Economics at your fingertips  

Flexibility of new hires’ earnings in Ireland

Reamonn Lydon and Matija Lozej

Labour Economics, 2018, vol. 53, issue C, 112-127

Abstract: The rigidity of the net present value of wages for newly hired workers from unemployment is one of the key ingredients to generate realistic volatility of (un)employment in standard search and matching models. With Nash bargaining or if wage contracts are long-term, this net present value is affected by wages of new hires. Yet data on wages of new hires are rare and, in the few papers that distinguish between new hires from unemployment and job changers, the findings vary. For the U.S., two influential papers reach the opposite conclusions, and the findings for the few European countries are mixed. We combine administrative tax data on earnings with the Household Finance and Consumption Survey for Ireland and find that earnings of new hires from non-employment are substantially more flexible compared to earnings of incumbent workers or job changers. The findings are robust. Earnings of new hires from non-employment are more procyclical for workers with less valuable outside options.

Keywords: Wage bargaining; Wage rigidity; Unemployment; New employees; Business cycles (search for similar items in EconPapers)
JEL-codes: C23 E24 J31 J41 J52 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Flexibility of new hires' earnings in Ireland (2016) Downloads
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:

Access Statistics for this article

Labour Economics is currently edited by A. Ichino

More articles in Labour Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-10-18
Handle: RePEc:eee:labeco:v:53:y:2018:i:c:p:112-127