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Uniform and Nonuniform Staggering of Wage Contracts

  • Danziger, Leif

    ()

    (Ben Gurion University)

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://ftp.iza.org/dp5023.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5023.

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Length: 39 pages
Date of creation: Jun 2010
Date of revision:
Publication status: published in: Labour Economics, 2010, 17 (6), 1038-1049
Handle: RePEc:iza:izadps:dp5023
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  17. Olivei, Giovanni & Tenreyro, Silvana, 2010. "Wage-setting patterns and monetary policy: International evidence," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 785-802, October.
  18. Smets, Frank & Wouters, Rafael, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," CEPR Discussion Papers 6112, C.E.P.R. Discussion Papers.
  19. Leaf Danziger, 1988. "Real Shocks, Efficient Risk Sharing, and the Duration of Labor Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 435-440.
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  21. 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.
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  24. Gray, Jo Anna, 1978. "On Indexation and Contract Length," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 1-18, February.
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