The Financial Channel of Wage Rigidity

Schoefer, Benjamin

doi:10.2139/ssrn.3913850

Cited by 9 publications

(11 citation statements)

References 123 publications

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“…22 The salary sensitivity to cash ows is 30 cents on the euro. This is exactly in line with other payroll sensitivities to cash ow found by Schoefer (2016), Garin andSilvério (2019), Acabbi et al (2019). 23 To interpret the results in terms of percentage changes of real variables, I also run the speci cation in (8) on invoice-weighted indices normalized by sales instead of capital.…”

Section: Benchmark Firm-level Sensitivity To Invoice Valuationssupporting

confidence: 90%

The Valuation Effects of Trade

Barbiero¹

2021

Federal Reserve Bank of Boston Research Department Working Papers

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This paper estimates the cash flow and real effects of currency mismatches generated by foreign-priced operations of French manufacturers. The value of transactions invoiced in foreign currencies is twice as sensitive to exchange rates as the value of transactions invoiced in the domestic currency. I aggregate foreign-priced operations to the firm level to build a shift-share measure of invoice currency mismatch. This measure outperforms any trade-weighted effective exchange rate index in explaining cash flows of trading firms. Large firms absorb valuation shocks in their balance sheet, and small exporters partially hedge their dollar-priced exports with dollar-priced imports. Only investment and payroll of small domestic-oriented firms are sensitive to invoice currency valuations. These results show how trade value sensitivities to currency fluctuations can coexist with the evidence of disconnect between exchange rates and real macroeconomic fundamentals.

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Section: Benchmark Firm-level Sensitivity To Invoice Valuationssupporting

confidence: 90%

The Valuation Effects of Trade

Barbiero¹

2021

Federal Reserve Bank of Boston Research Department Working Papers

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“…This is because in general equilibrium the participation rate simply shrinks the size of the economy. Since I allow the real wage to adjust to the change in labour supply in (36) the wage adjusts to correct hiring incentives, leaving the unemployment rate essentially unchanged. 28 Overall, we learn two things from the full decomposition exercise.…”

Section: Resultsmentioning

confidence: 99%

“…The path for discounts is measured from the capital Euler equation, and is identical to the series used in subsection 6.2. Finally, the wage shock is calculated by combining the labour Euler equation, (35), with the wage rule, (36), to eliminate the real wage. The series for ω t is chosen to make this equation hold in every period, and can thus be interpreted as being chosen to shift the wage in such a way as to move hiring incentives in the labour Euler to exactly replicate the path for employment.…”

Section: Extracting the Shocksmentioning

confidence: 99%

Discounts, rationing, and unemployment

Clymo

2020

European Economic Review

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“…But bargaining costs and commitment issues may often make such renegotiation impractical. Therefore, wage and hours rigidities may interact with liquidity constraints to amplify the employment response to negative shocks (Schoefer 2016;Jäger, Schoefer, and Zweimüller 2019). Finally, note that generous and imperfectly experience-rated unemployment insurance may also already distort workers' and firms' choices in favor of (socially inefficient) dismissals.…”

Section: The Welfare Value Of Labor Hoarding Subsidies the Welfare Va...mentioning

confidence: 99%

Should We Insure Workers or Jobs During Recessions?

Giupponi

Landais

Lapeyre

2022

Journal of Economic Perspectives

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What is the most efficient way to respond to recessions in the labor market? To this question, policymakers on the two sides of the pond gave diametrically opposed answers during the COVID-19 crisis. In the United States, the focus was on insuring workers by increasing the generosity of unemployment insurance. In Europe, instead, policies were concentrated on saving jobs, with the expansion of short-time work programs to subsidize labor hoarding. Who got it right? In this article, we show that far from being substitutes, unemployment insurance and short-time work exhibit strong complementarities. They provide insurance to different types of workers and against different types of shocks. Short-time work can be effective at reducing socially costly layoffs against large temporary shocks, but it is less effective against more persistent shocks that require reallocation across firms and sectors. We conclude that short-time work is an important addition to the labor market policy-toolkit during recessions, to be used alongside unemployment insurance.

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The Financial Channel of Wage Rigidity

Cited by 9 publications

References 123 publications

The Valuation Effects of Trade

The Valuation Effects of Trade

Discounts, rationing, and unemployment

Should We Insure Workers or Jobs During Recessions?

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