The Effect of Implicit Contracts on the Movement of Wages Over the Business Cycle: Evidence from Micro Data

Beaudry, Paul; DiNardo, John

doi:10.1086/261774

Cited by 476 publications

(501 citation statements)

References 14 publications

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“…The procyclicality of the wage rate is more pronounced among job movers and manual workers, and not significantly different from the cyclicality of hourly 3 When taking into account overtime earnings, he finds procyclicality of wages even when aggregating the data. 4 This higher procyclicality of job changers has been attributed to the existence of implicit contracts (Beaudry and DiNardo, 1991;McDonald and Worswick, 1999;Grant, 2003, Devereux andHart, 2005), or to compensating differentials (Barlevy, 2001). 5 They show that wage adjustments occur particularly in high employment times, which is evidence against the spot market model, where wage adjustments take place during both expansions and recessions.…”

Section: The Cyclicality Of Real Wagesmentioning

confidence: 99%

The cyclicality of effective wages within employer–employee matches in a rigid labor market

Anger

2011

Labour Economics

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ABSTRACT:I analyze the cyclicality of real wages for male workers within employer-employee matches over the period for Germany, which is known to have a relatively rigid labor market. Using individual based micro-data from the German Socio-Economic Panel Study (SOEP), I compare different wage measures: the standard hourly wage rate, hourly wage earnings including overtime and bonus payments, and the effective wage, which takes into account not only paid overtime, but also unpaid working hours. The hourly wage rates of salaried workers with unpaid overtime are shown to exhibit strong procyclicality. Despite acyclical wage rates, salaried workers without unpaid hours but with income from extra payments, such as bonuses, experienced procyclical earnings movements. Monthly earnings were also procyclical for hourly paid workers who received overtime payments. The procyclicality of earnings revealed for the rigid labor market in Germany, is clearly lower than in the U.K., but of comparable size with the one in the U.S.. JEL:E32, J31

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Section: The Cyclicality Of Real Wagesmentioning

confidence: 99%

The cyclicality of effective wages within employer–employee matches in a rigid labor market

Anger

2011

Labour Economics

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“…We conclude that the failure of the model to match employment fluctuations is related to the job creation process rather than to wage determination. Beaudry and DiNardo's (1991) model of implicit wage contracts is a good illustration of the type of wage rigidity that we believe to be plausible. Upon the start of a work-relationship the bargaining parties are relatively free in their wage determination.…”

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confidence: 94%

“…Furthermore, it is a well documented fact that wages are less volatile than most models of the business cycle predict. 1 Using individual-level panel data on wages, several studies document evidence for wage rigidity in ongoing employment relationships (Bils 1985, Solon, Barsky and Parker 1994, Beaudry and DiNardo 1991.…”

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Wage rigidity and job creation

Hæfke

Sonntag²,

Rens

2013

Journal of Monetary Economics

168

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Shimer (2005) and Hall (2005) have documented the failure of standard labor market search models to match business cycle fluctuations in employment and unemployment. They argue that it is likely that wages are not adjusted as regularly as suggested by the model, which would explain why employment is more volatile than the model predicts. We explore whether this explanation is consistent with the data. The main insight is that the relevant wage data for the search model are not aggregate wages, but wages of newly hired workers. Our results show that wages for those workers are much more volatile than aggregate wages and respond one-for-one to changes in labor productivity. Thus, we find no evidence for wage rigidity.JEL Codes: E24 E32 J31 J41 J64

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“…Those who refuse to downgrade become temporarily unemployed. The possibility of catching-up with a more fortunate generation that did not graduate in a recession is hampered by a slower pace of human capital accumulation in these lower quality jobs (Gibbons and Waldman, 2006), by rigidities induced by long-term contracting (Beaudry and DiNardo, 1991;Baker et al, 1994), or by search frictions that increase with age or job tenure, inducing workers to stop searching for a better paying job (Oreopoulos et al, 2012). The very strict EPL for white collar workers in Belgium increases the gradient of search frictions with age or job tenure.…”

Section: Introductionmentioning

confidence: 99%

Scars of recessions in a rigid labor market

Cockx

Ghirelli

2016

Labour Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Scars of Recessions in a Rigid Labor Market AbstractWe study the impact of graduating in a recession in Flanders (Belgium), i.e. in a rigid labor market. In the presence of a high minimum wage, a typical recession hardly influences the hourly wage of low educated men, but reduces working time and earnings by about 4.5% up to twelve years after graduation. For the high educated, the working time is not persistently affected, but the penalty on the hourly wage (and earnings) increases with experience, and attains roughly -6% ten years after labor market entry. We also contribute to the literature on inference with few clusters.

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The Effect of Implicit Contracts on the Movement of Wages Over the Business Cycle: Evidence from Micro Data

Cited by 476 publications

References 14 publications

The cyclicality of effective wages within employer–employee matches in a rigid labor market

The cyclicality of effective wages within employer–employee matches in a rigid labor market

Wage rigidity and job creation

Scars of recessions in a rigid labor market

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