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A NOTE ON THE UNEMPLOYMENT VOLATILITY PUZZLE: IS CREDIBLE WAGE BARGAINING THE ANSWER?

Published online by Cambridge University Press:  05 March 2020

Bingsong Wang
Bingsong Wang*
Affiliation:
The University of Warwick
*
Address correspondence to: Bingsong Wang, Department of Economics, The University of Warwick, Coventry, CV4 7AL, UK. e-mail: b.wang.9@warwick.ac.uk.
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Abstract

This paper shows that the ability of the credible wage bargaining model to match the observed unemployment volatility hinges on an unrealistic assumption about disagreement payoffs to the firm. Relaxing this assumption can lead to the substantial wage flexibility. As a consequence, the model is unable to capture the observed unemployment volatility.

Keywords

Credible BargainingSearch FrictionsUnemployment Volatility
Type
Articles
Information
Macroeconomic Dynamics , Volume 26 , Issue 1 , January 2022 , pp. 250 - 262
Copyright
© Cambridge University Press 2020

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