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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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  1. Fethke, Gary & Policano, Andrew, 1987. "Monetary policy and the timing of wage negotiations," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 89-105, January.
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  8. Ascari, Guido, 2000. "Optimising Agents, Staggered Wages and Persistence in the Real Effects of Money Shocks," Economic Journal, Royal Economic Society, vol. 110(465), pages 664-86, July.
  9. Smets, Frank & Wouters, Rafael, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," CEPR Discussion Papers 6112, C.E.P.R. Discussion Papers.
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  11. 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.
  12. Christopher J. Erceg & Dale W. Henderson & Andrew T. Levin, 1999. "Optimal monetary policy with staggered wage and price contracts," International Finance Discussion Papers 640, Board of Governors of the Federal Reserve System (U.S.).
  13. Matsukawa, Shigeru, 1986. "The Equilibrium Distribution of Wage Settlements and Economic Stability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 415-37, June.
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  17. Christofides, L.N., 1989. "The Interaction Between Indexation, Contract Duration And Non-Contengent Wage Adjustment," Working Papers 1989-13, University of Guelph, Department of Economics and Finance.
  18. K. Huang & Z. Liu, . "Staggered price-setting, staggered wage-setting, and business cycle persistence," Working Papers 2000-28, Utah State University, Department of Economics.
  19. Ronald G. Ehrenberg & Leif Danziger & Gee San, 1982. "Cost-of-Living Adjustment Clauses in Union Contracts," NBER Working Papers 0998, National Bureau of Economic Research, Inc.
  20. Gray, Jo Anna, 1978. "On Indexation and Contract Length," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 1-18, February.
  21. Andersen, Torben M., 1998. "Persistency in sticky price models," European Economic Review, Elsevier, vol. 42(3-5), pages 593-603, May.
  22. Fethke, Gary & Policano, Andrew J, 1990. "Information Incentives and Contract Timing Patterns," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 651-65, August.
  23. Leaf Danziger, 1988. "Real Shocks, Efficient Risk Sharing, and the Duration of Labor Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 435-440.
  24. Kevin J. Murphy, 1992. "Determinants of Contract Duration in Collective Bargaining Agreements," ILR Review, Cornell University, ILR School, vol. 45(2), pages 352-365, January.
  25. Wallace, Frederick H, 2001. "The Effects of Shock Size and Type on Labor-Contract Duration," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 658-81, July.
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