Abstract
Does wage setting exhibit strategic complementarity and produce multiple equilibria? This study constructs a discrete-time New Keynesian model in which households choose the timing of their wage adjustments endogenously subject to fixed wage-setting costs. I explore steady-state equilibrium of the state-dependent wage-setting model both analytically and numerically. For reasonable parameter values, complementarity in wage setting is weak and the steady-state equilibrium is unique.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics