Wage rigidity and job creation

Christian Haefke (), Marcus Sonntag and Thijs van Rens

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: 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 stickiness in the data. We also show, however, that a little wage rigidity goes a long way in amplifying the response of job creation to productivity shocks.

Keywords: Wage Rigidity; Search and Matching Model; Business Cycle (search for similar items in EconPapers)
JEL-codes: E24 E32 J31 J41 J64 (search for similar items in EconPapers)
Date: 2007-04, Revised 2012-04
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (80)

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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1047

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