Cyclical Movements in Hours and Effort Under Sticky Wages

We examine the response of a sticky-wage economy to various real and nominal shocks. In addition to variations in hours, we allow for an endogenous response in worker effort per hour. Despite wages being predetermined, the labor market clears through the effort margin. We find that the ability of a...

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Bibliographic Details
Published inInternational economic journal Vol. 15; no. 2; pp. 1 - 26
Main Authors Marks, Bils, Yongsung, Chang
Format Journal Article
LanguageEnglish
Published The Korea International Economic Association 01.07.2001
Korean International Economic Association
SeriesInternational Economic Journal
Subjects
Business cycles
Hours of work
Labour demand
Labour market
Productivity
Sticky wages
Stochastic processes
U.S.A
Wages
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Summary:We examine the response of a sticky-wage economy to various real and nominal shocks. In addition to variations in hours, we allow for an endogenous response in worker effort per hour. Despite wages being predetermined, the labor market clears through the effort margin. We find that the ability of a sticky-wage model to mimic U.S. business cycles is much improved by allowing for reasonable effort movements. The model also provides a ready explanation for the finding that TFP is negatively affected by nominal shocks. [E24]
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:1016-8737
1743-517X
DOI:10.1080/10168730100000033