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Why Are The Wages Of Job Stayers Procyclical?

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  • SHIN, DONGGYUN
  • SHIN, KWANHO

Abstract

This paper explains how real wages are procyclical for those who stay with the same employer. On the basis of the Panel Study of Income Dynamics data for the period of 1974-75 to 1990-91, we find that the substantial wage procyclicality among job stayers is mostly accounted for by great wage adjustments during the period when the unemployment rate reaches a historical minimum level from the start of the employee's current job. This finding explains how the real wages of job stayers behave asymmetrically over the cycle and more importantly how the evidence of stayers' great wage procyclicality accords with the theoretical prediction of implicit contracts that stresses costless mobility.
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  • Shin, Donggyun & Shin, Kwanho, 2008. "Why Are The Wages Of Job Stayers Procyclical?," Macroeconomic Dynamics, Cambridge University Press, vol. 12(01), pages 1-21, February.
  • Handle: RePEc:cup:macdyn:v:12:y:2008:i:01:p:1-21_06
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    Cited by:

    1. Anger, Silke, 2007. "The cyclicality of effective wages within employer-employee matches: evidence from German panel data," Working Paper Series 783, European Central Bank.
    2. Jonathan P. Thomas & Tim Worrall, 2007. "Limited Commitment Models Of The Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 750-773, November.
    3. Andy Snell & Jonathan P. Thomas, 2010. "Labor Contracts, Equal Treatment, and Wage-Unemployment Dynamics," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 98-127, July.
    4. Snell, Andy & Stüber, Heiko & Thomas, Jonathan P., 2018. "Downward Real Wage Rigidity and Equal Treatment Wage Contracts: Theory and Evidence," IZA Discussion Papers 11504, Institute for the Study of Labor (IZA).
    5. Anger, Silke, 2011. "The Cyclicality of Effective Wages within Employer–Employee Matches in a Rigid Labor Market," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 786-797.
    6. repec:eee:labeco:v:48:y:2017:i:c:p:67-86 is not listed on IDEAS
    7. Paulino Font & Mario Izquierdo & Sergio Puente, 2015. "Real wage responsiveness to unemployment in Spain: asymmetries along the business cycle," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-13, December.
    8. Verdugo, Gregory, 2016. "Real wage cyclicality in the Eurozone before and during the Great Recession: Evidence from micro data," European Economic Review, Elsevier, vol. 82(C), pages 46-69.
    9. Jonathan Thomas & Andy Snell, 2007. " Real and Nominal Wage Rigidity in a Model of Equal-Treatment Contracting," CDMA Conference Paper Series 0708, Centre for Dynamic Macroeconomic Analysis.
    10. Stüber, Heiko & Snell, Andy, 2014. "Downward Real Wage Rigidity and Equal Treatment Wage Contracts: Evidence from Germany," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100601, Verein für Socialpolitik / German Economic Association.
    11. Donggyun Shin & Gary Solon, 2007. "New Evidence On Real Wage Cyclicality Within Employer-Employee Matches," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 648-660, November.

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