Implicit Contracts and Asymmetric Pass-through of Productivity Shocks

Stuart Breslin, Andy Snell, Heiko Stueber and Jonathan Thomas
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Heiko Stueber: University of Applied Labour Studies (UALS), Institute for Employment Research (IAB), Friedrich-Alexander-Universitaet Erlangen-Nuernberg (FAU), IZA

No 312, Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: We document distinctive empirical features of wage pass-through in Germany that are consistent with Thomas-Worrall wage contracting in the presence of both idiosyncratic and nonstationary aggregate productivity components. These empirical features are hard to reconcile with the predictions of search models based on period-by-period Nash bargaining over match surplus and with the predictions of financial models where risk neutral firms may costlessly shield risk averse workers from idiosyncratic shocks (Guiso, Pistaferri et al. 2005).

Keywords: Labour contracts; pass-through; limited commitment; asymmetric shocks (search for similar items in EconPapers)
JEL-codes: E32 J41 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2023-11
New Economics Papers: this item is included in nep-eff
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