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Business Cycles and Wage Rigidity

Listed author(s):
  • Cristian Bartolucci

This paper analyzes the impact of downward wage rigidity on the labor market. It shows that imposing downward wage rigidity in a matching model with cyclical fluctuations in productivity, endogenous match-destruction, and on-the-job search, quits are procyclical and layoffs countercyclical. It provides evidence that downward wage rigidity is empirically relevant in ten European countries. It finally shows that layoffs are countercyclical and quits are procyclical, as predicted by the model.

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File URL: http://www.carloalberto.org/assets/working-papers/no.205.pdf
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Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 205.

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Length: 40 pages
Date of creation: 2011
Handle: RePEc:cca:wpaper:205
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  10. Francesco Devicienti & Agata Maida & Paolo Sestito, 2007. "Downward Wage Rigidity in Italy: Micro-Based Measures and Implications," Economic Journal, Royal Economic Society, vol. 117(524), pages 530-552, November.
  11. Cameron, A. Colin & Gelbach, Jonah B. & Miller, Douglas L., 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 238-249.
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  13. Fonseca, Raquel & Muñoz, Rafael, 1999. "Can the Matching Model Account for Spanish Unemployment ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  14. Orietta Dessy, 2002. "Nominal wage rigidity in the European Countries: evidence from the Europanel," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D2-1, International Conferences on Panel Data.
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  17. Shigeru Fujita & Garey Ramey, 2007. "The cyclicality of separation and job finding rates," Working Papers 07-19, Federal Reserve Bank of Philadelphia.
  18. Holden, Steinar, 1998. " Wage Drift and the Relevance of Centralised Wage Setting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(4), pages 711-731, December.
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  20. Steinar Holden, 2002. "The Costs of Price Stability - Downward Nominal Wage Rigidity in Europe," NBER Working Papers 8865, National Bureau of Economic Research, Inc.
  21. James Mabli & Christopher Flinn, 2007. "On-the-Job Search, Minimum Wages, and Labor Market Outcomes in an Equilibrium Bargaining Framework," 2007 Meeting Papers 791, Society for Economic Dynamics.
  22. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
  23. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  24. Knoppik, Christoph & Beissinger, Thomas, 2001. "How Rigid are Nominal Wages? Evidence and Implications for Germany," IZA Discussion Papers 357, Institute for the Study of Labor (IZA).
  25. Franco Peracchi, 2002. "The European Community Household Panel: A review," Empirical Economics, Springer, vol. 27(1), pages 63-90.
  26. Lippman, Steven A. & Mamer, John W., 1989. "A simple search model with procyclical quits," Journal of Economic Dynamics and Control, Elsevier, vol. 13(2), pages 247-253, April.
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  28. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
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