The Division of Revenues from Unexpected Demand Shocks

Paulo Bastos, Natalia P. Monteiro and Odd Rune Straume

No 19520, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We exploit gaps between observed and recently forecasted GDP growth in export destinations to estimate the effects of unexpected demand shocks on worker compensation. Using employer-employee panel data, we find that the revenues from these demand shocks are partly transmitted to workers in the form of higher average wages, especially close to the top of the within-firm wage distribution. These wage responses occur both in the form of higher overtime payment and base wage increases. We also find significant increases in bonus-related pay in firms managed by high-skilled managers, and the unequal average distribution of unexpected revenues is also mainly driven by wage effects in the same subset of firms. This suggests that the way in which revenues from unexpected demand shocks are transmitted to workers is significantly related to managerial capabilities.

JEL-codes: F16 F66 J2 J6 (search for similar items in EconPapers)
Date: 2024-09
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