Working Paper
Staggered Wages, Sticky Prices, and Labor Market Dynamics in Matching Models
This paper investigates the role of staggered wages and sticky prices in explaining stylized
labor market facts. We build on a partial equilibrium search and matching model and expand
the model to a general equilibrium model with sticky prices and/or staggered wages. We show
that the core model creates too much volatility in response to a technology shock. The sticky
price model outperforms the staggered wage model in terms of matching volatilities, while the
combination of both rigidities matches the data reasonably well.
Key Words
- search and matching
- Staggered Wages
- sticky prices