Financial Markets and Wages

Vincenzo Quadrini and Claudio Michelacci ()

No 4867, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study a labour market equilibrium model in which firms sign optimal long-term contracts with workers. Firms that are financially constrained offer an increasing wage profile: they pay lower wages today in exchange of higher wages once they become unconstrained and operate at a larger scale. In equilibrium, constrained firms are on average smaller and pay lower wages. In this way the model generates a positive relation between firm size and wages. Using data from the National Longitudinal Survey of Youth (NLSY) we show that the key dynamic properties of the model are supported by the data.

Keywords: Investment financing; Long-term contracts; Wages (search for similar items in EconPapers)
JEL-codes: E24 G31 J31 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-dge, nep-fin, nep-fmk, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://cepr.org/publications/DP4867 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Financial Markets and Wages (2009)
Working Paper: Financial Markets and Wages (2005)
Working Paper: Financial Markets and Wages (2004)
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:cpr:ceprdp:4867

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP4867

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().