Endogenous Separations, Wage Rigidities, and Unemployment Volatility

Mikael Carlsson and Andreas Westermark

American Economic Journal: Macroeconomics, 2022, vol. 14, issue 1, 332-54

Abstract: We show that in microdata, as well as in a search and matching model with flexible wages for new hires, wage rigidities of incumbent workers have substantial effects on separations and unemployment volatility. Allowing for an empirically relevant degree of wage rigidities for incumbent workers drives unemployment volatility as well as the volatility of vacancies and tightness to that in the data. Thus, the degree of wage rigidity for newly hired workers is not a sufficient statistic for determining the effect of wage rigidities on macroeconomic outcomes. This finding affects the interpretation of a large empirical literature on wage rigidities.

JEL-codes: E24 J23 J31 J41 J63 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Endogenous Separations, Wage Rigidities and Employment Volatility (2020)
Working Paper: Endogenous Separations, Wage Rigidities and Unemployment Volatility (2018)
Working Paper: Endogenous Separations, Wage Rigidities and Employment Volatility (2016)
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DOI: 10.1257/mac.20180314

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