Evaluating the search and matching model with sticky wages

Christopher Phillip Reicher

No 1674, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: Several authors have proposed staggered wage bargaining as a way to introduce sticky wages into search and matching models while preserving individual rationality. I evaluate the quantitative implications of such an approach. I feed through a series of estimated shocks from US data into a search and matching model with sticky prices and wages. I compare the implications of how the sticky wages enter into the hiring decision, and there seems to be a tradeoff between generating business cycle volatility and matching the lack of a long-run relationship between vacancy creation and inflation. With regard to wages, the sticky wage model unconditionally does a better job at matching wages than the flexible wage model.

Keywords: Sticky wages; sticky prices; staggered Nash bargaining; inflation; new hires; search and matching; business cycles (search for similar items in EconPapers)
JEL-codes: E24 E25 E32 J23 J31 J63 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1674

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