ELLINGTON, MICHAEL 
ORCID: 0000-0003-0264-7572, MARTIN, CHRIS and WANG, BINGSONG
(2024)
Revisiting Real Wage Rigidity.
Journal of Money, Credit and Banking, 56 (2-3).
pp. 613-626.
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Abstract
<jats:title>Abstract</jats:title><jats:p>In this paper, we provide empirical evidence that real wage rigidity is not a major cause of unemployment volatility. We argue that there is a disconnect between the theoretical and empirical literatures on this topic. While theoretical studies define real wage rigidity as the response of wages to changes in unemployment following productivity shocks, the empirical literature measures real wage rigidity as the estimated semi‐elasticity of wages with respect to unemployment, averaged over all shocks. We show that averaging over shocks gives a biased measure of real wage rigidity, as the impact of other shocks confounds the response to productivity shocks. Our results indicate that the estimated semi‐elasticity with respect to productivity shocks is twice as large as the estimated semi‐elasticity averaged over all shocks. This implies that one cannot attribute unemployment volatility to real wage rigidity.</jats:p>
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | 8 Decent Work and Economic Growth |
| Depositing User: | Symplectic Admin |
| Date Deposited: | 21 Oct 2022 08:28 |
| Last Modified: | 25 Mar 2024 23:52 |
| DOI: | 10.1111/jmcb.13056 |
| Related URLs: | |
| URI: | https://livrepository.liverpool.ac.uk/id/eprint/3165691 |
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