Labor Market Frictions into Staggered Wage Contracts

Francesco Zanetti

Economics Bulletin, 2006, vol. 5, issue 13, 1-7

Abstract: This paper proposes a generalization of the Calvo wage-setting equation, which embeds labor market frictions in the form of a Nash wage bargain. Adding labor market frictions changes significantly the dynamics of the standard wage-setting equation, such that it may have non-trivial implications for the design of optimal monetary policy, and could improve the ability of a general equilibrium model to replicate important labor market stylized facts.

JEL-codes: E3 J3 (search for similar items in EconPapers)
Date: 2006-10-09
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