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Sticky Wage Models and Labor Supply Constraints

Huo, Z; Rios-Rull, J-V; (2020) Sticky Wage Models and Labor Supply Constraints. American Economic Journal: Macroeconomics (In press). Green open access

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Abstract

In sticky wages models (either à la Calvo or à la Rotemberg), labor is solely determined by the demand side. However, a change of circumstances may make labor demand higher than agents' willingness to work. We find that workers are required to work against their will between 15 percent and 30 percent of the time (with 5 percent wage markup, less with higher markups and in Rotemberg models). Estimating models with the minimum of the demand and supply of labor instead of the demand-determined quantity yields different and unappealing properties. Hence, special attention should be paid to possible violations of the labor supply constraint.

Type: Article
Title: Sticky Wage Models and Labor Supply Constraints
Open access status: An open access version is available from UCL Discovery
Publisher version: https://www.aeaweb.org/articles?id=10.1257/mac.201...
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10100849
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