This paper studies a labor market with directed search, where multi-worker firms follow a firm wage policy: They pay … equally productive workers the same. The policy reduces wages, due to the influence of firms’ existing workers on their wage … applications, I first show that firm wages dampen wage variation over the business cycle, amplifying that in unemployment, with …

workers with limited ability to smooth consumption. I show that this leads to a form of equilibrium wage rigidity, as the … wage offers, and hence also the offers that employers find profitable to make. In the model risk-averse entrepreneurs use …

, the government faces recruitment problems. The optimal steady-state wage premium depends mainly on the labour market … the optimal policy can increase the volatility of unemployment significantly. Public sector wage and employment shocks … have mixed effects on unemployment. A wage shock raises the unemployment rate, while a reduction in the separations lowers …

, the government faces recruitment problems. The optimal steady-state wage premium depends mainly on the labour market … the optimal policy can increase the volatility of unemployment significantly. Public sector wage and employment shocks … have mixed effects on unemployment. A wage shock raises the unemployment rate, while a reduction in the separations lowers …

can commit to wage contracts but cannot commit not to replace incumbent workers. Workers are risk averse, so that there …

of reporting error and cover the entire population of workers, we find a substantial degree of downward nominal wage … flexibility in Ireland in the pre-crisis period. Furthermore, we observe a significant change in wage dynamics since the crisis … began. It was only after the peak crisis period that pay freezes became a feature of the Irish wage change distribution. …

There is considerable debate about the role of wage rigidity in explaining unemployment. Despite a large body of … empirical work, no consensus has emerged on the extent of wage rigidity. Previous attempts to empirically examine wage rigidity … have been hampered by small samples and measurement error. In this paper we examine nominal wage flexibility in Ireland …