The natural unemployment rate is a special case: it is the equilibrium unemployment rate at high inflation rates (and, ignoring downward wage rigidity
, at zero inflation).
Two potential causes of wage rigidity
are the suppression of wage renegotiation (since bargaining is costly and may encourage opportunistic behavior) and efficiency wages (the need to motivate workers provides a floor through which wages cannot fall).
In the context of sticky-wage models, nominal wage rigidity
reinforces the countercyclical response of the real wage to demand shocks and the real effect of these shocks on output growth.
In the development of Mankiw's brand of new Keynesianism it is evident that dissatisfaction with older style Keynesian models emphasizing nominal wage rigidity
played a crucial role.
Acyclical real wages are consistent with many different explanations of wage rigidity
, and procyclical labor productivity is consistent with technology shocks or labor hoarding.
Nominal wage rigidity
in that way is a considerable obstacle to real wage adjustments.
Widespread use of such pay schemes would overcome the constraints of downward nominal wage rigidity
, allowing lower overall wage changes.
The authors labelled one chapter as "Real Wage Rigidity
and Quality Effects: The Efficiency Wage Model" and the next "Real Wage Rigidity
and Turnover: The Insider-Outsider Model.
We have examined the implications of sector specific wage rigidity
and unemployment for the incidence of the corporate income tax.
There is no greater challenge to neoclassical labor market theory than the existence, and persistence, of downward wage rigidity
and its resultant unemployment.
economy as compared to the synchronized setting, we nevertheless explore the latter to better understand the monetary propagation mechanism created by nominal wage rigidity
A decline in real wage rigidity
could explain the increase in cyclicality of the labor force participation rate since 1984, as well as the divergent paths of prime-age and older workers.