Downward nominal wage rigiditythe implications from a new-keynesian model

  1. Maliar, Lilia
  2. Maliar, Serguei
  3. Hvozdyk, Luidmila
Aldizkaria:
Working papers = Documentos de trabajo: Serie AD

Argitalpen urtea: 2006

Zenbakia: 4

Mota: Laneko dokumentua

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We study the determinants of Downward Nominal Wage Rigidity(DNWR) in the context of a new-Keynesian heterogeneous-agent model. Laborproductivity of agents is subject to perfectly insurable idiosyncratic shocks.Wage contracts are signed one period ahead and specify the minimum wagethat the firm should pay to each worker conditional on her future expectedmarginal product. The model predicts a simple structural equation: the degreesof DNWR are entirely determined by unexpected shocks to technology andmoney supply. We test this model's implication with data on the U.S. economy,and we find that the above two shocks can account for about 60% of variation inthe aggregate measures of DNWR.

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