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Wage Cyclicality and Labour Market Institutions

Author

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  • Pereira, João

    (University of Évora)

  • Ramos, Raul

    (University of Barcelona)

  • Martins, Pedro S.

    (Nova School of Business and Economics)

Abstract

Do labour institutions influence how wages respond to the business cycle? Such responsiveness can then shape several economic outcomes, including unemployment. In this paper, we examine the role of two key labour market institutions - collective bargaining and temporary contracts - upon wage cyclicality. Our evidence is drawn from rich, 2002-2020 matched data from Portugal. We find that workers not covered by collective agreements exhibit much higher wage cyclicality, especially if new hires, compared to covered workers. In contrast, workers under fixed-term contracts do not exhibit sizable differences in cyclicality compared to counterparts under open-ended contracts. Our findings highlight a novel angle through which labour institutions influence the labour market and the economy.

Suggested Citation

  • Pereira, João & Ramos, Raul & Martins, Pedro S., 2024. "Wage Cyclicality and Labour Market Institutions," IZA Discussion Papers 16787, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16787
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    More about this item

    Keywords

    real wages; business cycles; collective bargaining; temporary contracts; matched data;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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