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Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation

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De Walque, Grégory [Banque nationale de Belgique] Pierrard, Olivier [UCL] Sneessens, Henri [UCL] Wouters, Raf [UCL]

We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers’ bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers’ bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility.

Document type Article de périodique (Journal article)
Publication date 2009
Language Anglais
Journal information "Annales d'économie et de statistique" - , no. 95/96, p. 221-250 (July/December 2009)
Publisher INSEE ((France) Paris)
issn 0769-489X
Publication status Publié
Affiliations Banque nationale de Belgique
UCL - ESPO/ECON - Département des sciences économiques
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Bibliographic reference De Walque, Grégory ; Pierrard, Olivier ; Sneessens, Henri ; Wouters, Raf. Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation. In: Annales d'économie et de statistique, , no. 95/96, p. 221-250 (July/December 2009)
Permanent URL http://hdl.handle.net/2078.1/77993