Author: Wataru HirataPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Flattening of the Wage Phillips Curve and Downward Nominal Wage Rigidity
Author: Wataru HirataHeterogeneous Downward Nominal Wage Rigidity
Author: Stephanie Schmitt-GrohéPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
We introduce a form of downward nominal wage rigidity that can vary in intensity across a continuum of labor varieties. The model delivers a static wage Phillips curve linking current wage inflation to current unemployment. For standard parameterizations, the dynamics of the model are qualitatively and quantitatively similar to those of the new-Keynesian model with wage stickiness, which features a forward-looking wage Phillips curve, linking current wage inflation to future expected wage inflation and current unemployment. This result puts in perspective the role played by the forward-looking component of the new-Keynesian wage Phillips curve. A convenient property of the proposed model is that it is amenable to perturbation analysis because although it features occasionally binding constraints at the level of individual labor types it does not have such constraints at the aggregate level.
Fixing the Phillips Curve
Author: Stefan ReitzDownward Nominal Wage Rigidity
Author: David E. LebowPublisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 50
Book Description
Evaluating the Economic Significance of Downward Nominal Wage Rigidity
Author: Michael W. L. ElsbyPublisher:
ISBN:
Category : Wages
Languages : en
Pages : 72
Book Description
This paper formalizes and assesses empirically the implications of widely observed evidence for downward nominal wage rigidity (DNWR). It shows how a model of DNWR informed by diverse evidence for worker resistance to nominal wage cuts is nevertheless consistent with weak macroeconomic effects. This occurs because firms have an incentive to compress wage increases as well as wage cuts when DNWR binds. By neglecting potential compression of wage increases, the previous literature may have overstated the costs of DNWR to firms. Using a broad range of micro--data from the US and Great Britain I find that firms do indeed compress wage increases as well as wage cuts at times when DNWR binds. Accounting for this reduces the estimated increase in aggregate wage growth due to DNWR to be much closer to zero, consistent with the predictions of the model. These results suggest that DNWR may not provide a strong argument against the targeting of low inflation rates, as practiced by many monetary authorities. Importantly, though, this result is nevertheless consistent with evidence that suggests workers are averse to nominal wage cuts.
Downward Nominal Wage Rigidity in the United States During and After the Great Recession
Author: Bruce C. FallickThe Robustness and Real Consequences of Nominal Wage Rigidity
Author: Ernst FehrPublisher:
ISBN:
Category : Unemployment
Languages : en
Pages : 60
Book Description
Exploring Wage Phillips Curves in Advanced Economies
Author: Rose CunninghamPublisher:
ISBN:
Category : Electronic books
Languages : en
Pages : 22
Book Description
We investigate the extent to which excess supply (demand) in labour markets contributes to a lower (higher) growth rate of average nominal wages for workers. Using panel methods on data from 10 advanced economies for 1992-2018, we produce reduced-form estimates of a wage Phillips curve specification that is consistent with a New Keynesian framework. We find comparable effects on nominal wage growth from several indicators of "slack" in the labour market: unemployment rates, unemployment rate gaps, the prime-age employment-topopulation ratios, a composite labour market indicator constructed using a principal component for a wide range of labour force data, and unemployment rates separated by duration of unemployment. Our results provide evidence that while the slope of the wage Phillips curve seems to have become flatter following the global financial crisis in 2008, the relationship still appears to be highly significant. We find that the long-term unemployment rate (unemployment longer than six months) has had a larger effect on wage growth in the period since 2008. We also investigate the shape of the Phillips curve and find some evidence of a convex relationship between labour market slack and nominal wage growth, particularly for the pre-crisis period. Piecewise regressions suggest some mixed evidence on nominal rigidities in the aggregate data.
The Extent and Consequences of Downward Nominal Wage Rigidity
Author: Joseph G. AltonjiPublisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 48
Book Description
Using the Panel Study of Income Dynamics, we find that true wage changes have many fewer nominal cuts and more nominal freezes than reported nominal wage changes. The data overwhelmingly rejects a model of flexible wage changes and provides some evidence against a model of perfect downward rigidity in favor of a more general model. The more general model incorporates downward rigidity but specifies that nominal wage cuts may occur when large cuts would occur in the absence of wage rigidity. However, the results of the general model imply that nominal wage cuts are rare. We also analyze the personnel files of a large corporation and find cuts in base pay are rare and almost always associated with changes in full time status or a switch between compensation schemes involving incentives. Our evidence on the consequences of nominal wage rigidity is mixed. We find modest support for the hypothesis that workers who are overpaid because of nominal wage rigidity are less likely to quit.
The Phillips Curve - History of Thought and Empirical Evidence
Author: Szabolcs SzentmihályiPublisher:
ISBN:
Category :
Languages : en
Pages : 24
Book Description
The Phillips curve is one of the best known, most discussed and most often used macroeconomic relationships. As a result of the severe, prolonged global recession that unfolded in the wake of the 2007-2008 financial crisis, special attention was paid to the issue of the slope of the curve. In spite of the protracted recession, the decline in inflation remained moderate, and although it reached a much lower level than before, permanent deflation did not occur. According to most of the empirical studies, flattening of the Phillips curve was observed in the past decades, i.e. the coefficient of the output gap declined significantly. Although this process started prior to the crisis, the crisis amplified it considerably. The main underlying reasons for these developments are attributable to changes in corporate pricing behaviour and to the process of globalisation, as well as to the fact that downward nominal wage rigidities made the Phillips curve even flatter in the low inflation environment following the crisis.