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Policy shocks and wage rigidities: empirical evidence from regional effects of national shocks

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dc.contributor.author Ridder, Maarten de
dc.contributor.author Pfajfar, Damjan
dc.date.accessioned 2017-09-20T16:18:04Z
dc.date.available 2017-09-20T16:18:04Z
dc.date.issued 2017-04
dc.identifier.uri http://hdl.handle.net/10230/32775
dc.description.abstract This paper studies the effect of wage rigidities on the transmission of fiscal and monetary policy shocks. We calculate downward wage rigidities across U.S. states using the Current Population Survey. These estimates are used to explain differences in the state level economic effects of identical national shocks in interest rates and taxes. In line with the role of sticky wages in New Keynesian models, we find that contractionary monetary policy and tax shocks increase unemployment and decrease economic activity in rigid states considerably more than in flexible states. We also find larger and more persistent effects of monetary and tax policy shocks for states where the ratio between minimum and median wage is higher and for states that do not have right-to-work legislation.
dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries ADEMU Working Paper Series;68
dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.
dc.rights.uri https://creativecommons.org/licenses/by/4.0/
dc.subject.other Wage rigidity
dc.subject.other Monetary policy
dc.subject.other Tax multipliers
dc.subject.other U.S. states
dc.title Policy shocks and wage rigidities: empirical evidence from regional effects of national shocks
dc.type info:eu-repo/semantics/workingPaper
dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
dc.rights.accessRights info:eu-repo/semantics/openAccess


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