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Welfare Costs of Sticky Wages When Effort Can Respond

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  • Yongsung Chang

    (University of Pennsylvania)

  • Mark Bils

    (University of Rochester)

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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Bibliographic Info

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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Web page: http://128.118.178.162

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Keywords: Sticky Wage; Endogenous Effort; Welfare Cost;

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References

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Citations

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Cited by:
  1. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  2. 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.
  3. Yongsung Chang & Mark Bils, 2002. "Cyclical Movements in Hours and Effort under Sticky Wages," Macroeconomics 0204004, EconWPA.
  4. Moon, Weh-Sol, 2011. "Business cycle with nominal contracts and search frictions," MPRA Paper 31716, University Library of Munich, Germany.
  5. Richard Holt, 2004. "Sticky prices, labour market rigidities and exchange rate puzzles," Money Macro and Finance (MMF) Research Group Conference 2003 47, Money Macro and Finance Research Group.

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