Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/167522
Authors: 
Kara, Engin
Park, Yongmin
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6536
Abstract: 
It has been noted that the search and matching model cannot account for the observed unemployment fluctuations. Gertler and Trigari (2009) show this weakness of the model disappears when wage stickiness is introduced to the model. Pissarides (2009) disagrees with this modification, arguing that new hires’ wages are not sticky. We argue that there is heterogeneity in wage setting: while some wages are sticky, the others are not. We generalise the model to account for this heterogeneity. We find that the new model with even only a small fraction of sticky wage contracts comes closer to matching the data.
Subjects: 
search and matching
heterogeneity in staggered wage bargaining
unemployment volatility puzzle
JEL: 
E24
E32
J64
Document Type: 
Working Paper
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