Searching for Wages in an Estimated Labor Matching Model

Tristan Potter, Sanjay Chugh and Ryan Chahrour

No 542, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We estimate a real business cycle economy with search frictions in the labor market in which the latent wage follows a non-structural ARMA process. The estimated model does an excellent job matching a broad set of quantity data and wage indicators. Under the estimated process, wages respond immediately to shocks but converge slowly to their long-run levels, inducing substantial variation in labor’s share of surplus. These results are not consistent with either a rigid real wage or flexible Nash bargaining. Despite inducing a strong endogenous response of wages, neutral shocks to productivity account for the vast majority of aggregate fluctuations in the economy, including labor market variables.

Date: 2017
New Economics Papers: this item is included in nep-dge
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Related works:
Working Paper: Searching for Wages in an Estimated Labor Matching Model (2016)
Working Paper: Searching for Wages in an Estimated Labor Matching Model (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:542

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