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Uniform and Nonuniform Staggering of Wage Contracts

  • Leif Danziger

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 provides 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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-07/cesifo1_wp3112.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3112.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3112
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  9. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  10. Giovanni Olivei & Silvana Tenreyro, 2008. "Wage setting patterns and monetary policy: international evidence," LSE Research Online Documents on Economics 19572, London School of Economics and Political Science, LSE Library.
  11. Dye, Ronald A, 1985. "Optimal Length of Labor Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 251-70, February.
  12. Fethke, Gary & Policano, Andrew, 1986. "Will Wage Setters Ever Stagger Decisions? [Wage Contingencies, the Pattern of Negotiation and Aggregate Implications of Alternative Contract Structures]," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 867-77, November.
  13. 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.
  14. Robert Rich & Joe Tracy, 2000. "Uncertainty and labor contract durations," Staff Reports 106, Federal Reserve Bank of New York.
  15. Harris, Milton & Holmstrom, Bengt, 1987. "On the Duration of Agreements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 389-406, June.
  16. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  17. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October.
  18. Christofides, Louis N. & Peng, Chen, 2006. "Contract duration and indexation in a period of real and nominal uncertainty," Labour Economics, Elsevier, vol. 13(1), pages 61-86, February.
  19. 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.
  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. Huang, Kevin X. D. & Liu, Zheng, 2002. "Staggered price-setting, staggered wage-setting, and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 405-433, March.
  22. 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.
  23. 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.
  24. 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.
  25. Danziger, Leif, 1988. "Real Shocks, Efficient Risk Sharing, and the Duration of Labor Contracts," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 435-40, May.
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