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Real and Nominal Wage Rigidity in a Model of Equal-Treatment Contracting

Author

Listed:
  • Martins, Pedro S.

    () (Queen Mary, University of London)

  • Snell, Andy

    () (University of Edinburgh)

  • Thomas, Jonathan P.

    () (University of Edinburgh)

Abstract

Following insights by Bewley (1999a), this paper analyses a model with downward rigidities in which firms cannot pay discriminate based on a year of entry to a firm, and develops an equilibrium model of wages and unemployment. We solve for the dynamics of wages and unemployment under conditions of downward wage rigidity, where forward looking firms take into account these constraints. Using simulated productivity data based on the post-war US economy, we analyse the ability of the model to match certain stylised labour market facts.

Suggested Citation

  • Martins, Pedro S. & Snell, Andy & Thomas, Jonathan P., 2009. "Real and Nominal Wage Rigidity in a Model of Equal-Treatment Contracting," IZA Discussion Papers 4346, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4346
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    References listed on IDEAS

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    Cited by:

    1. Reicher, Christopher Phillip, 2011. "Sticky wages in search and matching models in the short and long run," Kiel Working Papers 1722, Kiel Institute for the World Economy (IfW).
    2. Reicher, Christopher Phillip, 2010. "Evaluating the search and matching model with sticky wages," Kiel Working Papers 1674, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    cross-contract restrictions; labour contracts; business cycle; unemployment; equal treatment; downward rigidity;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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