@article{SnowerAhrens, author = {Snower, Dennis and Ahrens, Steffen}, title = {Envy, Guilt, and the Phillips Curve}, series = {Journal of Economic Behavior \& Organization}, volume = {99}, journal = {Journal of Economic Behavior \& Organization}, number = {C}, pages = {69 -- 84}, abstract = {We incorporate inequity aversion into an otherwise standard New Keynesian dynamic equilibrium model with Calvo wage contracts and positive inflation. Workers with relatively low incomes experience envy, whereas those with relatively high incomes experience guilt. The former seek to raise their income, and the latter seek to reduce it. The greater the inflation rate, the greater the degree of wage dispersion under Calvo wage contracts, and thus the greater the degree of envy and guilt experienced by the workers. Since the envy effect is stronger than the guilt effect, according to the available empirical evidence, a rise in the inflation rate leads workers to supply more labor over the contract period, generating a significant positive long-run relation between inflation and output (and employment), for low inflation rates. This Phillips curve relation, together with an inefficient zero-inflation steady state, provides a rationale for a positive long-run inflation rate. Given standard calibrations, optimal monetary policy is associated with a long-run inflation rate around 2 percent.}, language = {en} } @article{BrownMerklSnower, author = {Brown, Alessio and Merkl, Christian and Snower, Dennis}, title = {The Minimum Wage from a Two-Sided Perspective}, series = {Economics Letters}, volume = {124}, journal = {Economics Letters}, number = {3}, doi = {10.1016/j.econlet.2014.06.020}, pages = {389 -- 391}, abstract = {This paper sheds new light on the effects of the minimum wage on employment from a two-sided theoretical perspective, in which firms' job offer and workers' job acceptance decisions are disentangled. Minimum wages reduce job offer incentives and increase job acceptance incentives. We show that sufficiently low minimum wages may do no harm to employment, since their job-offer disincentives are countervailed by their job-acceptance incentives.}, language = {en} }