What question did this study set out to answer?

To resolve the inability of standard matching friction models to explain large employment fluctuations without relying on implausibly large macroeconomic shocks.

February 1, 2005American Economic Review

Employment Fluctuations with Equilibrium Wage Stickiness

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RHRobert E. HallHoover Institution

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Implication

Theoretical analysis demonstrates amplified employment fluctuations under equilibrium wage stickiness, indicating that sticky wages explain labor market volatility without causing inefficient job...

Key Points

To resolve the inability of standard matching friction models to explain large employment fluctuations without relying on implausibly large macroeconomic shocks.
Formulated an equilibrium search and matching labor market framework incorporating sticky wages.
Applied an equilibrium condition requiring that no worker-employer pair leaves mutually beneficial trade opportunities unexploited.
Wage stickiness substantially increases the sensitivity of vacancies, hiring, and unemployment to driving economic shocks relative to flexible-wage matching models.
Wage rigidity remains consistent with economic equilibrium, avoiding inefficient job match prevention or premature job destruction.

Cite This Study

Robert E. Hall (2005) studied this question.

synapsesocial.com/papers/69dee9dd7702a00918b0d1eb https://doi.org/10.1257/0002828053828482

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Implication

Theoretical analysis demonstrates amplified employment fluctuations under equilibrium wage stickiness, indicating that sticky wages explain labor market volatility without causing inefficient job...

Employment Fluctuations with Equilibrium Wage Stickiness

Discussion

Member takes

Implication

Key Points

Cite This Study

Employment Fluctuations with Equilibrium Wage Stickiness

Discussion

Member takes

Implication

Key Points

Cite This Study

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