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Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation

Raf Wouters (), Grégory de Walque (), Olivier Pierrard and Henri Sneessens ()

No 1007, Working Paper Series from European Central Bank

Abstract: We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers' bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labour market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility. JEL Classification: E31, E32, E52, J64

Keywords: DSGE; monetary policy; nominal wage rigidity; search and matching (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lab and nep-mac
Date: 2009-02
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Related works:
Journal Article: Sequential Bargaining in a Neo-Keynesian Model with Frictional Unemployment and Staggered Wage Negotiations (2009) Downloads
Working Paper: Sequential Bargaining in a New-Keynesian Model with Frictional Unemployment and Staggered Wage Negotiation (2009) Downloads
Working Paper: Sequential bargaining in a New Keynesian model with frictional unemployment and staggered wage negotiation (2009) Downloads
Working Paper: Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20091007

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