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Searching for Wages in an Estimated Labor Matching Model

Ryan Chahrour, Sanjay Chugh and Tristan Potter

No 2016-17, School of Economics Working Paper Series from LeBow College of Business, Drexel University

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.

Keywords: Search and Matching; Wages; Unemployment; Business Cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2016-12-20
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
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Related works:
Working Paper: Searching for Wages in an Estimated Labor Matching Model (2017) Downloads
Working Paper: Searching for Wages in an Estimated Labor Matching Model (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2016_017

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