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Unemployment Fluctuations with Staggered Nash Wage Bargaining

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Author Info
Mark Gertler
Antonella Trigari

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Abstract

A number of authors have argued 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 Mortensen-Pissarides 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. We then show that a reasonable calibration of the model can account for the cyclical behavior of wages and labor market activity observed in the data. (c) 2009 by The University of Chicago. All rights reserved..

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File URL: http://www.journals.uchicago.edu/doi/pdf/10.1086/597302
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 117 (2009)
Issue (Month): 1 (02)
Pages: 38-86
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Handle: RePEc:ucp:jpolec:v:117:y:2009:i:1:p:38-86

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References listed on IDEAS
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  34. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers 460, Society for Economic Dynamics.
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