Downward Wage Rigidity in a Model of Equal Treatment Contracting

Pedro Martins, Andy Snell and Jonathan Thomas

Scandinavian Journal of Economics, 2010, vol. 112, issue 4, 841-863

Abstract: Following insights by Bewley (1999a), this paper analyses a model with downward rigidities in which firms cannot pay discriminately based on year of entry to the firm, and develops an equilibrium model of wages and unemployment. We solve for the dynamics of wages and unemployment under conditions of downward wage rigidity, where forward‐looking firms take into account these constraints. We show that there is a frontloading incentive that leads to a simple solution in the case of certainty. Using productivity data from the postwar US economy, we analyse the ability of the model to match certain stylised labour market facts.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9442.2010.01628.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:112:y:2010:i:4:p:841-863

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520

Access Statistics for this article

Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

More articles in Scandinavian Journal of Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().