Arbeitspapier
Endogenous wage indexation and aggregate shocks
Wage indexation practices have changed. Evidence on the U.S. for instance suggests that wages were heavily indexed to past inflation during the Great Inflation but not during the Great Moderation. However, most DSGE models assume fixed indexation parameters in wage setting, which might not be structural in the sense of Lucas (1976). This paper presents a New-Keynesian model in which workers, by maximizing their welfare, set their wage indexation rule in response to aggregate shocks and monetary policy. We find that workers index their wages to past inflation when technology and permanent inflation-target shocks drive output fluctuations; when aggregate demand shocks do, workers index to trend-inflation. In addition, workers' choices do not coincide with the social planner's choice, which may explain the observed changes in wage indexation in the post-WWII U.S. data.
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Papers ; No. 2013-19
- Klassifikation
-
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Central Banks and Their Policies
- Thema
-
Wage indexation
Welfare costs
Nominal rigidities
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Carrillo, Julio A.
Peersman, Gert
Wauters, Joris
- Ereignis
-
Veröffentlichung
- (wer)
-
Banco de México
- (wo)
-
Ciudad de México
- (wann)
-
2013
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Carrillo, Julio A.
- Peersman, Gert
- Wauters, Joris
- Banco de México
Entstanden
- 2013
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