Reference : Sequential bargaining in a New Keynesian model with frictional unemployment and stagg...
Scientific journals : Article
Business & economic sciences : Macroeconomics & monetary economics
Sequential bargaining in a New Keynesian model with frictional unemployment and staggered wage negotiation
De Walque, Gregory [National Bank of Belgium, Research Department]
Pierrard, Olivier [BCL - Banque Centrale du Luxmbourg]
Sneessens, Henri mailto [Université Catholique de Louvain - UCL > IRES - Institut de recherches économiques et sociales]
Wouters, Raf [National Bank of Belgium, Research Department]
Annales d'Economie et de Statistique
Association pour le développement de la recherche en économie et en statistique
[en] DSGE ; search and matching ; nominal wage rigidity ; monetary policy
[en] 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.

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