Real wage rigidity boosts job market efficiency and lowers unemployment rates.
The researchers developed a model to study the labor market dynamics and found that it did not match real-world data. By adding real wage rigidity, they saw a more realistic negative correlation between job vacancies and unemployment. This change also made labor market flows more accurate. However, inflation dynamics were only slightly affected by real wage rigidity due to long-term employment relationships. The measure of real costs affecting inflation includes a component that changes independently of wages.