TY  - JOUR
AU  - Rotemberg,Julio J.
TI  - Cyclical Wages in a Search-and-Bargaining Model with Large Firms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12415
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12415
L1  - http://www.nber.org/papers/w12415.pdf
N1  - Author contact info:
Julio J. Rotemberg
Graduate School of Business
Harvard University, Morgan Hall
Soldiers Field
Boston, MA  02163
Tel: 617/495-1015
Fax: 617/496-5994
E-Mail: jrotemberg@hbs.edu
M1  - published as Julio J. Rotemberg. "Cyclical Wages in a Search-and-Bargaining Model with Large Firms," in Lucrezia Reichlin and Kenneth West, organizers, "NBER International Seminar on Macroeconomics 2006" University of Chicago Press (2008)

M2  - featured in NBER digest on 2006-08-07
M3  - presented at "ISOM Hosted by Bank of Estonia", June 16-17, 2006
AB  - This paper presents a complete general equilibrium model with flexible wages where the degree to which wages and productivity change when cyclical employment changes is roughly consistent with postwar U.S. data. Firms with market power are assumed to bargain simultaneously with many employees, each of whom finds himself matched with a firm only after a process of search. When employment increases as a result of reductions in market power, the marginal product of labor falls. This fall tempers the bargaining power of workers and thus dampens the increase in their real wages. The procyclical movement of wages is dampened further if the posting of vacancies is subject to increasing returns.
ER  -