IDEAS home Printed from https://ideas.repec.org/p/bof/bofrdp/2010_012.html
   My bibliography  Save this paper

New evidence on implicit contracts from linked employer-employee data

Author

Listed:
  • Kilponen, Juha
  • Santavirta, Torsten

Abstract

We improve the precision of the test of the implicit contract model that Beaudry and DiNardo proposed twenty years ago. Our data set allows us to define the precise industry and plant of a particular employment relationship, link local labour market characteristics and company characteristics to the individual level of wages, and control for composition effects. We find evidence in favour of the spot market model of wage setting in the whole sample, but there is significant variation across industries and educational levels. In particular, the spot market matters most for low-skill workers, while the implicit contract model with one-sided limited commitment applies better to high-skill workers

Suggested Citation

  • Kilponen, Juha & Santavirta, Torsten, 2010. "New evidence on implicit contracts from linked employer-employee data," Research Discussion Papers 12/2010, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2010_012
    as

    Download full text from publisher

    File URL: https://helda.helsinki.fi/bof/bitstream/123456789/7726/1/166119.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jonathan Thomas & Tim Worrall, 1988. "Self-Enforcing Wage Contracts," Review of Economic Studies, Oxford University Press, vol. 55(4), pages 541-554.
    2. Don Bellante & Albert N. Link, 1982. "Worker Response to a Menu of Implicit Contracts," ILR Review, Cornell University, ILR School, vol. 35(4), pages 590-599, July.
    3. Rudanko, Leena, 2009. "Labor market dynamics under long-term wage contracting," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 170-183, March.
    4. Tuomas Pekkarinen, 2001. "The wage curve : evidence from the Finnish metal industry panel data," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 51-60, Spring.
    5. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 1-25.
    6. Robert E. Hall & Paul R. Milgrom, 2008. "The Limited Influence of Unemployment on the Wage Bargain," American Economic Review, American Economic Association, vol. 98(4), pages 1653-1674, September.
    7. 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.
    8. Paul J. Devereux & Robert A. Hart, 2007. "The Spot Market Matters: Evidence On Implicit Contracts From Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 661-683, November.
    9. Darren Grant, 2003. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from the National Longitudinal Surveys," ILR Review, Cornell University, ILR School, vol. 56(3), pages 393-408, April.
    10. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    11. James Ted McDonald & Christopher Worswick, 1999. "Wages, Implicit Contracts, and the Business Cycle: Evidence from Canadian Micro Data," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 884-913, August.
    12. Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-257, July.
    13. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    14. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-688, August.
    15. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    16. Mark Gertler & Antonella Trigari, 2009. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 38-86, February.
    17. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    18. Petri Böckerman & Roope Uusitalo, 2006. "Erosion of the Ghent System and Union Membership Decline: Lessons from Finland," British Journal of Industrial Relations, London School of Economics, vol. 44(2), pages 283-303, June.
    19. Hogan, Chad, 2001. "Enforcement of Implicit Employment Contracts through Unionization," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 171-195, January.
    20. Milton Harris & Bengt Holmstrom, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 315-333.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Cockx, Bart & Ghirelli, Corinna, 2016. "Scars of recessions in a rigid labor market," Labour Economics, Elsevier, vol. 41(C), pages 162-176.
    2. Hermann Gartner, 2015. "Implicit contracts and industrial relations - Evidence from German employer-employee data," Economics Bulletin, AccessEcon, vol. 35(1), pages 298-304.
    3. Martins, Pedro & Snell, Andy & Thomas, Jonathan, 2010. "Minu, Startu and all that:- Pitfalls in estimating the sensitivity of a worker’s wage to aggregate unemployment," SIRE Discussion Papers 2010-109, Scottish Institute for Research in Economics (SIRE).
    4. Corinna Ghirelli, 2015. "Scars of early non-employment for low educated youth: evidence and policy lessons from Belgium," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-34, December.
    5. Corinna.Ghirelli, 2014. "The scarring effect of early non-employment," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/895, Ghent University, Faculty of Economics and Business Administration.
    6. Corinna GHIRELLI, 2015. "Scars of early non-employment in a rigid labour market," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:bof:bofrdp:2010_012. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman). General contact details of provider: http://edirc.repec.org/data/bofgvfi.html .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.