IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

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 stickiness in the data. We also show, however, that a little wage rigidity goes a long way in amplifying the response of job creation to productivity shocks.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8968
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8968.

as
in new window

Length:
Date of creation: May 2012
Handle: RePEc:cpr:ceprdp:8968
Contact details of provider: Postal:
Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.

Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Robert Shimer, 2004. "The Consequences of Rigid Wages in Search Models," NBER Working Papers 10326, National Bureau of Economic Research, Inc.
  2. Hirsch, Barry & Schumacher, Edward J., 2003. "Match Bias in Wage Gap Estimates Due to Earnings Imputation," IZA Discussion Papers 783, Institute for the Study of Labor (IZA).
  3. Susanto Basu & John Fernald & Miles Kimball, 2002. "Are Technology Improvements Contractionary?," Harvard Institute of Economic Research Working Papers 1986, Harvard - Institute of Economic Research.
  4. Kamil Galuscak & Mary Keeney & Daphne Nicolitsas & Frank Smets & Pawel Strzelecki & Matija Vodopivec, 2009. "The Determination of Wages of Newly Hired Employees: Survey Evidence on Internal versus External Factors," Working Papers 2009/5, Czech National Bank, Research Department.
  5. James Costain & Michael Reiter, 2005. "Business Cycles, Unemployment Insurance and the Calibration of Matching Models," Working Papers 215, Barcelona Graduate School of Economics.
  6. Jordi Galí & Thijs van Rens, 2010. "The Vanishing Procyclicality of Labor Productivity," Kiel Working Papers 1641, Kiel Institute for the World Economy.
  7. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  8. Olivier Blanchard & Jordi Galí, 2007. "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 35-65, 02.
  9. Mark Gertler & Antonella Trigari, 2006. "Unemployment fluctuations with staggered Nash wage bargaining," Proceedings, Federal Reserve Bank of San Francisco.
  10. Leena Rudanko, 2005. "Labor Market Dynamics under Long Term Wage Contracting," 2005 Meeting Papers 876, Society for Economic Dynamics.
  11. Marianna Kudlyak, 2011. "The cyclicality of the user cost of labor with search and matching," Working Paper 09-12, Federal Reserve Bank of Richmond.
  12. Blanchard, Olivier & Galί, Jordi, 2006. "A New Keynesian Model with Unemployment," Kiel Working Papers 1335, Kiel Institute for the World Economy (IfW).
  13. Gali, J., 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," Working Papers 96-28, C.V. Starr Center for Applied Economics, New York University.
  14. Marga Peeters & Ard den Reijer, 2003. "On Wage Formation, Wage Development and Flexibility: A comparison between European countries and the United States," DNB Staff Reports (discontinued) 108, Netherlands Central Bank.
  15. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  16. 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.
  17. Christian Belzil, 2008. "Testing the Specification of the Mincer Wage Equation," Annals of Economics and Statistics, GENES, issue 91-92, pages 427-451.
  18. Roger E. A. Farmer & Andrew Hollenhorst, 2006. "Shooting the Auctioneer," NBER Working Papers 12584, National Bureau of Economic Research, Inc.
  19. Simon, Curtis J., 2001. "The Supply Price Of Labor During The Great Depression," The Journal of Economic History, Cambridge University Press, vol. 61(04), pages 877-903, December.
  20. Barlevy, Gadi, 2001. "Why Are the Wages of Job Changers So Procyclical?," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 837-78, October.
  21. Boldrin, Michael & Horvath, Michael, 1995. "Labor Contracts and Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 972-1004, October.
  22. Helge Braun, 2006. "(Un)Employment Dynamics: The Case of Monetary Policy Shocks," 2006 Meeting Papers 87, Society for Economic Dynamics.
  23. Gary Solon & Robert Barsky & Jonathan A. Parker, 1992. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias," NBER Working Papers 4202, National Bureau of Economic Research, Inc.
  24. Jordi Gali & Luca Gambetti, 2008. "On the Sources of the Great Moderation," NBER Working Papers 14171, National Bureau of Economic Research, Inc.
  25. Valerie A. Ramey & Neville Francis, 2007. "Measures of Per Capita Hours and their Implications for the Technology-Hours Debate," 2007 Meeting Papers 314, Society for Economic Dynamics.
  26. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 254-83, June.
  27. Mortensen, Dale T. & Nagypál, Éva, 2005. "More on Unemployment and Vacancy Fluctuations," IZA Discussion Papers 1765, Institute for the Study of Labor (IZA).
  28. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
  29. Donggyun Shin & Gary Solon, 2006. "New Evidence on Real Wage Cyclicality within Employer-Employee Matches," NBER Working Papers 12262, National Bureau of Economic Research, Inc.
  30. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series 0853, European Central Bank.
  31. James R. Spletzer & Katharine G. Abraham & Jay C. Stewart, 1999. "Why Do Different Wage Series Tell Different Stories?," American Economic Review, American Economic Association, vol. 89(2), pages 34-39, May.
  32. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
  33. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  34. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-689, August.
  35. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "Unemployment and vacancy fluctuations in the matching model: inspecting the mechanism," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 19-50.
  36. Dale T. Mortensen & Christopher A. Pissarides, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 397-415.
  37. Bjoern Bruegemann & Giuseppe Moscarini, 2007. "Rent Rigidity, Asymmetric Information, and Volatility Bounds in Labor Markets," NBER Working Papers 13030, National Bureau of Economic Research, Inc.
  38. Fernald, John G., 2007. "Trend breaks, long-run restrictions, and contractionary technology improvements," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2467-2485, November.
  39. Michael Reiter, 2006. "Embodied technical change and the fluctuations of wages and unemployment," Economics Working Papers 980, Department of Economics and Business, Universitat Pompeu Fabra.
  40. Peter Gottschalk, 2002. "Downward nominal wage flexibility: real or measurement error?," Boston College Working Papers in Economics 534, Boston College Department of Economics.
  41. Devereux, Paul J. & Hart, Robert A., 2005. "Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers," IZA Discussion Papers 1651, Institute for the Study of Labor (IZA).
  42. Robert E. Hall & Paul R. Milgrom, 2005. "The Limited Influence of Unemployment on the Wage Bargain," NBER Working Papers 11245, National Bureau of Economic Research, Inc.
  43. Malcomson, J., 1998. "Individual employment contracts," Discussion Paper Series In Economics And Econometrics 9804, Economics Division, School of Social Sciences, University of Southampton.
  44. Bewley, Truman F., 1998. "Why not cut pay?," European Economic Review, Elsevier, vol. 42(3-5), pages 459-490, May.
  45. John Kennan, 2005. "Private Information, Wage Bargaining and Employment Fluctuations," 2005 Meeting Papers 555, Society for Economic Dynamics.
  46. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  47. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
  48. Paul J. Devereux, 2001. "The Cyclicality of Real Wages within Employer-Employee Matches," ILR Review, Cornell University, ILR School, vol. 54(4), pages 835-850, July.
  49. Michael W. Elsby & Ryan Michaels & Gary Solon, 2007. "The Ins and Outs of Cyclical Unemployment," NBER Working Papers 12853, National Bureau of Economic Research, Inc.
  50. Pascalau, Razvan, 2007. "Productivity Shocks, Unemployment Persistence, and the Adjustment of Real Wages in OECD Countries," MPRA Paper 7222, University Library of Munich, Germany.
  51. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc.
  52. Francesco Nucci & Marianna Riggi, 2011. "Performance pay and shifts in macroeconomic correlations," Temi di discussione (Economic working papers) 800, Bank of Italy, Economic Research and International Relations Area.
  53. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  54. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  55. Anabela Carneiro & Paulo Guimarães & Pedro Portugal, 2012. "Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 133-52, April.
  56. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 921-955.
  57. Moen, Espen R & Rosén, Åsa, 2006. "Incentives in Competitive Search Equilibrium and Wage Rigidity," CEPR Discussion Papers 5554, C.E.P.R. Discussion Papers.
  58. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 305-316, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8968. 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: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.