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Why Are The Wages of Job Stayers Procyclical?

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  • Donggyun Shin
  • Kwanho Shin

Abstract

This paper explains how real wages are procyclical for those who stay with the same employer. On the basis of the Panel Study of Income Dynamics data for the period of 1974-75 to 1990-91, we find that the substantial wage procyclicality among job stayers is mostly accounted for by great wage adjustments during the period when the unemployment rate reaches a historical minimum level from the start of the employee's current job. This finding explains how the real wages of job stayers behave asymmetrically over the cycle and more importantly how the evidence of stayers' great wage procyclicality accords with the theoretical prediction of implicit contracts that stresses costless mobility.

Suggested Citation

  • Donggyun Shin & Kwanho Shin, 2003. "Why Are The Wages of Job Stayers Procyclical?," ISER Discussion Paper 0573, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0573
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    Cited by:

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    2. Jonathan P. Thomas & Tim Worrall, 2007. "Limited Commitment Models Of The Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 750-773, November.
    3. Andy Snell & Jonathan P. Thomas, 2010. "Labor Contracts, Equal Treatment, and Wage-Unemployment Dynamics," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 98-127, July.
    4. María Cervini-Plá & Antonia López-Villavicencio & José Ignacio Silva, 2015. "The heterogeneous cyclicality of income and wages among the distribution," Working Papers halshs-01133823, HAL.
    5. Andrew Snell & Heiko Stuber & Jonathan Thomas, 2018. "Downward Real Wage Rigidity and Equal Treatment Wage Contracts: Theory and Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 265-284, October.
    6. Anger, Silke, 2011. "The Cyclicality of Effective Wages within Employer–Employee Matches in a Rigid Labor Market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 18(6), pages 786-797.
    7. Verdugo, Gregory, 2016. "Real wage cyclicality in the Eurozone before and during the Great Recession: Evidence from micro data," European Economic Review, Elsevier, vol. 82(C), pages 46-69.
    8. Park, Seonyoung & Shin, Donggyun, 2017. "The extent and nature of downward nominal wage flexibility: An analysis of longitudinal worker/establishment data from Korea," Labour Economics, Elsevier, vol. 48(C), pages 67-86.
    9. Paulino Font & Mario Izquierdo & Sergio Puente, 2015. "Real wage responsiveness to unemployment in Spain: asymmetries along the business cycle," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-13, December.
    10. Martins, Pedro & Snell, Andy & Thomas, Jonathan, 2010. "Minu, Startu and all that:- Pitfalls in estimating the sensitivity of a worker’s wage to aggregate unemployment," SIRE Discussion Papers 2010-109, Scottish Institute for Research in Economics (SIRE).
    11. Jonathan Thomas & Andy Snell, 2007. "Real and Nominal Wage Rigidity in a Model of Equal-Treatment Contracting," CDMA Conference Paper Series 0708, Centre for Dynamic Macroeconomic Analysis.
    12. Stüber, Heiko & Snell, Andy, 2014. "Downward Real Wage Rigidity and Equal Treatment Wage Contracts: Evidence from Germany," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100601, Verein für Socialpolitik / German Economic Association.
    13. Donggyun Shin & Gary Solon, 2007. "New Evidence On Real Wage Cyclicality Within Employer–Employee Matches," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 648-660, November.
    14. Fei Peng & Sajid Anwar & Lili Kang, 2020. "Job Movement and Real Wage Flexibility in Eastern and Western Parts of Germany," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(4), pages 764-789, October.

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