Employmentfluctuationswithdownwardwagerigiditythe.PDF

EMPLOYMENT FLUCTUATIONS 2006 WITH DOWNWARD WAGE RIGIDITY: THE ROLE OF MORAL HAZARD James Costain and Marcel Jansen Documentos de Trabajo N.º 0632 EMPLOYMENT FLUCTUATIONS WITH DOWNWARD WAGE RIGIDITY: THE ROLE OF MORAL HAZARD EMPLOYMENT FLUCTUATIONS WITH DOWNWARD WAGE RIGIDITY: THE ROLE OF MORAL HAZARD (*) James Costain (**) BANCO DE ESPAÑA Marcel Jansen (**) UNIVERSIDAD CARLOS III DE MADRID (*) We wish to thank Juan Pablo Rincón Zapatero, Juan Francisco Jimeno, and Wouter den Haan for their helpfull comments. We also thank seminar participants at Univ. Carlos III, Univ. Pompeu Fabra, the Bank of Spain, the Society for Economic Dynamics 2004, the Simposio de Análisis Económico 2005, the Society for Computational Economics 2006, and the 2006 North American Meetings of the Econometric Society. Financial support from the Spanish Ministry of Science and Technology (MCyT grants SEC2002-01601 and BEC2003-02943) and the Bank of Spain is gratefully acknowledged. Errors are the responsibility of the authors. (**) Correspondence addresses: Banco de España, División de Investigación, Servicio de Estudios. Calle Alcalá, 48, 28014 Madrid. E-mail: james.costain@bde.es; Departamento de Economía, Universidad Carlos III. Calle Madrid, 126, 28903 Getafe, Madrid. E-mail: jansen@eco.uc3m.es. Documentos de Trabajo. N.º 0632 2006 The Working Paper Series seeks to disseminate original research in economics and finance. All papers have been anonymously refereed. By publishing these papers, the Banco de España aims to contribute to economic analysis and, in particular, to knowledge of the Spanish economy and its international environment. The opinions and analyses in the Working Paper Series are the responsibility of the authors and, therefore