Billi, Roberto M.Galí, Jordi, 1961-2021-03-252021-03-252020Billi RM, Galí J. Gains from wage flexibility and the zero lower bound. Oxf Bull Econ Stat. 2020 Dec; 82(6): 1239-61. DOI:10.1111/obes.123810305-9049http://hdl.handle.net/10230/46932We analyse the welfare impact of greater wage flexibility in the presence of an occasionally binding zero lower bound (ZLB) constraint on the nominal interest rate.We show that the ZLB constraint generally amplifies the adverse effects of greaterwage flexibility onwelfare when the central bank follows a conventional Taylor rule. When demand shocks are the driving force, the ZLB implies that an increase in wage flexibility reduces welfare even under the optimal monetary policy with commitment.application/pdfeng© 2020 The Authors. Oxford Bulletin of Economics and Statistics published by Oxford University and John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License https://creativecommons.org/licenses/by-nc-nd/4.0/, which permits use and distribution in anymedium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.info:eu-repo/semantics/articlehttp://dx.doi.org/10.1111/obes.12381info:eu-repo/semantics/openAccess