The distribution of contract durations across firms: a unified framework for understanding and comparing dynamic wage and price setting models

Huw Dixon

No 676, Working Paper Series from European Central Bank

Abstract: This paper shows how any steady state distribution of ages and related hazard rates can be represented as a distribution across firms of completed contract lengths. The distribution is consistent with a Generalised Taylor Economy or a Generalised Calvo model with duration dependent reset probabilities. Equivalent distributions have different degrees of forward lookingness and imply different behaviour in response to monetary shocks. We also interpret data on the proportions of firms changing price in a period, and the resultant range of average contract lengths. JEL Classification: E50

Keywords: Calvo; Contract length; hazard rate; steady state; Taylor (search for similar items in EconPapers)
Date: 2006-09
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: The distribution of contract durations across firms: a unified framework for understanding and comparing dynamic wage and price setting models (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2006676

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