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How Sticky Wages in Existing Jobs Can Affect Hiring

Mark Bils, Yongsung Chang () and Sun-Bin Kim ()

No 19821, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We consider a matching model of employment with wages that are flexible for new hires, but sticky within matches. We depart from standard treatments of sticky wages by allowing effort to respond to the wage being too high or low. Shimer (2004) and others have illustrated that employment in the Mortensen-Pissarides model does not depend on the degree of wage flexibility in existing matches. But this is not true in our model. If wages of matched workers are stuck too high in a recession, then firms will require more effort, lowering the value of additional labor and reducing new hiring.

JEL-codes: E24 E32 J22 J23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab, nep-lma and nep-mac
Date: 2014-01
Note: EFG
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Working Paper: How Sticky Wages In Existing Jobs Can Affect Hiring (2016) Downloads
Working Paper: How Sticky Wages In Existing Jobs Can Affect Hiring (2014) Downloads
Working Paper: How Sticky Wages in Existing Jobs can affect Hiring (2013) Downloads
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