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New Keynesian models with labor market rigidities: a critical survey

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  • Marianna Riggi

Abstract

The labor market is receiving increasing attention in the New Keynesian literature. In this paper I critically survey this literature in order to highlight the role played by wage rigidities in the explanation of fluctuations caused by technology shocks. To this aim, I present a DSGE model with sticky prices, nominal wage rigidities, and hiring costs. The comparison between this model and Blanchard and Gali (2006) highlights the non trivial differences which exist in the way nominal wage and real wage rigidities drive the economy’s dynamics. My conclusion is that models incorporating nominal wage rigidities and some degree of price stickiness provide a better account of macroeconomic dynamics than models with real wage rigidities.

Suggested Citation

  • Marianna Riggi, 2007. "New Keynesian models with labor market rigidities: a critical survey," Working Papers in Public Economics 102, University of Rome La Sapienza, Department of Economics and Law.
    • Handle: RePEc:sap:wpaper:wp102
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    Cited by:

    1. Knell, Markus, 2013. "Nominal and real wage rigidities. In theory and in Europe," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 89-105.
    2. repec:onb:oenbwp:y::i:161:b:1 is not listed on IDEAS

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    More about this item

    Keywords

    new Keynesian model; labor market frictions; real wage rigidities; nominal wage rigidities; technology shock; employment.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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