Strategic wage bargaining, labor market volatility, and persistence

Matthias Hertweck

The B.E. Journal of Macroeconomics, 2013, vol. 13, issue 1, 123-149

Abstract: The textbook search and matching model suffers from too little amplification and weak internal propagation. We argue that the double failure is due to two negative feedback channels. Intuitively, a decline (rise) in unemployment (vacancies) rises both the wage rate, the “wage channel,” and the effective cost to fill a vacancy, the “hiring cost channel.” Therefore, we introduce hiring costs and strategic wage bargaining. The interaction between these two modifications limits the impact of both channels effectively and persistently. Thus, the modified model is able to closely match the (inversely) u-shaped impulse responses of vacancies and unemployment.

Keywords: hiring costs; matching; strategic bargaining; vacancy persistence (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Strategic Wage Bargaining, Labor Market Volatility, and Persistence (2011)
Working Paper: Strategic Wage Bargaining, Labor Market Volatility, and Persistence (2006)
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DOI: 10.1515/bejm-2012-0145

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