Flattening of the Wage Phillips Curve and Downward Nominal Wage Rigidity
Author: Wataru Hirata
Publisher:
Published: 2020
Total Pages:
ISBN-13:
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Author: Wataru Hirata
Publisher:
Published: 2020
Total Pages:
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DOWNLOAD EBOOKAuthor: Stephanie Schmitt-Grohé
Publisher:
Published: 2022
Total Pages: 0
ISBN-13:
DOWNLOAD EBOOKWe 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.
Author: Stefan Reitz
Publisher:
Published: 2012
Total Pages: 21
ISBN-13:
DOWNLOAD EBOOKAuthor: David E. Lebow
Publisher:
Published: 1999
Total Pages: 50
ISBN-13:
DOWNLOAD EBOOKAuthor: Michael W. L. Elsby
Publisher:
Published: 2006
Total Pages: 72
ISBN-13:
DOWNLOAD EBOOKThis 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.
Author: Bruce C. Fallick
Publisher:
Published: 2016
Total Pages:
ISBN-13:
DOWNLOAD EBOOKAuthor: Ernst Fehr
Publisher:
Published: 2000
Total Pages: 60
ISBN-13:
DOWNLOAD EBOOKAuthor: Rose Cunningham
Publisher:
Published: 2019
Total Pages: 22
ISBN-13:
DOWNLOAD EBOOKWe 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.
Author: Mr.Yasser Abdih
Publisher: International Monetary Fund
Published: 2018-06-15
Total Pages: 34
ISBN-13: 1484363574
DOWNLOAD EBOOKIn this paper, we undertake empirical analysis to understand U.S. wage behavior since the beginning of the new millennium. At the macroeconomic level, we find that a productivity-augmented Phillips curve model explains the data fairly well. The model reveals that the upward pressure on wage growth from recent tightening in the labor market has been dampened by a persistent decline in trend labor productivity growth and the share of income that accrues to labor. These themes are reinforced and complemented at the micro-economic level. Lower regional unemployment puts an upward pressure on wages of individuals, although this effect has become weaker since 2008. But there is downward pressure on wages for individuals with occupations that are exposed to automation and offshoring, and in industries with a higher concentration of large firms. All these factors appear to play a role illustrating why it is difficult to single out any one culprit for the observed wage growth moderation.
Author: Marcello M. Estevao
Publisher:
Published: 1998
Total Pages: 26
ISBN-13:
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