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History dependence in wages and cyclical selection: evidence from Germany

Listed author(s):
  • Bauer, Anja

    ()

    (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

  • Lochner, Benjamin

    ()

    (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

Registered author(s):

    "Using administrative data from Germany, this paper analyzes the relation between wages and past and current labor market conditions. Specifically, it explores whether the data is more consistent with implicit contract models (Beaudry/DiNardo, 1991) or a matching model with on-the-job search and cyclical selection (Hagedorn/Manovskii, 2013). The data suggests that wages are related to past labor market conditions as contract theories postulate. However, past labor market conditions also affect contemporaneous wages through the evolution of the match qualities over a worker's job history - the main hypothesis of the selection model. Refining the selection model by taking into account within company job regrading, we find that wages of workers who switched employers and occupations at the same time respond stronger to the cycle than wages of job stayers. In contrast, wages of workers who only switch employers or occupations are not more cyclical than wages of workers who stay at their previous employer and in their previous occupation." (Author's abstract, IAB-Doku) ((en))

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    Paper provided by Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] in its series IAB Discussion Paper with number 201629.

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    Length: 37 pages
    Date of creation: 29 Sep 2016
    Handle: RePEc:iab:iabdpa:201629
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    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. 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.
    3. 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.
    4. Yaniv Yedid-Levi & Giovanni Gallipoli & Joao Alfredo Galindo da Fonseca, 2016. "Revisiting the Relationship Between Unemployment and Wages," 2016 Meeting Papers 541, Society for Economic Dynamics.
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    6. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
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    8. Hermann Gartner & Christian Holzner, 2015. "Wage Posting as a Positive Selection Device: Theory and Empirical Evidence," CESifo Working Paper Series 5494, CESifo Group Munich.
    9. Hart, Robert A & Roberts, J Elizabeth, 2011. "Spot wages, job changes, and the cycle," Stirling Economics Discussion Papers 2011-11, University of Stirling, Division of Economics.
    10. Feng, Shuaizhang & Burkhauser, Richard V. & Butler, J.S., 2006. "Levels and Long-Term Trends in Earnings Inequality: Overcoming Current Population Survey Censoring Problems Using the GB2 Distribution," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 57-62, January.
    11. Paul J. Devereux & Robert A. Hart, 2006. "Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers," ILR Review, Cornell University, ILR School, vol. 60(1), pages 105-119, October.
    12. Arozamena, Leandro & Centeno, Mario, 2006. "Tenure, business cycle and the wage-setting process," European Economic Review, Elsevier, vol. 50(2), pages 401-424, February.
    13. Schulz, Bastian & Lochner, Benjamin, 2016. "Labor Market Sorting in Germany," Annual Conference 2016 (Augsburg): Demographic Change 145902, Verein für Socialpolitik / German Economic Association.
    14. 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.
    15. Pedro S. Martins & Gary Solon & Jonathan P. Thomas, 2012. "Measuring What Employers Do about Entry Wages over the Business Cycle: A New Approach," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 36-55, October.
    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.
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    18. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
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