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

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

No 157, Working Paper Research from National Bank of Belgium

Abstract: We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated for each period. The workers' bargaining power in the working time negotiations affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms tend to 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 determining the marginal cost. This set-up produces realistic labour market figures together with inflation persistence. Distinguishing the probability to bargain the wage rate for existing and new jobs, we show that the intensive margin helps reduce the new entrants' wage rigidity required to match observed unemployment volatility.

Keywords: DSGE; Search and Matching; Nominal Wage Rigidity; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 J64 (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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https://www.nbb.be/doc/oc/repec/reswpp/wp157en.pdf (application/pdf)

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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