American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Does Wage Persistence Matter for Employment Fluctuations? Evidence from Displaced Workers
American Economic Journal: Applied Economics
vol. 2,
no. 3, July 2010
(pp. 1–21)
Abstract
Previous literature has found that tight labor market conditions during a job raise wages. Using the Displaced Worker Survey from 1984 to 2006, we show that wage gains associated with good labor market conditions disappear at job loss. We also find that workers with higher wages due to tight past labor market conditions face higher risk of layoff. These findings suggest an important role of persistent rigidities in the wage setting process that are related to layoff decisions. This supports the notion that downward rigid employment contracts help explain the Shimer (2005) "puzzle" of low wage relative to employment fluctuations. (JEL J31, J41, J63)Citation
Schmieder, Johannes F., and Till von Wachter. 2010. "Does Wage Persistence Matter for Employment Fluctuations? Evidence from Displaced Workers." American Economic Journal: Applied Economics, 2 (3): 1–21. DOI: 10.1257/app.2.3.1Additional Materials
JEL Classification
- J31 Wage Level and Structure; Wage Differentials
- J41 Labor Contracts
- J63 Labor Turnover; Vacancies; Layoffs
There are no comments for this article.
Login to Comment