Economics at your fingertips  

Endogenous real wage rigidity in a search frictions model

Christopher Martin () and Bingsong Wang ()

Oxford Economic Papers, 2018, vol. 70, issue 4, 1016-1035

Abstract: The existing literature often incorporates ad hoc models of exogenous real wage rigidity into search frictions models of the labour market in order to match the large volatility of unemployment observed in the data. In this paper, we develop an alternative version of the search frictions model that incorporates insights from behavioural economics. We derive a model in which endogenous real wage rigidity emerges from optimal wage-setting and show that this model can match the observed volatility of unemployment. Thus our proposed model can match the data as closely as the existing literature but without the disadvantage of assuming exogenous and ad hoc forms of real wage rigidity.

JEL-codes: E23 E32 J23 J30 J64 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Oxford Economic Papers is currently edited by A. Banerjee and James Forder

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().

Page updated 2020-05-17
Handle: RePEc:oup:oxecpp:v:70:y:2018:i:4:p:1016-1035.