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A Note On The Unemployment Volatility Puzzle: Is Credible Wage Bargaining The Answer?

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  • Wang, Bingsong

Abstract

This paper shows that the ability of the credible wage bargaining model to match the observed unemployment volatility hinges on an unrealistic assumption about disagreement payoffs to the firm. Relaxing this assumption can lead to the substantial wage flexibility. As a consequence, the model is unable to capture the observed unemployment volatility.

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  • Wang, Bingsong, 2022. "A Note On The Unemployment Volatility Puzzle: Is Credible Wage Bargaining The Answer?," Macroeconomic Dynamics, Cambridge University Press, vol. 26(1), pages 250-262, January.
    • Handle: RePEc:cup:macdyn:v:26:y:2022:i:1:p:250-262_9
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