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REAL WAGE RIGIDITY, HETEROGENEITY, AND THE BUSINESS CYCLES.
- Source :
- Macroeconomic Dynamics; Oct2021, Vol. 25 Issue 7, p1701-1725, 25p
- Publication Year :
- 2021
-
Abstract
- This paper investigates the quantitative implications of real wage rigidities and heterogeneity for two long-lasting puzzles in the business cycle literature: the low correlation between total hours worked and labor productivity and the large volatility of the labor wedge, defined as a gap between the marginal rate of substitution of aggregate leisure for aggregate consumption and the marginal product of aggregate labor. I shed light on these issues by extending a heterogeneous-agent model with an indivisible labor supply choice to real wage rigidities. I find that a small amount of real wage stickiness would be sufficient to resolve both anomalies when long-term wage contracts and heterogeneity are taken into account. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 13651005
- Volume :
- 25
- Issue :
- 7
- Database :
- Complementary Index
- Journal :
- Macroeconomic Dynamics
- Publication Type :
- Academic Journal
- Accession number :
- 153372837
- Full Text :
- https://doi.org/10.1017/S136510051900083X