IDEAS home Printed from https://ideas.repec.org/a/aea/aejmac/v14y2022i1p332-54.html

Endogenous Separations, Wage Rigidities, and Unemployment Volatility

Author

Listed:
  • Mikael Carlsson
  • Andreas Westermark

Abstract

We show that in microdata, as well as in a search and matching model with flexible wages for new hires, wage rigidities of incumbent workers have substantial effects on separations and unemployment volatility. Allowing for an empirically relevant degree of wage rigidities for incumbent workers drives unemployment volatility as well as the volatility of vacancies and tightness to that in the data. Thus, the degree of wage rigidity for newly hired workers is not a sufficient statistic for determining the effect of wage rigidities on macroeconomic outcomes. This finding affects the interpretation of a large empirical literature on wage rigidities.

Suggested Citation

  • Mikael Carlsson & Andreas Westermark, 2022. "Endogenous Separations, Wage Rigidities, and Unemployment Volatility," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 332-354, January.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:1:p:332-54
    DOI: 10.1257/mac.20180314
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/mac.20180314
    Download Restriction: no
    File URL: https://doi.org/10.3886/E119548V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/mac.20180314.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/mac.20180314.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/mac.20180314?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christian Merkl & Heiko Stüber, 2019. "Value added, wages and labour market flows at the establishment level," Applied Economics Letters, Taylor & Francis Journals, vol. 26(2), pages 135-142, January.
    2. Gottfries, A. & Teulings, T., 2017. "Wage Posting, Nominal Rigidity, and Cyclical Inefficiencies," Cambridge Working Papers in Economics 1736, Faculty of Economics, University of Cambridge.
    3. Merkl, Christian & Stüber, Heiko, 2024. "Wage and employment cyclicalities at the establishment level," European Economic Review, Elsevier, vol. 161(C).
    4. Häkkinen Skans, Iida & Carlsson, Mikael & Nordström Skans, Oskar, 2017. "Wage Flexibility in a Unionized Economy with Stable Wage Dispersion," Working Papers 149, National Institute of Economic Research.
    5. Teulings, Coen & Gottfries, Axel, 2017. "Wage posting, nominal rigidity, and cyclical inefficiencies," CEPR Discussion Papers 12316, C.E.P.R. Discussion Papers.
    6. Takano, Tetsuaki, 2024. "Beveridge curve under endogenous separation model: The role of wage rigidity and match-specific productivity," Economic Modelling, Elsevier, vol. 141(C).
    7. Axel Gottfries, 2018. "Partial commitment in models of on-the-job search with an application to minimum wage spillovers," 2018 Meeting Papers 567, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmac:v:14:y:2022:i:1:p:332-54. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.