A NOTE ON INFLATION PERSISTENCE IN A FAIR WAGE MODEL OF THE BUSINESS CYCLE
David de la Croix (),
Grégory de Walque () and
Raf Wouters ()
Macroeconomic Dynamics, 2009, vol. 13, issue 5, 673-684
We generalize existing fair wage models to allow effort to vary over the business cycle. When effort is variable, wage fluctuations are partially compensated for by endogenous effort fluctuations, so that the sensitivity of marginal cost to output and employment variations is decreased. This new mechanism decreases the need for sluggishness to explain the observed high inflation persistence.
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Working Paper: Dynamics and monetary policy in a fair wage model of the business cycle (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:13:y:2009:i:05:p:673-684_08
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