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Title: |
Cyclical Movements in Hours and Effort under
Sticky Wages |
| Author: |
Bils, Mark;
Chang, Yongsung |
| Author
Affiliation: |
U Rochester and
NBER; U PA |
| Source: |
International Economic Journal, Summer 2001, v. 15, no. 2, pp. 1-26 |
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Publication Date: |
Summer 2001 |
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Abstract: |
We examine the response of a sticky-wage
economy to various real and nominal shocks. In addition to variations in
hours, we allow for an endogenous response in worker effort per hour.
Despite wages being predetermined, the labor market clears through the
effort margin. We find that the ability of a sticky-wage model to mimic
U.S. business cycles is much improved by allowing for reasonable effort
movements. The model also provides a ready explanation for the finding
that TFP is negatively affected by nominal shocks. |
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