Perhaps not as much as you might think: We introduce dynamic incentive contracts into a model of inflation and unemployment dynamics. Our main result is that wage cyclicality from incentives neither affects the slope of the Phillips curve for prices nor dampens unemployment dynamics. The impulse response of unemployment in economies with flexible, procyclical incentive […] The post How Does Flexible Incentive Pay Affect Wage Rigidity? appeared first on Marginal REVOLUTION.
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- © Tyler Cowen
