Strategic Wage Bargaining, Labor Market Volatility, and Persistence

Matthias Hertweck

No 2011-26, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: This paper modifies the standard Mortensen-Pissarides model in order to explain the cyclical behavior of vacancies and unemployment. The modifications include strategic wage bargaining and convex labor adjustment costs. We find that this setup replicates the cyclical behavior of both labor market variables remarkably well. First, we show that the model with strategic wage bargaining matches closely the volatility of vacancies and unemployment. Second, the introduction of convex labor adjustment costs makes both variables much more persistent. Third, our analysis indicates that these two modifications are complementary in generating labor market volatility and persistence.

Keywords: Business Cycles; Matching; Strategic Bargaining; Vacancy Persistence (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2011-07-15
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Strategic wage bargaining, labor market volatility, and persistence (2013)
Working Paper: Strategic Wage Bargaining, Labor Market Volatility, and Persistence (2006)
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