Bargaining and Wage Rigidity in a Matching Model for the US

This paper uses robust econometric methods to assess previous empirical results for the Mortensen and Pissarides () matching model. Assuming all wages are negotiated each period is inconsistent with the history dependence in US wages, even allowing for heterogeneous match productivities, time to build vacancies and credible bargaining. Flexible wages for job changers, with rigid wages for job stayers, allows the model to capture this history dependence and is not inconsistent with parameter calibrations in the literature. Such wage rigidity affects only the timing of wage payments over the duration of matches; conclusions about other characteristics are unaffected by it.