downward rigidity, and magnifying the response of unemployment to negative shocks. We also consider layoffs and show that for a … range of shocks labor hoarding occurs while wages are cut. We argue these features are consistent with recent evidence …

equilibrium model of wage dynamics and unemployment. The model is developed under the assumption of worker mobility, so that … Beaudry and DiNardo (1991). We solve for the dynamics of wages and unemployment, and show that real wages do not necessarily … to match actual unemployment and wage series. We also show that equal treatment follows in our model from the assumption …