Rescuing the Upward-Sloping Rigid-Nominal-Wage Aggregate Supply Curve

The rigid-nominal-wage aggregate supply curve is not exactly upward sloping but kinked. For that reason, a demand expansion does not involve an increase but a decrease in employment level and output volume. This problem is due to the theoretical representation of the labor market which is usually chosen in order to plot the curve in question. And the remedies found in the literature in order to get an upward-sloping curve nevertheless appear flawed. We propose an alternative representation which solves the problem without affecting the other explanatory properties of the standard ADAS model. The solution we propose is based on a perfectly inelastic labor supply (at least in the short run) and informational frictions in the labor market