Wage Cyclicality and Labor Market Institutions

João Pereira, Raul Ramos and Pedro Martins

Industrial Relations: A Journal of Economy and Society, 2025, vol. 64, issue 4, 598-615

Abstract: Do labor institutions influence how wages respond to the business cycle? Such responsiveness can then shape several economic outcomes, including unemployment. In this paper, we examine the role of two key labor market institutions—collective bargaining and temporary contracts—upon wage cyclicality. Our evidence is drawn from rich, 2002–2020 matched data from Portugal. We find that workers not covered by collective agreements exhibit much higher wage cyclicality, especially new hires, compared to covered workers. In contrast, workers under temporary contracts do not exhibit sizable differences in cyclicality compared to counterparts under permanent (open‐ended) contracts. Our findings highlight a novel angle through which labor institutions influence the labor market and the economy.

Date: 2025
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https://doi.org/10.1111/irel.12387

Related works:
Working Paper: Wage Cyclicality and Labour Market Institutions (2024)
Working Paper: Wage cyclicality and labour market institutions (2024)
Working Paper: Wage cyclicality and labour market institutions (2024)
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