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

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

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

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

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

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

short run employment functions when the speed of adjustment depends on the unemployment rate a bstratacross industry and country comparisons have found the speed of adjustment in short run employment functions to be positively related to the rate of unemployment the present paper develops a time series model in which the reaction coefficient varies with unemployment and estimates it for the manufacturing sectors of the eight oecd countries for which suitable data are available the new model is non linear and is estimated using full information maximum likelihood procedures application of the log likelihood ratio test finds that the new vanable reaction coefficient model is superior to the fixed reaction coefficient model for the united states canada australia austria ireland and the united kingdom

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

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

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

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

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

business cycle models aggregation and real wage cyclicality a substantial literature has developed to estimate the true cyclicality of real wages that is composition bias free two major issues are addressed in this article aggregation of heterogeneous workers and potential bias in the measurement of the labor input a general analysis of the biases is presented and alternative approaches in the literature are nested in a single framework estimates based on an efficiency units concept that avoids the usual aggregation problems are presented composition bias underestimates the usual parameters of interest unless both the price and the quantity of the labor input are adjusted appropriately

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

wage adjustment in the great recession and other downturns evidence from the united states and great britain using 1979 2012 cps data for the united states and 1975 2012 nes data for great britain we study wage behavior in both countries with particular attention to the great recession real wages are procyclical in both countries but the procyclicality of real wages varies across recessions and does so differently between the two countries in ways that defy simple explanations we devote particular attention to the hypothesis that downward nominal wage rigidity plays an important role in cyclical employment and unemployment fluctuations we conclude that downward wage rigidity may be less binding and have lesser allocative consequences than is often supposed

labor adjustment costs in a destination country the case of mexico abstract rodrik rodrik d 1997 has globalization gone too far institute for international economics washington dc argues that firms use the threat of moving to low cost generally developing markets to make employment more flexible at home although a large literature documents significant adjustment costs in developed countries we know little about their size and importance in developing countries that receive capital we employ monthly mexican data from the gatt nafta period to estimate adjustment costs in mexico we consider adjustment costs for production and non production workers and allow for asymmetry while patterns of adjustment costs are similar as in developed countries adjustment costs in mexico are generally an order of magnitude smaller

real rigidities and real exchange rate volatility abstract this paper shows that certain real rigidities can help explain high volatility of real exchange rates relative to other macroeconomic aggregates an international real business cycle model is used to demonstrate that real exchange rate volatility increases if i it is costly to move labor between sectors and ii the consumption of tradable goods requires distribution services model dynamics are generated by shocks to productivity and preferences based on sectoral output employment and consumption data from g 7 countries the introduction of intersectoral adjustment and distribution costs substantially increases the real exchange rate volatility generated by the model

the observational implications of labor contracts in a dynamic general equilibrium model economies are studied where labor contracts even without changing real allocations can make equilibria appear different one basic example is that wage observations generated by long term employment contracts are biased measures of theoretical market wages this idea is analyzed in a dynamic stochastic economic model including both overlapping generations of finite lived workers and infinite horizon employers so that the implications for business cycle life cycle and cross sectional phenomena can be explicitly addressed understanding contracts in this way potentially allows us to reconcile several ostensibly anomalous aspects of the data with equilibrium theory

unemployment in britain male unemployment in britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 see figure 1 the figures are for male unemployment because there is no consistent series for women 1 even more remarkably unemployment has fallen in only three years out of the last twenty 1973 1978 and 1979 to account for this we need a model that explains both changes in the natural or non accelerating inflation rate of unemployment nairu and deviations from it we use a three equation supply side model centred on the labour market this has two main features the first concerns the determination of employment in the short run the labour demand function that we use cuts through the fruitless debate now raging especially in europe as to whether current unemployment is classical or keynesian according to the classical view employment is too high because real wages are too high according to the keynesian view real wages are not binding and unemployment is high because the product market does not clear with prices too high relative to nominal demand the whole debate is set in the framework of perfect competition yet in perfect competition prices are set by impersonal forces and it is not clear what could possibly stop prices clearing the market it is much more reasonable to think of prices as being set by imperfectly competitive firms existing prices being the best they can think of given the demand they face in this context firms demand for labour will depend on both the real product wage and the level of real aggregate demand this is the demand function we estimate and it conforms both to common sense and to the data however this does not imply that employment can be made to grow without limit by pumping up real demand for in the medium term when price surprises are eliminated our model determines three variables employment real wages and real demand on the basis of three equations an employment equation a price equation and a wage equation thus in the medium term there is a natural level of employment and corresponding to this a natural level of real aggregate demand the second key feature of our model concerns the medium term determination of unemployment in the medium term the planned mark up of wages over prices in wage settlements must be consistent with the mark up of prices over wage costs in employers pricing behaviour for if wage setters try to set real product wages higher than is consistent with employers pricing behaviour this generates ever increasing inflation thus the key to understanding unemployment in the medium term is the behaviour of wage setters if events occur that push them towards too high real wages then unemployment has to rise to offset these influences we shall call these influences wage pressure variables or push factors and they are clearly crucial in understanding unemployment the variables here include the social security system employment protection

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 determinants of migrating with a pre arranged job and of the initial duration of urban unemployment an analysis based on indian data on rural to urban migrants abstract based on survey data on 1 400 rural migrants in delhi this paper examines within a multivariate context the determinants of migrating with a pre arranged job and of the initial duration of urban unemployment the results show that the probability of moving with a prearranged job increases with education and with age and is higher for those who seek non manual jobs for migrants who arrive in the city without a pre arranged job unemployment duration depends on marital status premigration information on urban employment opportunities and on the reliance on contacts for job search

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

employment in the british coal industry a test of the labour demand model the authors test the conventional model of labor demand against the alternative that bargaining takes place over both wages and employme nt for a time series cross section data set covering the british coal industry they note the difficulty of identifying the contract curve under the alternative hypothesis and suggest the use of variables affecting the union and management status quo points as instruments for the endogenous wage they find that outside variables such as benefits and manufacturing wages are important in determining the level of employment thus rejecting the labor demand model copyright 1988 by royal economic society

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

education and the duration of job search and unemployment in urban india an empirical analysis based on a survey of delhi jobseekers abstract this paper investigates why educated jobseekers tend to experience longer search and unemployment durations than their less educated counterparts the empirical analysis based upon a survey of delhi jobseekers indicates that while the duration of search is mainly determined by educational level the duration of unemployment is more closely related to personal and family characteristics normally associated with education earnings function results are consistent with the proposition that the educated search longer because their returns are higher

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

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

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

intertemporal rules with variable speed of adjustment an application to u k manufacturing employment this paper presents a procedure to estimate intertemporal dynamic decision rules where adjustment costs are assumed to be variable the estimation is based on the euler equation for purposes of illustration the authors concentrate on an employment function for the u k manufacturing sector where they find very significant effects of some variables that influence adjustment costs finally they point out an empirical result that has interesting implications when evaluating tests of efficient bargain models copyright 1989 by royal economic society

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

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

employment adjustment in uk manufacturing this analysis differs from previous studies of labor demand in its explicit inclusion of the costs to the firm of adju sting its workforce these costs include institutional factors such a s employment protection legislation and unions and market factors su ch as the degree of slack in the labor market two questions are addr essed what is the quantitative impact of these forces and does their inclusion improve the fit of a labor demand function the results sh owed these factors to have a strong influence on the rate of hiring f iring and to improve significantly on conventional labor demand funct ions copyright 1988 by royal economic society

real interest rates leverage and bank risk taking do low interest rate environments lead to greater bank risk taking we show that when banks can adjust their capital structures reductions in real interest rates lead to greater leverage and higher risk for any downward sloping loan demand function however if the capital structure is fixed the effect depends on the degree of leverage following a decrease in interest rates well capitalized banks increase risk while highly levered banks may decrease it if loan demand is linear or concave further the capitalization cutoff depends on the degree of bank competition this effect therefore should vary across countries and over time

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

dynamic labour demand using error correction model using a new econometric model this study provides evidence that contradicts previous assertions about the japanese labour market the interrelationship between employment and hours of labour is stressed in this analysis by explicitly dividing labour input into both employment and labour hours this model enables results to be obtained through both simulation and estimation which allow measurement of adjustment speeds and elasticity in both employment and labour hours to wages the results of the simulations are as follows no apparent difference in adjustment speeds between employment and hours of labour was found the adjustment of hours of labour is more cyclical and overshoots whereas that of employment is smoother the adjustment speed of each simulation is slower than that found in most previous studies in the present long run simulation it is not as slow in the short run and policy simulations therefore adjustment speeds strongly depend on the method of simulation

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

life below zero bank lending under negative policy rates we show that negative policy rates affect the supply of bank credit in a novel way banks are reluctant to pass on negative rates to depositors which increases the funding cost of high deposit banks and reduces their net worth relative to low deposit banks as a consequence the introduction of negative policy rates by the european central bank in mid 2014 leads to more risk taking and less lending by euro area banks with a greater reliance on deposit funding our results suggest that negative rates are less accommodative and could pose a risk to financial stability if lending is done by high deposit banks received april 17 2018 editorial decision september 18 2018 by editor philip strahan authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

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

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

heterogeneous workers and occupations inequality unemployment and crowding out this article attempts to determine the factors behind the cyclical behavior of the skill premium using the current population survey outgoing rotation group the premium is found uncorrelated with contemporaneous output and lags the business cycle to account for this observation the article develops a framework that features search frictions agents are either high or low educated and firms post two types of vacancies the complex which can be matched with the high educated and the simple which can be matched with the high and the low educated on the job search for a complex occupation is undertaken by the high educated in simple occupations an aggregate technological shock induces firms to increase their posting of simple and complex vacancies as complex vacancies are more costly to create than simple ones the increase in the former lags that of the latter as the number of complex vacancies increases with a lag on the job search intensity increases on the expense of the hours of work of the high educated in simple occupations on the other hand the total hours of the high educated in complex occupations increases this lagged cyclical increase in the labor input of the high educated in complex occupations causes the skill premium to increase with a lag as well

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

input choices under price uncertainty theory shows that depending on risk preferences and technological parameters price uncertainty may alter firms choice of capital intensity this paper presents an empirical analysis of the effect of price uncertainty on firms choices of capital and labor stocks empirical results from a cross section of manufacturing industries as well as within industries over time show that greater price uncertainty increases an industry s capital labor ratio it appears that risk aversion does not dominate firms decision making these empirical findings have implications for the analysis of factor demand and productivity and capacity utilization rates

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

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