Labor Selection, Turnover Costs, and Optimal Monetary Policy
Johann Wolfgang Goethe University; Kiel Institute for the World Economy; Friedrich-Alexander-University Erlangen-Nürnberg
New Keynesian DSGE model with labor selection process, labor turnover costs (hiring and firing costs), Nash bargained wages (collective bargaining), and Rotemberg price adjustment costs. Features idiosyncratic match-specific productivity shocks
intermediate goods firms: perfectly competitive, linear production in labor; wholesale firms: monopolistic competition with Rotemberg price adjustment costs; retailers: perfect competition, Dixit-Stiglitz aggregation
Table 5 p.26
Optimal Ramsey inflation volatility with firing costs at 60% of productivity, elasticity of substitution ν=4