Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153487 
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper No. 1053
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behaviour. In a search and matching environment, we consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates.
Subjects: 
business cycle
Inflation Dynamics
labour market
real rigidities
JEL: 
E31
E32
E24
J64
Document Type: 
Working Paper

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