For theoretical models that endogenize the nominal wage rigidity
see, for example, Gray .
and European performance could be traced to wage adjustment; the United States experienced "nominal wage rigidity
," while Europe suffered from "real wage rigidity
Over the past decade, economists have developed efficiency wage models to explain the presence of wage rigidity
and thus of involuntary unemployment.
, Union Activity and Unemployment," in Wage Rigidity
& Unemployment, edited by W.
Edmund Phelps attempts to persuade the reader that there is "structural alternative" to the Keynesian model, based on real wage rigidity
Persistent wage rigidity
and involuntary unemployment appear to be recurrent problems in most economies.
There have been no attempts to measure marginal wage rigidity
directly, but this is not surprising.
First, wage rigidity
in the contracting sector is responsible for a non-neutral response to aggregate demand shocks in both sectors.
But one theory I should have mentioned involves what economists call "downward nominal wage rigidity
But if downward wage rigidity
is to hinder the downward adjustment of wages during a downturn, one would expect to find a larger increase in the incidence of zero wage changes during recent recessions than in the past, yet this is a feature that, as we document, is absent in the data.
This high disparity of the wage rigidity
indicator across the country proves that "one size does not fill all.
First and as stated before, our model also considers endogenous wage rigidity
(through the dependence of the threat point on unemployment benefits and the dependence of the latter on past wages) and imperfect insurance (see Supporting Information).