This paper investigates the quantitative implications of real wage rigidities and heterogeneity for two long-lasting puzzles in the business cycles literature: the low correlation between total hours worked and labor productivity and the large volatility of the labor wedge, defined as a gap...

It is well-known that real wages are procyclical conditional on a monetary policy shock. This paper challenges this conventional view by using a quantitative heterogeneous-agent New Keynesian economy with sticky wages. In the model with benchmark calibration, the wage rate per effective unit of...