Nominal-Contracting Theories of Unemployment: Evidence from Panel Data
This paper examines economywide and sector-specific responses of real wages to nominal shocks using micro panel data from the National Longitudinal Survey of Young Men. The observed response patterns provide no support for nominal-contracting theories of unemployment, which predict that nominal surprises should be negatively correlated with real wages. In fact, both inflation and money-growth surprises are found to be essentially uncorrelated with real wages. Either a real-business-cycle model or a model with rigidities in commodity prices could be consistent with these results. Copyright 1993 by American Economic Association.
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Volume (Year): 83 (1993)
Issue (Month): 4 (September)
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