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Flexible Wages or Flexible Workers? A Decomposition of Wage Bill Adjustment by Dutch Firms, 2006–2013

Anja Deelen ()
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Anja Deelen: CPB Netherlands Bureau for Economic Policy Analysis

De Economist, 2021, vol. 169, issue 2, No 3, 179-209

Abstract: Abstract This paper investigates how firms adjust wages and employment in periods of adverse economic circumstances, using extensive, administrative linked employer–employee panel data for the Netherlands. Changes in the contractual wage bills of firms are decomposed into wages and job flows, distinguishing stayers and workers entering and exiting the firm. Employment reduction is found to be the major channel for wage-bill contraction in adverse periods, especially in firms with a low share of open ended contracts. Continuing workers in firms hit by negative sales shocks generally are assured of wage increases, pointing at a segmented labour market.

Keywords: Wages; Employment flows; Linked employer–employee data (search for similar items in EconPapers)
JEL-codes: J30 J31 J41 J62 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10645-021-09382-5

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