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Title:Preferences for Rigid versus Individualized Wage Setting in Search Economies with Frictions PDF Logo
Authors:Burda, Michael C.
Boeri, Tito
Issue Date:2004
Series/Report no.:IZA Discussion paper series 1133
Abstract:Firing frictions and renegotiation costs affect worker and firm preferences for rigid wages versus individualized Nash bargaining in a standard model of equilibrium unemployment, in which workers vary by observable skill. Rigid wages permit savings on renegotiation costs and prevent workers from exploiting the firing friction. For standard calibrations, the model can account for political support for wage rigidity by both workers and firms, especially in labor markets for intermediate skills. The firing friction is necessary for this effect, and reinforces the impact of both turbulence and other labor market institutions on preferences for rigid wages.
Subjects:wage rigidities
job protection
firing taxes
renegotiation costs
equilibrium unemployment
JEL:D7
J6
J5
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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