If wages fell during a recession

Joy Buchanan and Daniel Houser

Journal of Economic Behavior & Organization, 2022, vol. 200, issue C, 1141-1159

Abstract: Many economies exhibit downward wage rigidity. Surveys of managers indicate that employers hold wages rigid because they believe morale will suffer after a wage cut. Otherwise, there is little evidence for how employers’ beliefs contribute to wage rigidity and whether those beliefs are accurate. Using an experiment, we demonstrate that effort falls after workers experience a wage cut. Despite this partial confirmation of the Bewley (1999) morale theory, half of the employers in our experiment cut wages and lose money as a result. Under nominal inflation, real wage cuts do not have a significant effect on effort.

Keywords: Recession; Effort; Experiments; Inflation (search for similar items in EconPapers)
JEL-codes: C91 D84 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268120303577
Full text for ScienceDirect subscribers only

Related works:
Working Paper: If Wages Fell During a Recession (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:200:y:2022:i:c:p:1141-1159

DOI: 10.1016/j.jebo.2020.09.023

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().