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Business Cycles and Wage Rigidity

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  • Cristian Bartolucci

Abstract

This paper analyzes the impact of downward wage rigidity on the labor market. It shows that imposing downward wage rigidity in a matching model with cyclical fluctuations in productivity, endogenous match-destruction, and on-the-job search, quits are procyclical and layoffs countercyclical. It provides evidence that downward wage rigidity is empirically relevant in ten European countries. It finally shows that layoffs are countercyclical and quits are procyclical, as predicted by the model.

Suggested Citation

  • Cristian Bartolucci, 2011. "Business Cycles and Wage Rigidity," Carlo Alberto Notebooks 205, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:205
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    References listed on IDEAS

    as
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    2. Morin, Annaïg, 2017. "Cyclicality of wages and union power," Labour Economics, Elsevier, vol. 48(C), pages 1-22.

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    More about this item

    Keywords

    Downward wage rigidity; Business cycles; Wage renegotiation;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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