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Downward wage rigidity in a model of equal treatment contracting
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Martins, Pedro, Snell, Andy and Thomas, Jonathan P.. (2010) Downward wage rigidity in a model of equal treatment contracting. Scandinavian Journal of Economics, Vol.112 (No.4). pp. 841-863. ISSN 0347-0520
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Official URL: http://dx.doi.org/10.1111/j.1467-9442.2010.01628.x
Abstract
Following insights by Bewley (1999a), this paper analyses a model with downward rigidities in which firms cannot pay discriminately based on year of entry to the firm, and develops an equilibrium model of wages and unemployment. We solve for the dynamics of wages and unemployment under conditions of downward wage rigidity, where forward-looking firms take into account these constraints. We show that there is a frontloading incentive that leads to a simple solution in the case of certainty. Using productivity data from the postwar US economy, we analyse the ability of the model to match certain stylised labour market facts.
| Item Type: | Journal Article |
|---|---|
| Subjects: | H Social Sciences > HB Economic Theory |
| Divisions: | Faculty of Social Sciences > Economics |
| Journal or Publication Title: | Scandinavian Journal of Economics |
| Publisher: | Blackwell |
| ISSN: | 0347-0520 |
| Date: | December 2010 |
| Volume: | Vol.112 |
| Number: | No.4 |
| Number of Pages: | 23 |
| Page Range: | pp. 841-863 |
| Identification Number: | 10.1111/j.1467-9442.2010.01628.x |
| Status: | Peer Reviewed |
| Publication Status: | Published |
| Access rights to Published version: | Restricted or Subscription Access |
| Funder: | Economic and Social Research Council (ESRC) |
| Grant number: | RES-062-23-0546, |
| URI: | http://wrap.warwick.ac.uk/id/eprint/46061 |
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