Sequential Bargaining in a New-Keynesian Model with Frictional Unemployment and Staggered Wage Negotiation

Grégory de Walque, Olivier Pierrard, Henri Sneessens and Raf Wouters

No 4059, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers' bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility.

Keywords: search and matching; nominal wage rigidity; monetary policy; DSGE (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 J64 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2009-03
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published - published in: Annales d’économie et de statistique, 2009, 95-96, 221-250

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Related works:
Journal Article: Sequential Bargaining in a Neo-Keynesian Model with Frictional Unemployment and Staggered Wage Negotiations (2009)
Working Paper: Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation (2009)
Working Paper: Sequential bargaining in a New Keynesian model with frictional unemployment and staggered wage negotiation (2009)
Working Paper: Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation (2008)
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