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Does State-Dependent Wage Setting Generate Multiple Equilibria?

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  • Shuhei Takahashi

    (Institute of Economic Research, Kyoto University)

Abstract

Does wage setting exhibit strategic complementarity and produce multiple equilib- ria? This study constructs a discrete-time New Keynesian model in which the timing of individual wage adjustments is endogenous. I explore steady-state equilibrium of the state-dependent wage-setting model both analytically and numerically. For reasonable parameter values, complementarity in wage setting is weak and multiple equilibria are unlikely to exist at the steady state. The uniqueness of equilibrium is robust to imperfect consumption insurance.

Suggested Citation

  • Shuhei Takahashi, 2018. "Does State-Dependent Wage Setting Generate Multiple Equilibria?," KIER Working Papers 991, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:991
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP991.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    State-dependent wage setting; New Keynesian model; Multiple equilibria; Strategic complementarity; Incomplete markets; Deflation;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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