Wages and the Allocation of Hours and Effort / Mark Bils, Yongsung Chang.

Format:

Book

Author/Creator:

Bils, Mark.

Contributor:

National Bureau of Economic Research.

Chang, Yongsung.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7309.

NBER working paper series no. w7309

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

We examine the impact of wage stickiness when employment has an effort as well as hours dimension. Despite wages being predetermined, the labor market clears through the effort margin. We compare this model quantitatively to models with flexible and sticky wages, but no effort margin. Allowing for responses in effort dramatically improves the ability of a sticky-wage model to mimic U.S. business cycles. The model produces fluctuations in hours that are intermediate to the standard flexible-wage and sticky-wage models; but output and consumption behave much like in the flexible-wage economy. Consequently, welfare costs of wage stickiness are potentially much, much smaller if one entertains an effort dimension.

Notes:

Print version record

August 1999.