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The unemployment volatility puzzle: is wage stickiness the answer?

Pissarides, Christopher (2007) The unemployment volatility puzzle: is wage stickiness the answer? In: North American Summer Meeting of the Econometic Society, 2007-06-21 - 2007-06-24. (Submitted)

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I study the cyclical behavior of an equilibrium search model with endogenous job creation and destruction, with focus the model’s failure to match the observed cyclical volatility of unemployment.. Job creation in the model is influenced by wages in new matches. I summarize microeconometric evidence on wages in new matches and show that the key model elasticities are consistent with the evidence. Therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages. I discuss some extensions of the model that can increase cyclical unemployment volatility through mechanisms other than wage stickiness.

Item Type: Conference or Workshop Item (Other)
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Additional Information: © 2007 Christopher Pissarides
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
JEL classification: J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
Date Deposited: 11 Mar 2008 12:15
Last Modified: 07 Sep 2021 23:30

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