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Evaluating the search and matching model with sticky wages

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  • Reicher, Christopher Phillip
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    Several authors have proposed staggered wage bargaining as a way to introduce sticky wages into search and matching models while preserving individual rationality. I evaluate the quantitative implications of such an approach. I feed through a series of estimated shocks from US data into a search and matching model with sticky prices and wages. I compare the implications of how the sticky wages enter into the hiring decision, and there seems to be a tradeoff between generating business cycle volatility and matching the lack of a long-run relationship between vacancy creation and inflation. With regard to wages, the sticky wage model unconditionally does a better job at matching wages than the flexible wage model.

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    File URL: https://www.econstor.eu/bitstream/10419/45871/1/654663602.pdf
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    Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Working Papers with number 1674.

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    Date of creation: 2010
    Handle: RePEc:zbw:ifwkwp:1674
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    1. repec:wop:calsdi:97-23 is not listed on IDEAS
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