Cyclical Movements in Hours and Effort Under Sticky Wages-super-
We examine the response of a sticky-wage economy to various real and nominal shocks. In addition to variations in hours, we allow for an endogenous response in worker effort per hour. Despite wages being predetermined, the labor market clears through the effort margin. We find that the ability of a sticky-wage model to mimic U.S. business cycles is much improved by allowing for reasonable effort movements. The model also provides a ready explanation for the finding that TFP is negatively affected by nominal shocks. [E24]
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Volume (Year): 15 (2001)
Issue (Month): 2 (June)
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References listed on IDEAS
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"Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?,"
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- Strongin, Steven, 1995. "The identification of monetary policy disturbances explaining the liquidity puzzle," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 463-497, June. Full references (including those not matched with items on IDEAS)
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