Welfare Cost

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Find related papers by JEL classification:
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
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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    Other versions:
  6. Yongsung Chang & Mark Bils, 2002. "Cyclical Movements in Hours and Effort under Sticky Wages," Macroeconomics 0204004, EconWPA. [Downloadable!]
  7. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December. [Downloadable!] (restricted)
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  11. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October. [Downloadable!] (restricted)
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    Other versions:
  21. Robert E. Hall, 1980. "Labor Supply and Aggregate Fluctuations," NBER Working Papers 0385, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paustian Matthias, 2004. "Welfare Effects of Monetary Policy Rules in a Model with Nominal Rigidities and Credit Market Frictions," Departmental Working Papers 201, Tor Vergata University, CEIS. [Downloadable!]
  2. Yongsung Chang & Mark Bils, 2002. "Cyclical Movements in Hours and Effort under Sticky Wages," Macroeconomics 0204004, EconWPA. [Downloadable!]
  3. Matthias Paustian, 2004. "Welfare Effects of Monetary Policy Rules in a Model with Nominal Rigidities and Credit Market Frictions," Econometric Society 2004 Far Eastern Meetings 597, Econometric Society. [Downloadable!]
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