Working Paper: NBER ID: w26723
Authors: Lawrence J. Christiano; Martin S. Eichenbaum; Mathias Trabandt
Abstract: We argue that wage inertia plays a pivotal role in allowing empirically plausible variants of the standard search and matching model to account for the large countercyclical response of unemployment to shocks.
Keywords: No keywords provided
JEL Codes: E0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage inertia (J31) | countercyclical response of unemployment (J64) |
| wage rigidity (J31) | unemployment dynamics (J64) |
| less wage rate response to marginal revenue product (J39) | more responsive unemployment rate (J64) |
| wage inertia (J31) | greater unemployment response to shocks (J64) |
| wage rate responds one-to-one to marginal revenue product (J31) | unemployment rate unchanged across steady states (J64) |