Wage Rigidities and Old-Age Unemployment

Wage smoothing is beneficial for firms and workers, but wage rigidities can lead to bilaterally inefficient separations. By comparing the impact of four policy measures regarding their impact on welfare, output and government expenditures, Martin Kerndler (TU Wien) and Michael Reiter (IHS Vienna, NYU Abu Dhabi, EconPol Europe) have identified a reasonable policy mix to counter the negative employment effects of wage rigidities.