Publication

A search and matching model with infrequently bargained nominal wages would predict the observed behavior of labor’s share after a productivity disturbance, and it also predicts the observed behavior of labor’s share after an inflationary disturbance. Wages at the macroeconomic level seem to be sticky in a way which is consistent with micro-economic evidence; much of the ongoing discussion about the real effects of sticky wages seems to be well-motivated, while sticky price models fail to match the data.