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Asymmetries and Rigidities in Wage Adjustments by Firms

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Author Info
Harry J. Holzer
Edward B. Montgomery

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Abstract

In this paper we use micro data from the Employment Opportunity Pilot Project (EOPP) surveys of firms in 1980 and 1982 to test for labor market rigidities and asymmetries in response to demand shifts. We analyze wage and employment adjustments to positive and negative shifts, as measured by sales growth between 1979 and 1981. The analysis is done for both entire sample of firms and for selected subsamples based on firm size, unionization, industry and skill mix. The results show that wage adjustments appear to be fairly rigid, compared with employment adjustments. They also appear to be quite asymmetric, with significant adjustments in response to positive shifts but little adjustment in response to negative shifts. These asymmetries are not more pronounced in large firms, manufacturing, heavily-waged or highly-skilled industries than in other firms or industries. pattern of asymmetry.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3274.

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Date of creation: Mar 1990
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Handle: RePEc:nbr:nberwo:3274

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  3. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February. [Downloadable!] (restricted)
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  15. Blanchflower, David G & Oswald, Andrew J & Garrett, Mario D, 1990. "Insider Power in Wage Determination," Economica, London School of Economics and Political Science, vol. 57(226), pages 143-70, May. [Downloadable!] (restricted)
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  1. Philip Arestis & Iris Biefang-Frisancho Mariscal, . "Capital Shortages and Asymmetries in UK Unemployment," Working Papers 9607, University of East London, Department of Economics. [Downloadable!]
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  2. Erica L. Groshen & Mark E. Schweitzer, 1996. "Macro- and microeconomic consequences of wage rigidity," Working Paper 9607, Federal Reserve Bank of Cleveland. [Downloadable!]
  3. Ana Rute Cardoso & Miguel Portela, 2005. "The Provision of Wage Insurance by the Firm: Evidence from a Longitudinal Matched Employer-Employee Dataset," IZA Discussion Papers 1865, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Erica L. Groshen & Mark E. Schweitzer, 1996. "The effects of inflation on wage adjustments in firm-level data: grease or sand?," Staff Reports 9, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  5. Anabela Carneiro & Pedro Portugal, 2006. "Market Power, Dismissal Threat and Rent Sharing: The Role of Insider and Outsider Forces in Wage Bargaining," IZA Discussion Papers 2102, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Lucia Foster, 1999. "Employment Adjustment Costs and Establishment Characteristics," Working Papers 99-15, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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