Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/157969
Authors: 
Carlsson, Mikael
Westermark, Andreas
Year of Publication: 
2016
Series/Report no.: 
Sveriges Riksbank Working Paper Series 326
Abstract: 
We show that in micro data, as well as in a search and matching model with endogenous separations and rigid wages, separations and hence employment volatility are non-neutral to wage rigidities of incumbent workers. In contrast to when all wages are flexible, the standard deviation of unemployment in a model with rigid wages for incumbent workers (only) matches the standard deviation in the data. Thus, the degree of wage rigidity for newly hired workers is not a sufficient statistic for determining the effect of wage rigidities on macroeconomic outcomes in this class of models.
Subjects: 
Search and matching
Unemployment volatility puzzle
Wage rigidities
Job Destruction
JEL: 
J63
J64
E30
Document Type: 
Working Paper

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