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Unemployment volatility in a generalized staggered Nash wage bargaining framework

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  • Engin Kara

Abstract

Micro evidence on wages suggests that there is heterogeneity across wage contract durations. While, on average, wages are sticky, a non‐negligible proportion of wages are flexible. I generalize the Gertler and Trigari model to match this heterogeneity and show that the new model closely matches observed unemployment volatility. This finding deviates from the literature proposing an alternative calibration of the standard model and arguing that large unemployment fluctuations require a small surplus from an employment relationship. However, in the multi‐sector model I present, unemployment volatility arises even with the standard calibration, where the surplus is relatively large. Volatilité du chômage dans un cadre de négociation salariale échelonnée et généralisée de Nash. Les données micro‐économiques sur les salaires suggèrent qu'il y a de l'hétérogénéité dans la durée des contrats salariaux. Bien qu'en moyenne les salaires soient rigides, une proportion non négligeable d'entre eux sont flexibles. Je généralise le modèle de Gerle et Trigari pour faire correspondre cette hétérogénéité et démontrer que le nouveau modèle correspond étroitement à la volatilité du chômage observée. Cette constatation s'écarte de la littérature proposant une calibration de rechange au modèle standard et soutenant que les fluctuations importantes du chômage exigent un petit surplus d'une relation d'emploi. Toutefois, dans le modèle multisectoriel que je présente, la volatilité du chômage survient même dans le cadre de la calibration standard, où le surplus est relativement important.

Suggested Citation

  • Engin Kara, 2024. "Unemployment volatility in a generalized staggered Nash wage bargaining framework," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(2), pages 378-400, May.
  • Handle: RePEc:wly:canjec:v:57:y:2024:i:2:p:378-400
    DOI: 10.1111/caje.12709
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    References listed on IDEAS

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