{"title":"Wage rigidity and destabilizing spirals","authors":"Euiyoung Jung","doi":"10.1016/j.jmacro.2023.103546","DOIUrl":null,"url":null,"abstract":"<div><p>This paper investigates the impact of real wage<span> rigidity on the (de)stabilizing role of demand feedback. I show that destabilizing supply–demand feedback driven by countercyclical precautionary savings demand against uninsured unemployment risk is fundamentally a matter of rigid real wage adjustments over business cycles. Given the estimated wage rigidity consistent with aggregate labor market dynamics in the United States, the quantitative results suggest that the unemployment risk channel has a minor impact on aggregate volatility.</span></p></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":null,"pages":null},"PeriodicalIF":1.3000,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Macroeconomics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0164070423000460","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
This paper investigates the impact of real wage rigidity on the (de)stabilizing role of demand feedback. I show that destabilizing supply–demand feedback driven by countercyclical precautionary savings demand against uninsured unemployment risk is fundamentally a matter of rigid real wage adjustments over business cycles. Given the estimated wage rigidity consistent with aggregate labor market dynamics in the United States, the quantitative results suggest that the unemployment risk channel has a minor impact on aggregate volatility.
期刊介绍：
Since its inception in 1979, the Journal of Macroeconomics has published theoretical and empirical articles that span the entire range of macroeconomics and monetary economics. More specifically, the editors encourage the submission of high quality papers that are concerned with the theoretical or empirical aspects of the following broadly defined topics: economic growth, economic fluctuations, the effects of monetary and fiscal policy, the political aspects of macroeconomics, exchange rate determination and other elements of open economy macroeconomics, the macroeconomics of income inequality, and macroeconomic forecasting.
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