Aggregate wage rigidity is a primary driver of employment volatility over the business cycle
the verdict
SUPPORTED
the evidence backs this
confidence 80/100
Economic literature and theoretical models support the view that downward wage rigidities contribute significantly to employment fluctuations and unemployment volatility over the business cycle.
Evidence for · 4
Downward Nominal Wage Rigidity in Europe
2004 · cited by 5
Paper 0 documents the prevalence of downward nominal wage rigidity across European countries and sectors.
See more details
More for · 3
Wage Commitments, Financial Frictions, and Unemployment
2022 · cited by 0
Paper 4 demonstrates how wage commitments and rigidities interact with financial frictions to significantly increase unemployment volatility.
Fair Pay and a Wagebill Argument for Wage Rigidity and Excessive Employment Variability
2000 · cited by 0
Paper 9 shows theoretically that wage rigidities lead to inefficient employment levels and excessive employment variability in bad states of the world.
Downward nominal wage rigidity and the optimal inflation target
2025 · cited by 0
Paper 10 highlights how downward nominal wage rigidity has a substantial impact on macroeconomic outcomes and the distribution of wage changes.