Cyclical movements in hours and effort under sticky wages

Marks Bils, Yongsung Chang

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

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].

Original languageEnglish
Pages (from-to)1-26
Number of pages26
JournalInternational Economic Journal
Volume15
Issue number2
DOIs
Publication statusPublished - 2001 Jun

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

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