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Uniform and nonuniform staggering of wage contracts

  • Danziger, Leif

This paper provides a model that can account for the almost uniform staggering of wage contracts in some countries as well as for the markedly nonuniform staggering in others. In the model, short and long contracts as well as long contracts concluded in different periods are strategic substitutes, which provide a powerful rationale for staggering. We show that for realistic parameter values, there is a continuum of possible equilibria with various degrees of staggering of long contracts. If the contracting cost is not too large, then the lowest possible degree of staggering decreases with the contracting cost and increases with monetary uncertainty.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 6 (December)
Pages: 1038-1049

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Handle: RePEc:eee:labeco:v:17:y:2010:i:6:p:1038-1049
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  19. Louis Christofides & Amy Chen Peng, 2003. "Contract Duration and Indexation in a Period of Real and Nominal Uncertainty," CESifo Working Paper Series 994, CESifo Group Munich.
  20. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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