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Wage rigidity and job creation

  • Haefke, Christian
  • Sonntag, Marcus
  • van Rens, Thijs

Recent research in macroeconomics emphasizes the role of wage rigidity in accounting for the volatility of unemployment fluctuations. We use worker-level data from the CPS to measure the sensitivity of wages of newly hired workers to changes in aggregate labor market conditions. The wage of new hires, unlike the aggregate wage, is volatile and responds almost one-to-one to changes in labor productivity. We conclude that there is little evidence for wage rigidity in the data.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 60 (2013)
Issue (Month): 8 ()
Pages: 887-899

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Handle: RePEc:eee:moneco:v:60:y:2013:i:8:p:887-899
DOI: 10.1016/j.jmoneco.2013.09.003
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