Unemployment fluctuation with staggered Nash wage bargaining

Arbeitspapier

A number of authors have recently emphasized that the conventional model of unemployment dynamics due to Mortensen and Pissarides has difficulty accounting for the relatively volatile behavior of labor market activity over the business cycle. We address this issue by modifying the MP framework to allow for staggered multiperiod wage contracting. What emerges is a tractable relation for wage dynamics that is a natural generalization of the period-by-period Nash bargaining outcome in the conventional formulation. An interesting side-product is the emergence of spillover effects of average wages on the bargaining process. We then show that a reasonable calibration of the model can account well for the cyclical behavior of wages and labor market activity observed in the data. The spillover effects turn out to be important in this respect.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper ; No. 2007/09

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: Unemployment ; Labor Market ; Nash Bargaining ; Wage Rigidity ; Konjunktur ; Beschäftigung ; Volatilität ; Reallohn ; Lohnverhandlungen ; Nash-Gleichgewicht

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gertler, Mark ; Trigari, Antonella
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/25510
• URN: urn:nbn:de:hebis:30-38193
• Last update: 10.03.2025, 11:45 AM CET