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The Division of Revenues from Unexpected Demand Shocks

Author

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  • Bastos, Paulo
  • Monteiro, Natalia P.
  • Straume, Odd Rune

Abstract

We exploit gaps between observed and recently forecasted GDP growth in export destinations to estimate the effects of unexpected demand shocks on worker compensation. Using employer-employee panel data, we find that the revenues from these demand shocks are partly transmitted to workers in the form of higher average wages, especially close to the top of the within-firm wage distribution. These wage responses occur both in the form of higher overtime payment and base wage increases. We also find significant increases in bonus-related pay in firms managed by high-skilled managers, and the unequal average distribution of unexpected revenues is also mainly driven by wage effects in the same subset of firms. This suggests that the way in which revenues from unexpected demand shocks are transmitted to workers is significantly related to managerial capabilities.

Suggested Citation

  • Bastos, Paulo & Monteiro, Natalia P. & Straume, Odd Rune, 2024. "The Division of Revenues from Unexpected Demand Shocks," CEPR Discussion Papers 19520, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19520
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    File URL: https://cepr.org/publications/DP19520
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    More about this item

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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