Macroeconomic Dynamics with Rigid Wage Contracts

Article dans une revue: We adapt the wage contracting structure in Chari (1983) to a dynamic, balanced-growth setting with recontracting as in Calvo (1983). The resulting wage-rigidity framework dampens income effects in the short run, thus allowing significant responses of hours to aggregate shocks. In reduced form, the model dynamics are 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 are reset frequently, labor supply behaves in accordance with King, Plosser, and Rebelo (1988) preferences, whereas if they are never reset, we obtain the setting in Greenwood, Hercowitz, and Huffman (1988).

Auteur(s)

Tobias Broer, Karl Harmenberg, Per Krusell, Erik Öberg

Revue
  • American Economic Review: Insights
Date de publication
  • 2023
Mots-clés JEL
E24 J22 J23 J24 J31 J41
Pages
  • 55-72
Version
  • 1
Volume
  • 5