cyclical and causal relations between real wages and employment in the eu this paper analyses and compares the joint behaviour of real wages and employment over the business cycle in the european union eu economies using both annual and quarterly data since 1960 further investigation of the cointegrating properties and the existence of causal effects in the real wage employment relation is undertaken by employing appropriate var models the evidence suggests weak procyclical or acyclic behaviour of real wages relative to cyclical employment in the quarterly data and stronger procyclicality in the annual data thus confirming the dunlop tarshis result for the majority of the eu economies with a few exceptions no cointegrating relations were detected while the granger causality tests suggest either weak or lack of unidirectional causality finally the sensitivity analysis showed that the filtering method has not much influence on the results but the choice of deflator may overturn them in certain cases

inflation and wage rigidity flexibility in the short run a recent literature uses accurate wage data from payroll records and provides compelling evidence against the conventional belief that nominal wages are downward sticky this paper provides a unique contribution to this literature by conducting a formal analysis of the role of inflation in cyclical wage rigidity flexibility analysis of payroll based wage data from the korean labor market for the period 1971 2014 finds that the degree of downward nominal wage flexibility is countercyclical and the countercyclicality becomes stronger during a deflationary relative to inflationary recession this serves as a counter example to the conventional theory of cyclical wage rigidity jel e24 e32 j30 j64

wage changes and intrafirm job mobility over the business cycle two case studies despite the many reasons to expect sluggish wage adjustment recent evidence suggests that real wages are quite procyclical growing more rapidly during economic expansions than during recessions and that this wage procyclicality pertains even to workers who stay with the same employer one possible explanation for these findings is the old hypothesis that a portion of firms cyclical adjustment of labor costs is achieved not by changing the wages paid in particular jobs but by changing the quality of labor assigned to those jobs the authors analysis of interwar personnel data from the ford motor company and the a m byers company supports that hypothesis the authors recognize that case studies of only two firms cannot be definitive but they conclude that cyclicality in workers job assignments deserves further attention

a simple search model with procyclical quits abstract a simple two state model of search is constructed which consistent with empirical studies engenders procyclical quits

the sullying effect of recessions previous work has established that recessions involve a cleansing effect so that in downturns only high productivity jobs remain but empirical evidence suggests job quality is procyclical jobs created in recessions are likely to be low paying and temporary this paper modifies previous models by adding on the job search which leads to an additional sullying effect calibration of the model suggests this offsetting sullying effect is likely to be much larger than the cleansing effect and can account for the procyclical match quality we observe in the data

slow recoveries any role for corporate leverage abstract this paper examines whether financial conditions of the non financial corporate sector can explain why the recovery from recessions in the united states is slower since the mid 1980s leverage by the corporate sector has increased significantly since the financial deregulation of the mid 1980s empirical evidence shows that slow recoveries are associated with a significant drop in the growth rates of investment and bank loans and with a surge in the growth rates of corporate bonds in an estimated dynamic stochastic general equilibrium model with a financial accelerator counterfactual experiments based on estimates of two samples 1965 1983 and 1984 2007 show that the non financial corporate indebtedness affects only marginally the speed of the recovery in the two samples

the real wage cyclicality of newly hired and incumbent workers in germany several recent macroeconomic models assume that real wages are rigid the wage rigidity of newly hired workers assumes a crucial role in these models as the decision of whether to open a vacancy is primarily influenced by real hiring wages this article analyses the cyclical behaviour of real wages in germany it considers recent concerns that not controlling for cyclical job up and downgrading leads to biased results the results indicate that wages are not rigid neither for all workers nor for newly hired workers but instead respond considerably to business cycle conditions

the taylor principle fights back part ii abstract the existing literature holds that the taylor principle often leads to indeterminacy in new keynesian models that allow for capital accumulation and limited asset market participation this conclusion is special however to the case of continuous full employment when the assumption of perfect wage flexibility is relaxed very slightly so that the labor market clears quickly but not instantaneously determinacy is the norm the threat of indeterminacy is limited to a tiny irrelevant corner of the parameter space where the elasticity of labor supply is unusually high and real wage adjustment is unbelievably fast everywhere else the taylor principle guarantees a unique rational expectations equilibrium the dramatic difference in results reflects the sensitivity of the monetary transmission mechanism to the speed of adjustment in the labor market

nominal and real wage cyclicality during the interwar period although there have been numerous attempts to study the cyclicality of real wages in the u s no consensus has formed as to the implications of the various findings for business cycle theory this paper will demonstrate that separating the real wage into its nominal and price level components can shed new light on the interwar u s labor market more specifically we will show that an evolution from a relatively laissez faire labor market during the 1920s to a more highly regulated labor market during the 1930s may have resulted in a more countercyclical real wage rate if we could be certain that equilibrium business cycle models provided the correct specification of the labor market then interpretation of real wage cyclicality would be relatively straightforward during periods dominated by labor demand shocks real wages would move procyclically and during periods dominated by labor supply shocks real wages would move countercyclically in a disequilibrium model context however interpretation of real wage cyclicality is much more problematic if nominal wages are sticky then unanticipated price level changes can induce countercyclical real wage movements that mimic the real wage movements generated by shifts in the supply of labor perhaps the most famous and controversial example occurred during the first three years of the great depression when a massive decline in hours worked and production was associated with a sharp increase in the aggregate real wage rate see figure 1 even greater complexity results from governmental attempts to influence the aggregate nominal wage policies that attempt to artificially change the nominal wage rate can result in either procyclical or countercyclical real wages depending on whether the direct impact of changes in the price of labor on the quantity of labor demanded outweighs the impact of wage changes on aggregate demand and output separating the aggregate real wage rate into its nominal and price level components will allow us to discriminate between these two hypotheses if labor markets are correctly characterized by equilibrium models then the price level and real wage are determined independently and separating the real wage into its nominal and price

default recovery rates and aggregate fluctuations abstract default recovery rates in the us are highly volatile and pro cyclical we show that state of the art models with a bernanke gertler gilchrist financial accelerator mechanism imply that recovery rates are flat over the cycle we propose a model where financially constrained entrepreneurs face an idiosyncratic cost of redeploying liquidated capital the resulting endogenous liquidation costs magnify the effect of the financial accelerator we fit the model to us data and find that it explains a substantial amount of variation in recovery rates including their sharp contraction at the onset of the great recession our mechanism delivers a more flexible relationship between credit spreads and macroeconomic variables and leads to novel policy implications about the effectiveness of subsidies for liquidated assets

cyclical quality adjustment in the labor market 1 introductionthe u s unemployment rate fell to very low levels during the 1990s even more impressively the unemployment rate for minorities and less educated individuals fell disproportionately convergence of relative unemployment rates in expansions and divergence in recessions has been a feature of the u s economy over the last 30 years there are many possible reasons for this feature for example if the costs of hiring and firing less skilled labor are low one would expect these individuals to have very procyclical employment in this paper i explore an alternative model when there is an excess supply of labor high skilled people take jobs that would normally be occupied by less skilled people in expansions the process reverses with less skilled workers getting access to jobs that they would normally not attain i refer to this process as cyclical quality adjustment reder 1955 p 834 was one of the first to discuss how hiring standards adjust to business cycle conditions quality variations in labor markets arise through upgrading and downgrading of members of the labor force relative to the jobs they are to fill when applicants become scarce employers tend to lower the minimum standards upon which they insist as a condition for hiring a worker to fill a particular job and vice versa when applicants become plentiful since then many papers have developed this idea theoretically and many economic commentators appear to share this view of the labor market for example the economic report of the president states that a strong labor market is particularly important to less advantaged groups in the labor market such as workers with less education younger workers racial and ethnic minorities and immigrants when employers find it hard to fill vacancies they are more willing to hire and train workers whom they might pass over when they have fewer openings and an abundance of applicants council of economic advisors 1999 p 103 likewise the expansion during the 1990s spawned many newspaper articles about the improvement in the types of jobs available to less skilled applicants however there is little systematic empirical work about changes in job assignment in the united states over the business cycle the empirical work in this paper seeks to redress this situation cyclical assignment changes are important for many reasons as mentioned earlier job upgrading is a potential explanation for the greater cyclical variation of employment experienced by less skilled workers it is well known that the unemployment rates of less skilled individuals and minorities are more countercyclical relative to more skilled individuals clark and summers 1981 kydland 1984 keane and prasad 1993 hoynes 1999 the standard explanation for this effect is that low ability workers are more likely to be laid off in downturns because training and hiring costs are lower for these workers no commensurate attention has been paid to the issue of how the decision of who to hire changes over the business cycle however assignment models present a natural explanation for the greater procyclicality of employment of the less skilled both the adjustment cost hypothesis and the upgrading hypothesis imply that less skilled workers will have more procyclical employment empirically they are distinguishable because the upgrading explanation implies that jobs obtained by comparable workers should vary systematically over the cycle the adjustment cost hypothesis relates to the composition of those whose jobs are terminated second these mechanisms suggest a reason why wages are particularly procyclical for job changers recent studies using panel data have indicated that the wages of job starters are much more procyclical than the wages of workers who do not change jobs researchers have suggested various explanations for this result beaudry and dinardo 1991 and macleod and malcomson 1993 present contracting models in which the wages of job starters depend on the state of the labor market when they join the firm

real wages over the business cycle some further evidence over the past 50 years economists have been puzzled by the movement of real wages over the business cycle neoclassical and early keynesian theories advanced the view that real wages are countercyclical varying inversely with employment and output over the business cycle 12 13 on the other hand early empirical evidence by dunlop 9 and tarshis 25 suggested that in fact real wages move procyclically the macroeconomic disequilibrium analysis of barro and grossman 3 provided a theoretical explanation for the possibility of procyclical real wages despite this theoretical work numerous recent empirical tests of the movement of real wages over the business cycle have reached no definite conclusions one reason these studies have reached no definite conclusion lies in the fact that they have been performed at the aggregate level 2 they have ignored the possibility that the agesex race composition of the labor force may change considerably over the course of the business cycle but the human capital theory of becker 4 and oi 21 and the more recent implicit contract theory of azariadis 1 and baily 2 predicts that employment shares of different demographic groups will vary over the business cycle consider the consequences of changing employment shares suppose for instance that firms tend to lay off lower skill and or less senior workers during cyclical downturns and retain workers who on the average are higher skilled and or more senior than the workers laid off the result will be that the quality of the workers still employed will rise as a consequence the aggregate real wage which is typically constructed by dividing the aggregate straight time payroll by aggregate straight time manhours will tend to rise even when no real wage growth has in fact occurred per unit of quality adjusted labor to reverse the example during cyclical expansions employment increases may come disproportionately from among lesser skilled less senior workers because employment is becoming more skewed towards lower paid workers the aggregate real wage may show a decline even when no workers have actually

demand disturbances and aggregate fluctuations the implications of near rationality the paper investigates some properties of near rational models of the cycle examining two types of framework in the first an otherwise classical competitive economy is shown to respond to demand disturbances when some firms follow a near rational hiring policy in the second model a dynamic setting is addressed and a criterion termed stochastic near rationality is employed simulation results are consistent with recent empirical findings and suggest that further quantitative evaluation is merited copyright 1987 by royal economic society

wage rigidity and job creation 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 rigidity in the data

reconciling the wage curve and the phillips curve the wage curve is the negative relationship that links wage levels to the unemployment rate it fits accurately with modern non competitive labour market models but goes against a phillips curve modelling because the latter ties wage growth to the unemployment rate in this article we present a comprehensive review of these non competitive models highlighting recent contributions that try to eliminate the possible gap that exists between the concepts of the wage curve on the one hand and the phillips curve on the other copyright blackwell publishers ltd 2005

the cyclicality of the user cost of labor abstract the user cost of labor is the expected difference between the present discounted value of wages paid to a worker hired in the current period and that paid to a worker hired in the next period analogous to the price of any long term asset the user cost not wage is the relevant price for a firm that is considering adding a worker i construct its counterpart in the data and estimate that it is substantially more procyclical than average wages or wages of newly hired workers i demonstrate an application of the finding using the textbook search and matching model

matching workers and jobs cyclical fluctuations in match quality using national longitudinal survey of youth data on tenure and wages this article analyzes the extent to which the level of job mismatching varies over the business cycle and how it is dealt with by the labor market i find significant cyclical variation in job match quality and an internalization of the variation by the labor market through wages mismatching occurs more during recessions but is primarily captured in starting wages the evidence suggests the cyclical phenomenon is one of general mismatching rather than an increased number of stopgap jobs during recessions

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

the real wage employment relationship an industry analysis abstract estimates of industry differences in the strength and direction of the real wage employment relationship are used to draw implications for the magnitude of aggregation bias and the role of employment contracts

disaggregating the effect of the business cycle on the distribution of income this paper disaggregates total household income into a complete set of components and studies the comparative cyclicality of these com ponent to economic growth comparisons of the relative responsiveness to gnp growth of wages hours of work and total labor market income of heads and wives and transfer income sources of households are made across income race sex and age groups this provides a picture of the channels by which economic growth produces income change significant differences in elasticities are found to exist both between different income components and between different population groups for the same component the narrowing income distribution in times of high growth occurs primarily because of large elasticities on head s labor market income among the poor both wages and hours show evidence of cycli cality the labor market earnings of women both wives and household heads is far less responsive to growth cyclicality in transfer income varies enormously between population groups and by type of transfer

wage flexibility in the chinese labour market 1989 2009 abstractwage flexibility in the chinese labour market 1989 2009 regional studies china s bureaucratic wage determination system is gradually being replaced by a market based system leading to a novel version of a dual labour market this paper studies wage flexibility in this dual market its principal findings are as follows wages in both sectors have become less responsive to changes in official registered unemployment with an alternative market based measure of unemployment becoming more relevant there is evidence of convergence of flexibility between the two sectors the wages of women exhibit greater flexibility than those of men and there is evidence of differences in wage flexibility between workers who have urban residential rights and rural migrants

how to measure labour market effects of immigration a review abstract this paper surveys available empirical evidence on labour market effects of immigration many different approaches have been used already to try to find out whether immigration hurts the labour market opportunities of natives no doubt new approaches will follow in the future as globalization will keep the migration issue on the agenda this literature review discusses the different approaches concentrating on both the methodology and the results at the end it tries to summarize available evidence

sticky wage or sticky price analysis of the cyclical behavior of the real wage the study of business cycles has been at the heart of macroeconomic theory for decades theoretical efforts have focused on providing an adequate explanation for sources of economic fluctuations new keynesian explanations have emphasized rigidity that interferes with market forces increasing the effect of demand shocks on the output produced the form of rigidity is in sharp contrast between sticky wage and sticky price models the former imposes rigidity on the shortrun adjustment of wages to demand shocks 20 47 the latter in contrast imposes rigidity on the short run price adjustment to demand shocks 2 34 40 9 43 4 the theoretical plausibility of competing explanations of business cycles has stimulated interest to establish their empirical validity 32 28 1 8 11 23 21 26 these efforts have focused attention on cyclical fluctuations of the real wage in response to demand shocks the real wage may move procyclically or countercyclically according to the relative adjustment of wages and prices the interest in studying the cyclical behavior of the real wage relates to its implications to the real effects of aggregate demand shocks in the context of sticky wage models nominal wage rigidity reinforces the countercyclical response of the real wage to demand shocks and the real effect of these shocks on output growth sticky price models in contrast advocate that price rigidity increases the procyclical response of the real wage to demand shocks and their real effect on output growth the results of earlier investigations of the cyclical behavior of the real wage appear conflicting and therefore do not lend support to a given explanation 2 the present investigation seeks to contribute to this literature unlike previous empirical research on the subject the objective of this investigation is to study the cyclical behavior of the real wage and the relative flexibility of the nominal wage and the price level that determines this behavior in response to demand shocks using data for the united states in the preand post world war ii sample periods the cyclical

customer markets credit market imperfections and real price rigidity according to standard theory an increase in demand should raise prices of goods given factor prices empirically however prices appear to be unaffected by short run variations in demand this paper suggests an explanation of this observation if customers react slowly to price changes and credit markets are imperfect prices may be unchanged or even fall when demand increases the reason is that when demand is high profits are high and firms can compete more intensely for customers without increasing their borrowing copyright 1991 by the london school of economics and political science

inflation dynamics during the financial crisis using confidential product level price data underlying the u s producer price index ppi this paper analyzes the effect of changes in firms financial conditions on their price setting behavior during the great recession that surrounds the financial crisis the evidence indicates that during the height of the crisis in late 2008 firms with weak balance sheets increased prices significantly relative to industry averages whereas firms with strong balance sheets lowered prices a response consistent with an adverse demand shock these stark differences in price setting behavior are consistent with the notion that financial frictions may significantly influence the response of aggregate inflation to macroeconomic shocks we explore the implications of these empirical findings within a general equilibrium framework that allows for customer markets and departures from the frictionless financial markets in the model firms have an incentive to set a low price to invest in market share though when financial distortions are severe firms forgo these investment opportunities and maintain high prices in an effort to preserve their balance sheet capacity consistent with our empirical findings the model with financial distortions relative to the baseline model without such distortions implies a substantial attenuation of price dynamics in response to contractionary demand shocks

from sick man of europe to economic superstar germany s resurgent economy in the late 1990s and into the early 2000s germany was often called the sick man of europe indeed germany s economic growth averaged only about 1 2 percent per year from 1998 to 2005 including a recession in 2003 and unemployment rates rose from 9 2 percent in 1998 to 11 1 percent in 2005 today after the great recession germany is described as an economic superstar in contrast to most of its european neighbors and the united states germany experienced almost no increase in unemployment during the great recession despite a sharp decline in gdp in 2008 and 2009 germany s exports reached an all time record of 1 738 trillion in 2011 which is roughly equal to half of germany s gdp or 7 7 percent of world exports even the euro crisis seems not to have been able to stop germany s strengthening economy and employment how did germany with the fourth largest gdp in the world transform itself from the sick man of europe to an economic superstar in less than a decade we present evidence that the specific governance structure of the german labor market institutions allowed them to react flexibly in a time of extraordinary economic circumstances and that this distinctive characteristic of its labor market institutions has been the main reason for germany s economic success over the last decade

cyclicality of real wages among young men abstract this paper analyzes the cyclical behavior of real wages received by the young men in the national longitudinal surveys of labor market experience it extends the studies by bils journal of political economy 1985 93 666 689 and tremblay quarterly review of economics and business 1990 30 90 101 by using the full duration of the survey and by examining differences in wage cyclicality across industries and between workers that change employers and those that stay with the same employer

private information wage bargaining and employment fluctuations shimer 2005 pointed out that although we have a satisfactory theory of why some workers are unemployed at any given time we don t know why the number of unemployed workers varies so much over time the basic mortensen pissarides 1994 model does not generate nearly enough volatility in unemployment for plausible parameter values this paper extends the mortensen pissarides model to allow for informational rents productivity is subject to publicly observed aggregate shocks and to idiosyncratic shocks that are seen only by the employer it is shown that there is a unique equilibrium provided that the idiosyncratic shocks are not too large the main result is that small fluctuations in productivity that are privately observed by employers can give rise to a kind of wage stickiness in equilibrium and the informational rents associated with this stickiness are sufficient to generate relatively large unemployment fluctuations

growth and decline of european cities changing positions of cities in europe the paper reviews the various models of the core or cores of urban europe seeking a causal explanation for regional economic shifts the paper uses data on the location of major corporate headquarters offices an analysis of the 500 largest companies shows a concentration in london and paris in 1973 which intensifies in the period 1973 88 this period also sees significant growth in southern europe although not necessarily in the second mediterranean banana the most significant losers in 1973 88 were the ruhr and the randstad in terms of the urban hierarchy corporate office growth is strongly concentrated in paris and london and the study offers no evidence of a comparative advantage for smaller cities

the evolution of wages in the united kingdom evidence from micro data we use data on male employees from the u k family expenditure survey for the years 1968 86 to investigate the behavior of wages over time and across cohorts we find that differentials between manual workers and professional managerial ones are lower at labor market entry for younger cohorts but increasing faster with age in the 1980s than in the past the returns to experience appear to be very low in the united kingdom particularly for manual and clerical workers although the improved education of younger workers may partly explain this finally we show that individual wages in the united kingdom are highly procyclical

the mobility of labor and capital a study in international investment and labor flow list of tables acknowledgements introduction 1 foreign investment a neglected variable 2 the use of foreign workers 3 the new immigration 4 the globalization of production implications for labor migration 5 the rise of global cities and the new labor demand 6 the reconcentration of capital in the united states a new investment zone conclusion notes references index

immigrant underemployment across us metropolitan areas from a spatial perspective a significant number of immigrants fail to realise their full potential in the us labour markets as evidenced by those working in occupations requiring skill levels far below their own level of ed

non nested tests of efficient bargain and labour demand models abstract in this paper efficient bargain and labour demand models derived from a variety of product market structures are compared using non nested test procedures data on wage employment outcomes are drawn from actual contract data from the canadian unionised sector results indicate that efficient bargain models are preferred to labour demand models

revisiting the matching function abstract there is strong empirical evidence for cobb douglas matching functions we show in this paper that this widely found relation between matches on the one hand and unemployment and vacancies on the other hand can be the result of different underlying mechanisms obviously it can be generated by assuming a cobb douglas matching function less obvious the same relationship results from a vacancy free entry condition and idiosyncratic productivity shocks a positive aggregate productivity shock leads to more vacancy posting a shift of the idiosyncratic selection cutoff and thereby more hiring we calibrate a model with both mechanisms to administrative german labor market data and show that idiosyncratic productivity for new contacts is an important driver of the elasticity of the job finding rate with respect to the market tightness accounting for idiosyncratic productivity can explain the observed negative time trend in estimated matching efficiency and asymmetric business cycle responses to large aggregate shocks

native internal migration and the labor market impact of immigration this paper presents a theoretical and empirical study of how immigration influences the joint determination of the wage structure and internal migration behavior for native born workers in local labor markets using data from the 1960 2000 decennial censuses the study shows that immigration is associated with lower in migration rates higher out migration rates and a decline in the growth rate of the native workforce the native migration response attenuates the measured impact of immigration on wages in a local labor market by 40 to 60 per cent depending on whether the labor market is defined at the state or metropolitan area level

a behavioral explanation for nominal wage rigidity during the great depression nominal wages in manufacturing were left unchanged by the large decline in nominal demand that marked the first two years of the great depression this rigidity in nominal wages is explained using the tools of the behavioral theory of the firm the emphasis is on the reasons firms changed their decision rules linking fluctuations in final sales to changes in nominal wages

cyclical labor costs within jobs abstract using uk employer employee panel data we present novel facts on how wages and working hours respond to the business cycle within jobs firms reacted to the great recession with substantial real wage cuts and by recruiting more part time workers a one percentage point increase in the unemployment rate led to an average decline in real hourly wages of 2 6 for new hires as well as for job stayers hiring hours worked were substantially procyclical while job stayer hours were acyclical these results show that real wages are not rigid and that the labor costs of new hires are especially flexible

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

the role of employer employee interactions in labor market cycles evidence from the self employed self employed workers are less likely to be affected by implicit contracts efficiency wages and other forces that mute wage cyclicality and exacerbate employment cyclicality this observation motivates our comparison of the cyclical experience of the self employed with wage and salary workers who clearly have an employer we find negligible or small differences in annual hours cyclicality between the two groups but hourly wages and annual earnings are much more cyclical for the self employed these results are consistent with efficient contracting models where employers smooth workers income without causing inefficiencies in hours of work

real wage cyclicality of job stayers within company job movers and between company job movers using the british new earnings survey panel data nespd for the period 1975 to 2001 we estimate the wage cyclicality of job stayers those remaining within single jobs in a given company within company job movers and between company job movers we also examine how the proportion of internal and external job moves varies over the business cycle we find that the wages of internal movers are slightly more procyclical and wages of external movers considerably more procyclical than those of stayers notwithstanding a decomposition shows that in britain wage cyclicality arises almost entirely from the procyclicality of wages for job stayers with across and within firm mobility playing a lesser role thus there is little evidence for rigid wage models that imply that employers use changes in job titles as a means of adjusting wages to the business cycle we also show that the distinctions between private and public sectors and between workers covered and uncovered by collective agreements have important impacts on the wage estimates of both stayers and movers

foreign direct investment and international migration to dutch cities this article assesses separately the push pull factor explanations in sassen s theory on migration from newly industrialising countries to cities in oecd countries the push factor explanation argues that foreign direct investments spawn migration flows to the country from which these investments stem the pull factor explanation revolves around demand for low skilled workers in cities due to the clustering of advanced producer services it is found that dutch investment flows indeed function as a push factor for migration to dutch cities but that the local settlement of immigrants is not related to the clustering of advanced producer services

optimal labour contracts and involuntary unemployment under costly and imperfect monitoring this paper provides an explanation for the concurrence of rigid wages and involuntary unemployment we consider cases in which a firm monitors its workers but at some cost a key assumption in the model is that the firm cannot perfectly distinguish shirkers from nonshirkers thus the firm has to rely on negotiated compensation and work effort as well as monitoring to reduce the incentive to shirk we find that rigid wages and involuntary unemployment arise simultaneously when monitoring costs are large and the effectiveness of monitoring is low

the relative adjustment of wages and prices direct tests within a multiple equation system in order to assess the relative rigidity of the aggregate price level and the nominal wage rate most researchers have focused on the implied behaviour of the real wage rate in response to a purely demand disturbance the present work examines the explicit behaviour of the two variables and is therefore able to analyse the variables short run responses within the context of their defined long run behaviour while the paper reports evidence of long run stability in the real wage rate additional evidence is presented which supports both sticky price and sticky wage models the determining factor is the choice of lag

real wages over the business cycle a band spectrum approach this paper presents new evidence on the cyclical relationship between real wages and aggregate employment as is well known models that attribute fluctuations in output to movements in aggregate demand and retain the assumption of flexible product prices the adpf hypothesis imply countercyclical real wage movements as employment adjusts along a downward sloping aggregate demand for labor schedule in contrast real business cycle theories 10 15 13 suggest procyclical movements as workers substitute work for leisure along dynamic labor supply schedules the empirical evidence on these propositions remains mixed some influential studies report a negative relationship 4 5 25 others report a positive relationship 2 12 18 and geary and kennan gk 7 to identify the purely business cycle correlation and distinguish it from correlations at very high and very low frequencies the frequency domain decomposition provides a simple framework for reconciling the conflicting conclusions of previous studies and for focusing attention on the business cycle relationship i show that the highly significant positive or negative correlations reported in previous studies are attributable to variations at frequencies far too high or far too low to be associated with the business cycle the true business cycle relationship is quite different from that revealed by simple regressions of real wages on employment i find a weak but statistically significant negative relationship over business cycle frequencies for the post war u s data when wages are deflated by the producer price index ppi the negative relationship is particularly strong over the subperiod 1947 70 but becomes weak and insignificant over the last sixteen years 1971 86 this finding is consistent with the widely held belief that in the former period cyclical movements in employment were determined by changes in aggregate demand while real shocks dominated in the 1970s however when wages are deflated by the consumer price index cpi the business cycle relationship is weak and not statistically significant over both subperiods these results contrast sharply with those of previous studies that do not isolate business cycle components

cultural amenities and unemployment in dutch cities disentangling a consumerist and productivist explanation for less educated urbanites varying unemployment levels across urban economies previous studies on the advanced economies have shown that unemployment levels of the less educated are low in cities with high employment shares in the advanced producer services scholars have consistently interpreted this finding according to sassen s polarisation thesis this article confronts this production based interpretation with a competing consumption based explanation which focuses on the role of cultural amenities analysing data on 22 dutch metropolitan agglomerations between 1996 and 2008 it is shown that in line with consumerists notions of richard florida advanced producer services settle in cities that are rich in cultural amenities instead of the other way around as classical labour follows capital explanations imply yet only advanced producer services prove to reduce the unemployment levels of the less educated meaning that the polarisation thesis and not the theory on cultural amenities is a valid explanation for the low level of unemployment in post industrial cities

why have aggregate skilled hours become so cyclical since the mid 1980 s this paper documents and discusses a dramatic change in the cyclical behavior of aggregate hours worked by individuals with a college degree skilled workers since the mid 1980 s using the cps outgoing rotation data set for the period 1979 1 2003 4 we find that the volatility of aggregate skilled hours relative to the volatility of gdp has nearly tripled since 1984 in contrast the cyclical properties of unskilled hours have remained essentially unchanged we evaluate the extent to which a simple supply demand model for skilled and unskilled labor with capital skill complementarity in production can help explain this stylized fact within this framework we identify three effects which would lead to an increase in the relative volatility of skilled hours i a reduction in the degree of capital skill complementarity ii a reduction in the absolute volatility of gdp and unskilled hours and iii an increase in the level of capital equipment relative to skilled labor we provide empirical evidence in support of each of these effects our conclusion is that these three mechanisms can jointly explain about sixty percent of the observed increase in the relative volatility of skilled labor the reduction in the degree of capital skill complementarity contributes the most to this result

mass migration to israel and natives employment transitions this study examines how mass migration from the former soviet union to israel affected natives probability of moving from employment to non employment and vice versa using 1989 99 data from the israeli labor force survey the authors find that the share of immigrants in labor market cells defined by occupation industry district of residence schooling and experience was generally positively associated with natives probability of moving from employment to non employment however when the analysis controls for the endogenous sorting of immigrants across cells this effect is substantially reduced for men and disappears or is even reversed for women the authors conclude that immigrants tended to cluster in labor market cells with high turnover rates and that immigration did not increase natives likelihood of exiting employment they also find no discernible effects of immigration on natives transitions between labor market cells or on the probability of their moving from non employment to employment

business cycles unemployment insurance and the calibration of matching models this paper theoretically and empirically documents a puzzle that arises when an rbc economy with a job matching function is used to model unemployment the standard model can generate sufficiently large cyclical fluctuations in unemployment or a sufficiently small response of unemployment to labor market policies but it cannot do both variable search and separation finite ui benefit duration efficiency wages and capital all fail to resolve this puzzle however either sticky wages or match specific productivity shocks can improve the model s performance by making the firm s flow of surplus more procyclical which makes hiring more procyclical too

unravelling the global city debate on social inequality a firm level analysis of wage inequality in amsterdam and rotterdam in this article an assessment is made of the consequences of globalisation for urban wage inequality using data on employers in the dutch cities of amsterdam and rotterdam it is shown that simpl

the unemployment volatility puzzle is wage stickiness the answer i discuss the failure of the canonical search and matching model to match the cyclical volatility in the job finding rate i show that job creation in the model is influenced by wages in new matches i summarize microeconometric evidence and find that wages in new matches are volatile and consistent with the model s key predictions therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages i discuss a modification of the model based on fixed matching costs that can increase cyclical unemployment volatility and is consistent with wage flexibility in new matches

job selection and wages over the business cycle we consider a model with on the job search where current wages depend only on current aggregate labor market conditions and idiosyncratic match specic productivities we show theoretically that the model replicates the ndings in bils 1985 and beaudry and dinardo 1991 on the history dependence in wages we develop a method to measure match qualities in the data and show empirically that various variables summarizing past aggregate labor market conditions have explanatory power for current wages only because they are correlated with match qualities they lose any predictive power once match qualities are accounted for

household choices in equilibrium this paper is an empirical investigation of equilibrium restrictions on household consumption and male labor supply it exploits a simple factor structure rationalized by two assumptions that household allocations are pareto optimal and that the labor market is competitive the paper estimates household preferences and tests how well this parsimonious factor structure represents panel data on married couples and time series data on asset returns most of the estimates are roughly comparable to those found in previous work no evidence against the simple factor representation is found and the intertemporal capital asset pricing model is not rejected copyright 1990 by the econometric society

the responsiveness of industry wages to low frequency shocks in canada the first objective of this paper is to examine the empirical relationship between low frequency shocks to labour demand and average wages on an industrial basis using a canadian longitudinal data set we estimate a fixed effects model that controls for workers unobservable attributes the second major objective is to extend the existing industry based literature by estimating a specification allowing for a comparison between the degree of wage responsiveness of within firm stayers and between firm movers the findings indicate that average wages by industry tend to respond positively to low frequency changes in employment and that there is some degree of wage flexibility within firm worker matches jel classification j3 j62 la reponse des salaires industriels a des chocs peu frequents au canada le premier objectif de ce memoire est d examiner la relation empirique entre des chocs peu frequents dans la demande de travail et les salaires moyens au niveau de l industrie a l aide d une base de donnees longitudinales pour le canada on calibre un modele a effets fixes qui tient compte des attributs non observables de travailleurs le second objectif est d enrichir la litterature au niveau de l industrie en calibrant une specification du modele qui permet une comparaison entre le degre de reaction des salaires pour ceux qui restent dans leur entreprise et ceux qui se deplacent entre entreprises les resultats indiquent que les salaires moyens par industrie tendent a repondre positivement a des changements peu frequents dans l emploi et qu il y a un certain degre de flexibilite des salaires pour les travailleurs

the employment real wage relationship an international study the neoclassical and keynesian theories of employment both predict an inverse relationship between employment and real wages in the short run the observed correlation between employment and real wages however has usually failed to conform to this prediction dunlop 1938 and tarshis 1939 reported a positive correlation between real and money wages which given procyclical movement of money wages was interpreted as evidence against the theoretical prediction the statistical significance of these results was however challenged by ruggles 1940 and tobin 1948 more recent studies by kuh 1966 and bodkin 1969 failed to detect a significant relationship between real wages and employment these findings stimulated a series of contributions by solow and stiglitz 1968 barro and grossman 1971 1976 and others developing alternative models not apparently refuted by the evidence barro and grossman recast macro theory under the assumption that markets did not clear modigliani 1977 argued that the observed relationship between employment and real wages could be accounted for in an oligopolistic model of firm behavior thus both the competitive and equilibrium assumptions of the classical model were diagnosed as the sources of its apparent empirical refutation

do employers have more monopsony power in slack labor markets this article confronts monopsony theory s predictions regarding workers wages with observed wage patterns over the business cycle using german administrative data for the years 1985 to 2010 and a

firm wage differentials and labor market sorting reconciling theory and evidence why do firms pay different wages empirical evidence suggests the presence of substantial differences in firm pay controlling for worker skill moreover these differences are uncorrelated with ski

post industrialisation immigration and unemployment how and why the impact of immigration on unemployment differs between dutch cities studies on the substitution thesis in advanced economies show scattered results the impact of immigration on the wages and likelihood of unemployment of the less educated varies strongly both studies on the substitution thesis itself and studies on the unequal post industrial development of urban economies suggest that this is because the substitution thesis is conditional on the type of urban economy the empirical validity of this suggestion is tested by comparing the impact of immigration on the employment level of the less educated among 22 dutch metropolitan areas the findings corroborate the central hypothesis in strong service oriented urban economies the impact of immigration on unemployment levels is mitigated because of high labour demand for the less educated

a meta analytic assessment of the effect of immigration on wages in our increasingly interconnected and open world international migration is becoming an important socio economic phenomenon for many countries since the early 1980s many studies have been undertaken of the impact of immigration on host labour markets borjas 2003 noted that the estimated effect of immigration on the wage of native workers varies widely from study to study and sometimes even within the same study in addition these effects cluster around zero such a small effect is a rather surprising outcome given that in a closed competitive labour market an increase in labour supply may be expected to exert a downward pressure on wages we revisit this issue by applying meta analytic techniques to a set of eighteen papers which altogether generated 348 estimates of the percentage change in the wage of a native worker with respect to a one percentage point increase in the ratio of immigrants over native workers while many studies in our database employ us data estimates are also obtained from germany the netherlands france norway austria israel and australia our analysis shows that results vary across countries and are inter alia related to the type of modelling approach technical issues such as publication bias and quality of the estimates are addressed as well

demand shocks supply shocks and the cyclicality of real wages the behaviour of real wages over the business cycle has received increasiing attention in recent years the cyclicality of real wages constitues an important aspect of recent models of the business cycle however empirical studies undertaken to determine whether real wages are procyclical or countercyclical have reported conflicting findings in thiis paper we use vector autoregressions to analyse the cyclicality of real wages we find that the source of the disturbance plays a decisive role in the cyclical behaviour of real wages in particular we demonstrate that a supply shock generates procyclical real wages whereas a demand shock yields countercyclicality

skill heterogeneity and the business cycle this paper extends the real business cycle framework to incorporate ex ante skill heterogeneity among workers consistent with the empirical evidence skilled and unskilled workers in the model face the same degree of cyclical variation in real wages although unskilled workers are subject to substantially higher procyclical variation in employment systematic cyclical changes in the average skill level of employed workers are shown to induce bias in standard aggregate measures of cyclical variation in the labour input productivity and the real wage the introduction of skill heterogeneity improves the model s ability to match the empirical correlation between total hours and the real wage but the correlation between total hours and labour productivity remains higher than it does in the data

training and union wages abstract this paper investigates whether unions through imposing wage floors that lead to wage compression increase on the job training our analysis focuses on germany based on a model of unions and firm financed training we derive empirical implications regarding apprenticeship training intensity layoffs wage cuts and wage compression in unionized and nonunionized firms we test these implications using firm panel data matched with administrative employee data we find support for the hypothesis that union recognition via imposing minimum wages and wage compression increases training in apprenticeship programs

is the new immigration really so bad this article reviews the recent evidence on us immigration focusing on two key questions 1 does immigration reduce the labour market opportunities of less skilled natives 2 have immigrants who arrived after the 1965 immigration reform act been successfully assimilated overall evidence that immigrants have harmed the opportunities of less educated natives is scant on the question of assimilation the success of the us born children of immigrants is a key yardstick by this metric post 1965 immigrants are doing reasonably well even children of the least educated immigrant origin groups have closed most of the education gap with the children of natives

sectoral shares specialisation and metropolitan wages in the united states 1969 96 we investigate the effect of specialisation upon the level of metropolitan wage per worker specialisation is measured by the share of metropolitan earnings in each of five traded goods and services sectors sectoral specialisations are assumed to be determinants of location specific productivity which in turn is treated as a term in a metropolitan production function panel data are used for estimating that production function for 313 metropolitan areas in the us over the long period 1969 96 and two shorter periods we find that some specialisations raise average metropolitan wages some lower it and some have no effect and that the effects of specialisation differ by time period

economic shocks and labor market flexibility we test how labor markets adjust to large but temporary economic shocks in a context in which such shocks are common using an individual level panel from 1 140 philippine municipalities over 26 quarters we find that workers in areas affected by strong typhoons experience reductions in hours worked and hourly wages without evidence of layoffs the results are strongest for formal wage paying jobs we argue that those results are best explained by implicit contracts where workers and firms share risks we provide extensive qualitative data suggesting that employment contracts in the philippines allow for such flexibility abstract from author

spatial dynamics and heterogeneity in the cyclicality of real wages neither the issue of how local and aggregate labor markets interact over time nor the issue of how heterogeneity by education race and other factors interacts with these spatial dynamics has prev

tenure business cycle and the wage setting process abstract we analyze the interaction between job tenure and external labor market conditions in wage determination first we introduce a model that combines job matching with business cycle effects as the employment relationship progresses the worker appropriates a portion of the value of the match specific human capital she accumulates gradually becoming shielded from the cyclical variations in external labor market conditions the employment relationship is progressively internalized then we present empirical evidence supporting this prediction the elasticity of wages to the unemployment rate decreases with tenure this finding is robust to different specifications that allow for job heterogeneity and it contributes to the interpretation of recent evidence of changes in the effect of the business cycle on wages

long term wage fluctuations with industry specific human capital exploiting long term interindustry demand shifts this article provides evidence that 1 industry level wages do not respond to industry demand conditions 2 at the industry level the employment of young workers responds more to demand shifts than does the employment of experienced workers and 3 the postdisplacement wages of displaced workers are strongly affected by demand in their predisplacement industries these findings are consistent with a model in which worker s investments in industry specific skills pose a barrier to interindustry labor mobility and wages do not respond to spot labor market conditions

does downward nominal wage rigidity dampen wage increases focusing on the compression of wage cuts many empirical studies find a high degree of downward nominal wage rigidity dnwr however the resulting macroeconomic effects seem to be surprisingly weak this contradiction can be explained within an intertemporal framework in which dnwr not only prevents nominal wage cuts but also induces firms to compress wage increases we analyze whether a compression of wage increases occurs when dnwr is binding by applying unconditional quantile regression and seemingly unrelated regression to a data set comprising more than 169 million wage changes we find evidence for a compression of wage increases and only very small effects of dnwr on average real wage growth the results indicate that dnwr does not provide a strong argument against low inflation targets

recovery rates default probabilities and the credit cycle in recessions the number of defaulting firms rises on top of this the average amount recovered on the bonds of defaulting firms tends to decrease this paper proposes an econometric model in which this joint time variation in default rates and recovery rate distributions is driven by an unobserved markov chain which we interpret as the credit cycle this model is shown to fit better than models in which this joint time variation is driven by observed macroeconomic variables we use the model to quantitatively assess the importance of allowing for systematic time variation in recovery rates which is often ignored in risk management and pricing models

payroll taxes social insurance and business cycles payroll taxes represent a major distortionary influence of governments on labor markets this paper examines the role of time varying payroll taxes and the social safety net for cyclical fluctuations in a nonmonetary economy with labor market frictions and unemployment insurance when the latter is only imperfectly related to search effort a balanced social insurance budget induces countercyclical payroll taxation renders gross wages more rigid over the cycle and strengthens the model s endogenous propagation mechanism for conventional calibrations the model generates a negatively sloped beveridge curve and countercyclical unemployment as well as substantial volatility and persistence of vacancies and unemployment

the wages of older men in this paper net depreciation rates in human capital are estimated from wage data on a longitudinal sample of men aged 45 to 64 the results indicate that wage rates begin to decline in the early fifties at rates under 1 percent annually and decline at about 2 percent annually after age 60 this decrease was offset by the general increase in wage levels so that on average the real wages of men approaching retirement did not decline during the period studied the general increase was larger for blacks than for whites probably because of decreases in labor market discrimination between 1966 and 1974 an appendix presents a gls estimator for a variance components model in which the number of observations per individual varies

unemployment fluctuations match quality and the wage cyclicality of new hires we revisit the issue of the high cyclicality of wages of new hires we show that after controlling for composition effects likely involving procyclical upgrading of job match quality the wages of new hires are no more cyclical than those of existing workers the key implication is that the sluggish behaviour of wages for existing workers is a better guide to the cyclicality of the marginal cost of labour than is the high measured cyclicality of new hires wages unadjusted for composition effects key to our identification is distinguishing between new hires from unemployment versus those who are job changers we argue that to a reasonable approximation the wages of the former provide a composition free estimate of the wage flexibility while the same is not true for the latter we then develop a quantitative general equilibrium model with sticky wages via staggered contracting on the job search and heterogeneous match quality and show that it can account for both the panel data evidence and aggregate evidence on labour market volatility

general productivity growth in a theory of quits and layoffs an efficient matching model of quits and layoffs is developed to account for several empirical regularities differences between quits and layoffs over the life and business cycles and across demographic groups are generated by differential rates of general productivity growth the standard approach to quits and layoffs based on wage rigidity is shown to be incapable of accounting for many of the empirical regularities although a formal test rejects a structural prediction of the efficient turnover model the specification does well in predicting both the level of and time series variation in the fraction of separations labeled quits

time series representations of economic variables and alternative models of the labour market accepting the hypothesis that the time series facts of the aggregate labour market may be summarized by the linear autoregressive and moving average representations of wages prices unemployment and interest rates implies that a useful theory ought to lead to predictions about these representations following this approach this paper first catalogues many of the time series facts about the aggregate labour market and then compares them against alternative models of the labour market based on the intertemporal substitution and staggered contract hypotheses