Martins, Pedro S., 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. doi:10.1111/j.1467-9442.2010.01628.x ISSN 0347-0520.

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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
Official Date:	December 2010
Dates:	Date Event December 2010 Published
Volume:	Vol.112
Number:	No.4
Number of Pages:	23
Page Range:	pp. 841-863
DOI:	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,

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