Wage rigidities and jobless recoveries
Robert Shimer ()
Journal of Monetary Economics, 2012, vol. 59, issue S, S65-S77
Real wage rigidities cause jobless recoveries. Suppose that a one-time shock reduces the capital stock below trend. If wages are flexible, they decline and employment increases at the moment of the shock, before both revert back to normal levels as the economy grows back to trend. If wages are completely rigid and the labor market is otherwise frictionless, the shock causes a proportional and permanent decline in employment, capital, output, consumption, and investment relative to trend. In a search model with rigid wages, the shock causes a persistent but not permanent decline in these economic outcomes, a jobless recovery.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:59:y:2012:i:s:p:s65-s77
Access Statistics for this article
Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser
More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().