Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/35435
Authors: 
de Walque, Gregory
Pierrard, Olivier
Sneessens, Henri R.
Wouters, Raf
Year of Publication: 
2009
Series/Report no.: 
IZA discussion papers 4059
Abstract: 
We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers' bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility.
Subjects: 
DSGE
search and matching
nominal wage rigidity
monetary policy
JEL: 
E31
E32
E52
J64
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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