How Sticky Wages in Existing Jobs Can Affect Hiring

We consider a matching model of employment with flexible wages for new hires but sticky wages within matches. Unlike most models of sticky wages, we allow effort to respond if wages are too high or too low. In the Mortensen-Pissarides model, employment is not affected by wage stickiness in existing matches. But it is in our model. If wages of matched workers are stuck too high, firms require more effort, lowering the value of additional labor and reducing hiring. We find that effort’s response can greatly increase wage inertia. (JEL E24, J23, J31, J41, M51)

MPCs, MPEs, and Multipliers: A Trilemma for New Keynesian Models

We show that New Keynesian models with frictionless labor supply face a challenge: given standard parameters, they cannot simultaneously match plausible estimates of marginal propensities to consume (MPCs), marginal propensities to earn (MPEs), and fiscal multipliers. A HANK model with sticky wages provides a solution to this trilemma.

Sticky Wage Models and Labor Supply Constraints

In sticky wages models (either à la Calvo or à la Rotemberg), labor is solely determined by the demand side. However, a change of circumstances may make labor demand higher than agents’ willingness to work. We find that workers are required to work against their will between 15 percent and 30 percent of the time (with 5 percent wage markup, less with higher markups and in Rotemberg models). Estimating models with the minimum of the demand and supply of labor instead of the demand-determined quantity yields different and unappealing properties. Hence, special attention should be paid to possible violations of the labor supply constraint. (JEL E12, E24, E32, J22, J23, J31, J51)

Unemployment Fluctuations, Match Quality, and the Wage Cyclicality of New Hires

We revisit the issue of the high cyclicality of wages of new hires. We show that after controlling for composition effects likely involving procyclical upgrading of job match quality, the wages of new hires are no more cyclical than those of existing workers. The key implication is that the sluggish behaviour of wages for existing workers is a better guide to the cyclicality of the marginal cost of labour than is the high measured cyclicality of new hires wages unadjusted for composition effects. Key to our identification is distinguishing between new hires from unemployment versus those who are job changers. We argue that to a reasonable approximation, the wages of the former provide a composition-free estimate of the wage flexibility, while the same is not true for the latter. We then develop a quantitative general equilibrium model with sticky wages via staggered contracting, on-the-job search, and heterogeneous match quality, and show that it can account for both the panel data evidence and aggregate evidence on labour market volatility.

A Spatial Evolutionary Study of Technological Innovation Talents’ Sticky Wages and Technological Innovation Efficiency Based on the Perspective of Sustainable Development

In China, with the deepening of the reform of industrial structures, the improvement of technological innovation has become a key issue. This is not only related to whether the strategic development of Chinese science and technology can be achieved, but also whether the Chinese economy and high-quality human capital can develop sustainably. Based on the theoretical boundary of sustainable development—free transfer of information—we see that sticky wages are the embodiment of information dissemination. Under the dual effects of profit-seeking behavior and information barriers, the relationship between the sticky wages of technological innovation talents (TIT), as the most profitable labor force, and technological innovation efficiency (TIE) has become more complex, and so far we still have a limited understanding of it. We explore this issue in an empirical study by using a two-stage chain Data Envelopment Analysis (DEA) of TIE followed by modifying the wages of TIT; finally, we build a collaborative evolution model with spatial effects on a large dataset (from 2007 to 2016). The results show that the overall Chinese TIE is relatively low, and in the central and western regions the TIE has been seriously reversed; there are also divergences in the TIE at different stages in the regions we focus on. As the output of technological innovation, except for initial results (such as patents), the more important value is whether it has an ability to transform the initial results into production, and the core of it is whether it can match the market environment and technology transfer system (for example, market mechanism, transformation incentive mechanism, and institutional mechanism). So, considering these aspects, the central and west of China are obviously insufficient, while the east has obvious advantages; this can also explain the results of spatial diffusion, namely, in the eastern region it is higher than in other areas, but the gap between them is gradually narrowing; lastly, from the perspective of synergy, the wage stickiness of TIT in the central region is larger than that of the eastern and western regions, and the evolutionary relationship in the former is “extruding” while in the latter it is “cooperative.” Mainly due to the popularity of the eastern innovation network and the initial state of the west, the barriers of information transmission are relatively low, while the central part is undergoing economic transformation, so its extreme demand for TIT has pushed up the cost of information transmission.