How Sticky Wages in Existing Jobs Can Affect Hiring

Mark Bils, Yongsung Chang and Sun-Bin Kim

American Economic Journal: Macroeconomics, 2022, vol. 14, issue 1, 1-37

Abstract: We consider a matching model of employment with flexible wages for new hires but sticky wages within matches. Unlike most models of sticky wages, we allow effort to respond if wages are too high or too low. In the Mortensen-Pissarides model, employment is not affected by wage stickiness in existing matches. But it is in our model. If wages of matched workers are stuck too high, firms require more effort, lowering the value of additional labor and reducing hiring. We find that effort's response can greatly increase wage inertia.

JEL-codes: E24 J23 J31 J41 M51 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: How Sticky Wages In Existing Jobs Can Affect Hiring (2019)
Working Paper: How Sticky Wages in Existing Jobs Can Affect Hiring (2014)
Working Paper: How Sticky Wages In Existing Jobs Can Affect Hiring (2014)
Working Paper: How Sticky Wages in Existing Jobs can affect Hiring (2013)
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DOI: 10.1257/mac.20190338

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