wages, which does not impose any structure between real wages and observed cyclical indicators. In particular, we employ a … Bayesian dynamic factor model and longitudinal microdata to estimate common latent factors driving real wages. We find that the … comovement of real wages is related to a common factor that exhibits a mild correlation with the national unemployment rate. Our …

Nash-bargained wages rather than actual wages, then the cyclical volatility of unemployment would decrease to less than one … seventh of what it is in the data. We compare our results to various models of rigid and flexible wages in the literature. …