Macroeconomic Dynamics with Rigid Wage Contracts

Tobias Broer, Karl Harmenberg, Per Krusell and Erik Öberg

No 29540, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We adapt the wage contracting structure in Chari (1983) to a dynamic, balanced-growth setting with re-contracting à la Calvo (1983). The resulting wage-rigidity framework delivers a model very similar to that in Jaimovich and Rebelo (2009), with their habit parameter replaced by our probability of wage-contract resetting. That is, if wage contracts can be reset very frequently, labor supply behaves in accordance with King, Plosser, and Rebelo (1988) preferences, whereas if they are sticky for a long time, we obtain the setting in Greenwood, Hercowitz, and Huffman (1988), thus allowing significant responses of hours to wage changes.

JEL-codes: E2 E3 J2 J3 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-cta, nep-lma and nep-mac
Note: EFG
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Published as Tobias Broer & Karl Harmenberg & Per Krusell & Erik Öberg, 2023. "Macroeconomic Dynamics with Rigid Wage Contracts," American Economic Review: Insights, vol 5(1), pages 55-72.

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Journal Article: Macroeconomic Dynamics with Rigid Wage Contracts (2023)
Working Paper: Macroeconomic Dynamics with Rigid Wage Contracts (2023)
Working Paper: Macroeconomic Dynamics with Rigid Wage Contracts (2023)
Working Paper: Macroeconomic Dynamics with Rigid Wage Contracts (2021)
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