Equilibrium Nominal Wage Stickiness
Hong Kong University of Science & Technology (HKUST) - Department of Economics
August 1, 2012
This paper builds a parsimonious model of nominal wage stickiness, in which wage stickiness is an equilibrium outcome, but not an assumption. The model also has the property that money is neutral, regardless of the presence of wage stickiness. The paper shows that this model can successfully explain those salient features of wage adjustment in the data, including the average frequency of wage adjustment, the average duration of a wage, and the size distribution of wage changes.
Keywords: Search frictions, wage dispersion, wage stickiness, money neutrality
JEL Classification: E24, E25, J64working papers series
Date posted: August 1, 2012 ; Last revised: January 15, 2013
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