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Labor Economics and Macroeconomics: Infrequent Wage Adjustment and Unemployment Dynamics (joint with Axel Gottfries, Pawel Krolikowski and Gary Solon)

Mike Elsby, University of Edinburgh
Wednesday, February 24, 2021
2:30-3:50 PM
We seek to provide a synthesis of the allocative effects of infrequent wage adjustment in long-term employment relationships subject to idiosyncratic shocks. We devise a new theory of wage dynamics that follow a “drunken walk,” whereby wages adjust minimally to satisfy participation constraints of firm and worker. The theory is amenable to analytical solution for the endogenous wage adjustment bounds, and is easily embedded into canonical models of aggregate labor market equilibrium, allowing a study of allocative implications for unemployment dynamics. A variety of extensions to accommodate an inflationary environment, on-the-job search, and costly wage cuts further allow an interpretation of recent evidence on nominal wage adjustment, base vs. non-base pay, and the possibility of inefficient separations.

* To join the seminar, please contact at
Building: Off Campus Location
Location: Virtual
Event Type: Workshop / Seminar
Tags: Economics, seminar
Source: Happening @ Michigan from Department of Economics, ISR-Zwerdling Seminar in Labor Economics, Michael Beauregard Seminar in Macroeconomics