Wages and the Allocation of Hours and Effort
We examine the impact of wage stickiness when employment has an effort as well as hours dimension. Despite wages being predetermined, the labor market clears through the effort margin. We compare this model quantitatively to models with flexible and sticky wages, but no effort margin. Allowing for responses in effort dramatically improves the ability of a sticky-wage model to mimic U.S. business cycles. The model produces fluctuations in hours that are intermediate to the standard flexible-wage and sticky-wage models; but output and consumption behave much like in the flexible-wage economy. Consequently, welfare costs of wage stickiness are potentially much, much smaller if one entertains an effort dimension.
|Date of creation:||Aug 1999|
|Date of revision:|
|Publication status:||published as Bils, Mark and Youngsung Chang. "Cyclical Movements In Hours And Efforts Under Sticky Wages," International Economic Journal, 2002, v15(2,Summer), 1-26.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Parkin, M., 1988.
"A Method For Determining Whether Parameters In Aggregative Models Are Structural,"
UWO Department of Economics Working Papers
8803, University of Western Ontario, Department of Economics.
- Parkin, Michael, 1988. "A method for determining whether parameters in aggregative models are structural," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 215-252, January.
- Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1990.
"Labor Hoarding and the Business Cycle,"
NBER Working Papers
3556, National Bureau of Economic Research, Inc.
- Ben Bernanke, 1990.
"The Federal Funds Rate and the Channels of Monetary Transnission,"
NBER Working Papers
3487, National Bureau of Economic Research, Inc.
- Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-21, September.
- Ben S. Bernanke & Alan S. Blinder, 1989. "The federal funds rate and the channels of monetary transmission," Working Papers 89-10, Federal Reserve Bank of Philadelphia.
- Bils, Mark & Cho, Jang-Ok, 1994.
"Cyclical factor utilization,"
Journal of Monetary Economics,
Elsevier, vol. 33(2), pages 319-354, April.
- Mark Bils & Jang-Ok Cho, 1993. "Cyclical factor utilization," Discussion Paper / Institute for Empirical Macroeconomics 79, Federal Reserve Bank of Minneapolis.
- Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994.
"The effects of monetary policy shocks: evidence from the flow of funds,"
Federal Reserve Bank of Dallas, issue Apr.
- Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February.
- Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994. "The effects of monetary policy shocks: evidence from the Flow of Funds," Working Paper Series, Macroeconomic Issues 94-2, Federal Reserve Bank of Chicago.
- Sims, Christopher A. & Zha, Tao, 2006.
"Does Monetary Policy Generate Recessions?,"
Cambridge University Press, vol. 10(02), pages 231-272, April.
- King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
- Steven Strongin, 1992. "The identification of monetary policy disturbances: explaining the liquidity puzzle," Working Paper Series, Macroeconomic Issues 92-27, Federal Reserve Bank of Chicago.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996.
"Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?,"
NBER Working Papers
5809, National Bureau of Economic Research, Inc.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998. "Sticky price models of the business cycle: can the contract multiplier solve the persistence problem?," Staff Report 217, Federal Reserve Bank of Minneapolis.
- Robert E. Hall, 1986.
"The Role of Consumption in Economic Fluctuations,"
in: The American Business Cycle: Continuity and Change, pages 237-266
National Bureau of Economic Research, Inc.
- Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.
- MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
- Oi, Walter Y, 1990. "Employment Relations in Dual Labor Markets (" It's Nice Work If You Can Get It")," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S124-49, January.
- Gilbert Ghez & Gary S. Becker, 1975. "The Allocation of Time and Goods over the Life Cycle," NBER Books, National Bureau of Economic Research, Inc, number ghez75-1, May.
- Becker, Gary S, 1985. "Human Capital, Effort, and the Sexual Division of Labor," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages S33-58, January.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7309. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.