Bodart, Vincent
[UCL]
Pierrard, Olivier
[UCL]
Sneessens, Henri
[UCL]
RBC models with search unemployment and wage renegotiation generate too much wage volatility and too stable unemployment rate. Shimer (2004) shows that it is possible to reproduce a volatility of unemployment similar to that observed in actual economies by imposing full real wage rigidity. We use a similar model but with Calvo wage contracts and we obtain a microfounded equation of real wage rigidities. The models with full wage flexibility or full wage rigidity are obtained as particular cases. We show that a contract length of about six quarters fits best the observed cyclical properties of wages and unemployment.
Bibliographic reference |
Bodart, Vincent ; Pierrard, Olivier ; Sneessens, Henri. Calvo Wages in a Search Unemployment Model. IZA Discussion papers ; 2521 (2006) 9 pages |
Permanent URL |
http://hdl.handle.net/2078.1/74896 |