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The Division of Revenues from Unexpected Demand Shocks

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

Abstract

This paper exploits gaps between observed and recently forecasted Gross Domestic Product growth in export destinations to estimate the effects of unexpected demand shocks on worker compensation. Using employer-employee panel data, the paper finds 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. The findings also show that there are 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

  • Paulo Bastos & Monteiro,Natalia P. & Straume,Odd Rune, 2024. "The Division of Revenues from Unexpected Demand Shocks," Policy Research Working Paper Series 10925, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10925
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    References listed on IDEAS

    as
    1. Bastos, Paulo & Monteiro, Natália P. & Straume, Odd Rune, 2009. "Firm heterogeneity and wages in unionised labour markets: Theory and evidence," Labour Economics, Elsevier, vol. 16(4), pages 440-450, August.
    2. Baumgarten, Daniel, 2013. "Exporters and the rise in wage inequality: Evidence from German linked employer–employee data," Journal of International Economics, Elsevier, vol. 90(1), pages 201-217.
    3. David Card & Ana Rute Cardoso & Patrick Kline, 2016. "Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(2), pages 633-686.
    4. John Grigsby & Erik Hurst & Ahu Yildirmaz, 2021. "Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data," American Economic Review, American Economic Association, vol. 111(2), pages 428-471, February.
    5. Mario Macis & Fabiano Schivardi, 2016. "Exports and Wages: Rent Sharing, Workforce Composition, or Returns to Skills?," Journal of Labor Economics, University of Chicago Press, vol. 34(4), pages 945-978.
    6. Ana L. Revenga, 1992. "Exporting Jobs?The Impact of Import Competition on Employment and Wages in U. S. Manufacturing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 255-284.
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