Flexible Wages or Flexible Workers?

Anja Deelen (a.p.deelen@cpb.nl)
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Anja Deelen: CPB Netherlands Bureau for Economic Policy Analysis

No 405, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: This paper investigates how fi rms adjust wages and employment in periods of adverse economic circumstances, using extensive, administrative linked employer/employee panel data for the Netherlands. Changes in the contractual wage bills of fi rms are decomposed into wages and job flows, distinguishing stayers and workers entering and exiting the fi rm. This paper investigates how firms adjust wages and employment in periods of adverse economic circumstances, using extensive, administrative linked employer/employee panel data for the Netherlands. Changes in the contractual wage bills of firms are decomposed into wages and job flows, distinguishing stayers and workers entering and exiting the firm. Employment reduction is found to be the major channel for wage-bill contraction by firms, indicating downward wage rigidity. A negative relationship is established between fi rms' degree of downward wage rigidity and their employment growth, suggesting that job losses in response to adverse shocks would be signi cantly lower if wages were more downwardly flexible.

JEL-codes: J30 J31 J41 J62 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-hrm and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:405

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