Sticky prices, fair wages, and the co-movements of unemployment and labor productivity growth

Fabien Tripier ()

Macroeconomics from EconWPA

Abstract: This paper studies the co-movements of unemployment and labor productivity growth for the U.S. economy. Measures of co-movements in the frequency domain indicate that co-movements between variables differ strongly according to the frequency. First, long-term and business cycle co-movements are larger than short-term co-movements. Second, co- movements are negative in the short and long run, but positive over the business cycle. A New Keynesian model that combines nominal rigidity on the goods market (sticky prices) and real rigidity on the labor market (fair wages) is shown to be quantitatively consistent with the observed co-movements both in the long term and over the business cycle. However, the model fails to explain the short-term co-movements.

Keywords: growth; unemployment; sticky prices; fair wages; spectral analysis (search for similar items in EconPapers)
JEL-codes: C32 E31 E32 J41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
Date: 2005-10-18
Note: Type of Document - pdf; pages: 41
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Journal Article: Sticky prices, fair wages, and the co-movements of unemployment and labor productivity growth (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0510015

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