ECONOMIC THOUGHT THROUGH THE PRISM OF NEW KEYNESIAN ECONOMICS
In this paper I study the relation between real wage rigidity and nominal price and wage rigidities. We formulate a generalized price-setting framework that incorporates staggered contracts of multiple durations and that enables us to directly identify the influences of nominal vs. real rigidities...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Academica Brâncuşi
2015-03-01
|
| Series: | Analele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie |
| Subjects: | |
| Online Access: | http://www.utgjiu.ro/revista/ec/pdf/2015-01.Volumul%201/02_Krume%20Nikoloski,%20Aleksoski.pdf |
| Summary: | In this paper I study the relation between real wage rigidity and nominal price and wage rigidities. We formulate a
generalized price-setting framework that incorporates staggered contracts of multiple durations and that enables us to
directly identify the influences of nominal vs. real rigidities. We also find that new contracts exhibit very low sensitivity
to marginal cost, corresponding to a relatively high degree of real rigidity. For instance, in models focused on labour
contracts, wages are regarded as an „insurance” provided by the employer to the workers, while in efficiency wage
models, wages are determinants of labour productivity. Such models have the ability to account for unemployment, but
they are not able to explain the failure of the classical dichotomy. |
|---|---|
| ISSN: | 1844-7007 1844-7007 |