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The Macroeconomics of Wage Rigidity and Job Separations

Author

Listed:
  • Andrés Blanco
  • Andrés Drenik
  • Christian Moser
  • Emilio Zaratiegui

Abstract

We study the macroeconomic implications of wage-rigidity-induced job separations in an equilibrium labor market model with four features: worker productivity shocks, staggered wage contracts, search frictions, and two-sided lack of commitment. Endogenous quits and layoffs are unilaterally initiated whenever a worker’s wage-to-productivity ratio or markdown moves outside an inaction region. We derive sufficient statistics for the labor market response to inflationary shocks based on the distribution of markdowns, which we show how to identify using microdata on wage changes and worker flows between jobs. Using an extension of the model for quantitative analysis, we find that aggregate shocks generate significant cyclicality in endogenous job separations, including 62 percent of the empirical quit volatility and 94 percent of the empirical layoff volatility.

Suggested Citation

  • Andrés Blanco & Andrés Drenik & Christian Moser & Emilio Zaratiegui, 2026. "The Macroeconomics of Wage Rigidity and Job Separations," CESifo Working Paper Series 12671, CESifo.
    • Handle: RePEc:ces:ceswps:_12671
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    References listed on IDEAS

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    2. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    3. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    4. John Grigsby & Erik Hurst & Ahu Yildirmaz, 2021. "Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data," American Economic Review, American Economic Association, vol. 111(2), pages 428-471, February.
    5. Mark Gertler & Antonella Trigari, 2009. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 38-86, February.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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