DOWNWARD NOMINAL WAGE RIGIDITY: THE IMPLICATIONS FROM A NEW-KEYNESIAN MODEL

Lilia Maliar, Liudmyla Hvozdyk and Serguei Maliar
Additional contact information
Liudmyla Hvozdyk: University of Munich

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We study the determinants of Downward Nominal Wage Rigidity(DNWR) in the context of a new-Keynesian heterogeneous-agent model. Laborproductivity of agents is subject to perfectly insurable idiosyncratic shocks.Wage contracts are signed one period ahead and specify the minimum wagethat the firm should pay to each worker conditional on her future expectedmarginal product. The model predicts a simple structural equation: the degreesof DNWR are entirely determined by unexpected shocks to technology andmoney supply. We test this model's implication with data on the U.S. economy,and we find that the above two shocks can account for about 60% of variation inthe aggregate measures of DNWR.

Keywords: Downward Nominal Wage Rigidity; New-Keynesian model (search for similar items in EconPapers)
JEL-codes: E12 E24 J31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2006-02
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published by Ivie

Downloads: (external link)
http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-04.pdf Fisrt version / Primera version, 2006 (application/pdf)

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: https://EconPapers.repec.org/RePEc:ivi:wpasad:2006-04

Access Statistics for this paper

More papers in Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Contact information at EDIRC.
Bibliographic data for series maintained by Departamento de Edición ().