Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25510
Authors: 
Gertler, Mark
Trigari, Antonella
Year of Publication: 
2006
Series/Report no.: 
CFS Working Paper 2007/09
Abstract: 
A number of authors have recently emphasized that the conventional model of unemployment dynamics due to Mortensen and Pissarides has difficulty accounting for the relatively volatile behavior of labor market activity over the business cycle. We address this issue by modifying the MP framework to allow for staggered multiperiod wage contracting. What emerges is a tractable relation for wage dynamics that is a natural generalization of the period-by-period Nash bargaining outcome in the conventional formulation. An interesting side-product is the emergence of spillover effects of average wages on the bargaining process. We then show that a reasonable calibration of the model can account well for the cyclical behavior of wages and labor market activity observed in the data. The spillover effects turn out to be important in this respect.
Subjects: 
Unemployment
Labor Market
Nash Bargaining
Wage Rigidity
JEL: 
E32
E50
J64
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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