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Monetary Policy Effects on Wage Inequality Between and Within Firms

Author

Listed:
  • Christian Moser

    (Columbia University)

  • Benjamin Wirth

    (IAB Nuremberg)

  • Farzad Saidi

    (Stockholm School of Economics)

Abstract

We study pass-through of negative interest rates to workers’ wages in the European currency union from 2014-16. To this end, we construct a novel dataset combining ad- ministrative linked employer-employee (IAB-LIAB) data with proprietary syndicated loans (Dealscan) and executive compensation (BoardEx) data from Germany. To identify monetary policy effects on wage inequality between and within firms, we exploit the interaction of nominal interest rate movements around the zero lower bound with variation in pre-determined balance sheet exposure of banks and their lending relations with firms. We find significant increases in credit supply of affected banks, leading to increased within-firm inequality. The results are driven by executives and highest- paid employees reaping relatively greater benefits from positive firm-level credit supply shocks. At the same time, low-paying firms increase their average pay in response to easier credit access.

Suggested Citation

  • Christian Moser & Benjamin Wirth & Farzad Saidi, 2018. "Monetary Policy Effects on Wage Inequality Between and Within Firms," 2018 Meeting Papers 1035, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:1035
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    References listed on IDEAS

    as
    1. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2013. "Credit within the Firm," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(1), pages 211-247.
    2. Schepens, Glenn, 2018. "Bank lending under negative policy rates," Research Bulletin, European Central Bank, vol. 43.
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    Cited by:

    1. Manthos D. Delis & Fulvia Fringuellotti & Steven Ongena, 2020. "Credit and Income Inequality," Staff Reports 929, Federal Reserve Bank of New York.

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