{"content":[{"text":"Introduction","bbox":{"left":0.168119,"top":0.164118,"width":0.145151,"height":0.018129000000000006}},{"text":"Models of the business cycle with search frictions and wage bargaining im- \n prove our understanding of the US labor market stylized facts (see Merz \n [1995] and Andolfatto [1996]). These models are capable of replicating that:","bbox":{"left":0.168119,"top":0.198019,"width":0.634913,"height":0.05888300000000002}},{"text":"(i)","bbox":{"left":0.184872,"top":0.276261,"width":0.021485000000000004,"height":0.01510800000000001}},{"text":"the correlation between unemployment and job vacancies is negative,","bbox":{"left":0.215926,"top":0.276261,"width":0.578292,"height":0.01510800000000001}},{"text":"(ii) employment is more volatile than labor productivity and the real wage,","bbox":{"left":0.17902,"top":0.310728,"width":0.624026,"height":0.01510800000000001}},{"text":"(iii)","bbox":{"left":0.173153,"top":0.345194,"width":0.03320400000000001,"height":0.01510800000000001}},{"text":"labor’s share of output behaves countercyclically,","bbox":{"left":0.215926,"top":0.345194,"width":0.41051599999999994,"height":0.01510800000000001}},{"text":"(iv)","bbox":{"left":0.176095,"top":0.379661,"width":0.030273999999999995,"height":0.01510800000000001}},{"text":"labor productivity is a leading indicator of labor input,","bbox":{"left":0.215926,"top":0.379661,"width":0.461864,"height":0.01510800000000001}},{"text":"(v)","bbox":{"left":0.181946,"top":0.414128,"width":0.024414999999999992,"height":0.01510800000000001}},{"text":"GNP growth is characterized by positive serial correlations.1","bbox":{"left":0.215926,"top":0.412429,"width":0.505047,"height":0.016807000000000016}},{"text":"However, this framework does not allow for a weak procyclical real wage2, \n whereas the US data shows a weak correlation between the real wage and \n the business cycle (see Cooley and Prescott [1995], Kydland [1995] and Stock \n and Watson [2000]). This casts some doubts on the labor market search \n explanation of the business cycle.3 \n This failure in the model’s predictions is all the more puzzling that im- \n plicit contracts and eﬃciency wage theories have been found to succeed in \n replicating the real wage rigidity. For instance, Boldrin and Horvath [1995] \n successfully illustrated the explanatory power of the implicit contracts the- \n ory. Providing workers with an income insurance that smoothes the real \n wage dynamics, entrepreneurs take advantage of a more ﬂexible labor sup- \n ply. This entails the desired low procyclicality of the real wage. A similar \n sluggishness in the real wage has been obtained by Collard and De Lacroix \n [2000], by extending the gift exchange model of Danthine and Donaldson \n [1990] to include social or personal norms, which allow the reference wage to","bbox":{"left":0.168119,"top":0.446896,"width":0.6349130000000001,"height":0.323231}},{"text":"1See Cogley and Nason [1995]. \n 2In the standard Real Business Cycle (RBC) model driven by a single productivity \n shock the aggregate real wage is highly procyclical (see, e.g., King and Rebelo [2000]). \n 3Extensions of the labor market search model to allow for endogenous ﬁring decisions \n do not overcome this empirical shortcoming (see Merz [1999] and Den Haan, Ramey, and \n Watson [2000]); so does also for the introduction of nominal rigidities and monetary shocks \n (see Ch´eron and Langot [2000]).","bbox":{"left":0.168119,"top":0.782086,"width":0.6349809999999999,"height":0.10590200000000005}},{"text":"2","bbox":{"left":0.480772,"top":0.933718,"width":0.009570999999999996,"height":0.01510800000000001}}],"images_bbox":[],"images_bbox_not_text_overlap":[]}