The Legal Bases of Sticky Wages

Abstract

Sticky wages are a well-known economic phenomenon, in which wages don’t respond quickly to changes in economic conditions. This is important in derivations of macroeconomic theory from microeconomic phenomena, in setting monetary policy, and in many other applications, but the origins of them remain debated among economists. In this thesis, I will explore differential employment contract structure as a mechanism for sticky wages, then will seek empirical evidence for this behavior. I will begin in Section One by providing some background into the phenomenon of sticky wages, existing theories for how they originate, and their importance. Section Two will propose four research questions and describe why each is worthy of study. Sections Three through Six will address each of these questions, and Section Seven will provide overall conclusions. Section Eight is a bibliography.