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Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation

  • Gregory de Walque
  • Olivier Pierrard
  • Henri Sneessens
  • Raf Wouters

    ()

We build a model with frictional unemployment and staggered wage bargaining and we assume that hours worked are negotiated every period. We analyze the role of workers? bargaining power in the hours negotiation on unemployment volatility and inflation persistence. The closer to zero is this parameter, (i ) the more firms adjust on the intensive margin, reducing employment volatility, (ii ) the lower the effective workers? bargaining power for wages and (iii ) the more important is the hourly wage in the marginal cost determination. Combining staggered wage bargaining with some degree of workers? bargaining power in the hours negotiation, we produce realistic labor market statistics together with inflation persistence.

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File URL: http://www.bcl.lu/fr/publications/cahiers_etudes/33/BCLWP033.pdf
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Paper provided by Central Bank of Luxembourg in its series BCL working papers with number 33.

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Length: 34 pages
Date of creation: Jul 2008
Date of revision:
Publication status: published in Annals of Economics and Statistics, 2009, 96(2): 221-250.
Handle: RePEc:bcl:bclwop:bclwp033
Contact details of provider: Web page: http://www.bcl.lu/

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  13. Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999 1151, Society for Computational Economics.
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  18. Carlos Thomas, 2006. "Search and matching frictions and optimal monetary policy," LSE Research Online Documents on Economics 19782, London School of Economics and Political Science, LSE Library.
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  26. Shigeru Fujita & Garey Ramey, 2007. "Reassessing the Shimer facts," Working Papers 07-2, Federal Reserve Bank of Philadelphia.
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