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Movements of wages over the business cycle: an intra-firm view

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  • Beth Anne Wilson
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    Abstract

    This paper tests the hypothesis that firms adjust to the business cycle by altering employment through promotion and hiring and holding the salary structure and salaries assigned to jobs relatively constant. Two comprehensive firm-level panel datasets are used to examine salary setting and worker movement within firms. The salary structure is found to be rigid whereas promotion rates are cyclically sensitive. In contrast to the hypothesis, wage cyclicality in these two firms is driven by changes in salaries associated with jobs rather than by worker movement. An additional finding is that salaries in the two firms are countercyclical.

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    File URL: http://www.federalreserve.gov/pubs/feds/1997/199701/199701abs.html
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    File URL: http://www.federalreserve.gov/pubs/feds/1997/199701/199701pap.pdf
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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 1997-1.

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    Date of creation: 1997
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    Handle: RePEc:fip:fedgfe:1997-1

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    Related research

    Keywords: Business cycles ; Wages;

    References

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    1. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
    2. Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-57, July.
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    Cited by:
    1. Anger, Silke, 2011. "The Cyclicality of Effective Wages within Employer-Employee Matches in a Rigid Labor Market," IZA Discussion Papers 5489, Institute for the Study of Labor (IZA).
    2. Paul J. Devereux & Robert A. Hart, 2006. "Real wage cyclicality of job stayers, within-company job movers, and between-company job movers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(1), pages 105-119, October.
    3. Silke Anger, 2007. "The Cyclicality of Effective Wages within Employer-Employee Matches: Evidence from German Panel Data," Discussion Papers of DIW Berlin 719, DIW Berlin, German Institute for Economic Research.
    4. Julio J. Rotemberg, 1998. "Cyclical Movements in Wages and Consumption in a Bargaining Model of Unemployment," NBER Working Papers 6445, National Bureau of Economic Research, Inc.

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