Working Paper

Evaluating the performance of the search and matching model with sticky wages


  • Reicher
  • C.
Publication Date

Several authors have proposed staggered wage bargaining as a way to introduce sticky wages into search and matching models while preserving individual rationality. I evaluate the quantitative implications of such an approach. I feed through a series of estimated shocks from US data into a search and matching model with sticky prices and wages. I compare the implications of how the sticky wages enter into the hiring decision, and there seems to be a tradeoff between generating business cycle volatility and matching the lack of a long-run relationship between vacancy creation and inflation. With regard to wages, the sticky wage model unconditionally does a better job at matching wages than the flexible wage model.


JEL Classification
E24, E25, E32, J23, J31, J63

Key Words

  • Business cycles
  • Inflation
  • Konjunkturzyklen
  • Löhne
  • new hires
  • search and matching
  • staggered Nash bargaining
  • sticky prices
  • Wages