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Does State-Dependent Wage Setting Generate Multiple Equilibria?

Shuhei Takahashi

No 991, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: Does wage setting exhibit strategic complementarity and produce multiple equilib- ria? This study constructs a discrete-time New Keynesian model in which the timing of individual wage adjustments is endogenous. I explore steady-state equilibrium of the state-dependent wage-setting model both analytically and numerically. For reasonable parameter values, complementarity in wage setting is weak and multiple equilibria are unlikely to exist at the steady state. The uniqueness of equilibrium is robust to imperfect consumption insurance.

Keywords: State-dependent wage setting; New Keynesian model; Multiple equilibria; Strategic complementarity; Incomplete markets; Deflation (search for similar items in EconPapers)
JEL-codes: E24 E31 E32 E52 (search for similar items in EconPapers)
Pages: 50pages
Date: 2018-05
New Economics Papers: this item is included in nep-dge, nep-ias and nep-mac
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