Transcript Mark Gertler, Luca Sala, Antonella Trigari, “An Estimated

Mark Gertler, Luca Sala, Antonella Trigari,
“An Estimated Monetary DSGE Model with
Nominal Wage Bargaining”
Comments by Espen R. Moen
About the paper
• Elaborates on a model by Gertler and Trigari
that introduces search frictions in a model with
Calvo pricing
• Structurally estimates the model
• Relevant for understanding the Shimer puzzle
– Hard to reconcile the standard search- and matching
model with business cycle facts
Structure of model
• DSGE model
– Representative agents
• Habit formation
– Two-layered production sector
• Manufacturing firms: labor and capital inputs, constant returns to
scale
• Endogenous capital utuilization
– Diamond-Mortensen-Pissarides search model
– Calvo pricing in retail firms, Calvo wage setting in manufacturing
firms
– DMP –style search model of the labor market
• Wage bargaining
• Partly indexed wage contracts
• Staggered wages complicates search model
– Firms are heterogeneous, wages differ
– More difficult to calculate the value of search to
workers
– All jobs are accepted
• The model is structurally estimated (which data
set?)
• Some important parameters are assumed, while
others are estimated (for instance the
unemployment income)
Findings
• Replacement ratio: 0,75
– Lower than Hagerdorn and Manovskii, but
higher than Shimer
• Bargaining power of workers: 0,89
– Higher than usual
– Inefficient
• Wage rigidity improves the fit of the model
Comments
• Complex model
– Hard to get intuition for the results
– What are the separate effects of each
extension relative to the standard DMPmodel?
• Interesting to see partial effect of sticky
wages on the dynamic properties of the
model
Theory issues
• Sticky wages for new hires?
– Refer to Menzio and Moen, but this is not fully appropriate
• Degree of indexation – probably a choice variable
• Wage bargaining
– Complicated, as future hirings influence the bargaining game
– Shocks to the worker’s bargaining power- may give rise to
relatively big effects on current wages
• Why not go for directed search and competitive search
equilibrium?
• Some missing references