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Sticky prices, fair wages, and the co-movements of unemployment and labor productivity growth

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  • Fabien Tripier

    (EconomiX - University of Paris X Nanterre)

Abstract

This paper studies the co-movements of unemployment and labor productivity growth for the U.S. economy. Measures of co-movements in the frequency domain indicate that co-movements between variables differ strongly according to the frequency. First, long-term and business cycle co-movements are larger than short-term co-movements. Second, co- movements are negative in the short and long run, but positive over the business cycle. A New Keynesian model that combines nominal rigidity on the goods market (sticky prices) and real rigidity on the labor market (fair wages) is shown to be quantitatively consistent with the observed co-movements both in the long term and over the business cycle. However, the model fails to explain the short-term co-movements.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0510015.

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Length: 41 pages
Date of creation: 18 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0510015

Note: Type of Document - pdf; pages: 41
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Web page: http://128.118.178.162

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Keywords: growth; unemployment; sticky prices; fair wages; spectral analysis;

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Cited by:
  1. Addessi, William & Busato, Francesco, 2009. "Fair wages, labor relations and asset returns," Journal of Financial Stability, Elsevier, vol. 5(4), pages 410-430, December.
  2. Miyamoto, Hiroaki & Takahashi, Yuya, 2011. "Productivity growth, on-the-job search, and unemployment," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 666-680.
  3. Hiroaki Miyamoto & Yuya Takahashi, 2009. "Technological Progress, On-the-Job Search, and Unemployment," ISER Discussion Paper 0734, Institute of Social and Economic Research, Osaka University.
  4. Dennis Wesselbaum, 2010. "Reciprocity and Matching Frictions," Kiel Working Papers 1616, Kiel Institute for the World Economy.
  5. Sven Schreiber, 2009. "Explaining shifts in the unemployment rate with productivity slowdowns and accelerations: a co-breaking approach," Kiel Working Papers 1505, Kiel Institute for the World Economy.

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