Wages, Implicit Contracts, and the Business Cycle: Evidence from a European Panel

Andriana Bellou () and Baris Kaymak

No 2011-13, LISER Working Paper Series from Luxembourg Institute of Socio-Economic Research (LISER)

Abstract: This paper examines the cyclical behavior of hours and wages in a unique panel of 11 European countries, and documents signi?cant history dependence in wages. Workers who experience favorable market conditions during their tenure on the job, have higher wages, and work fewer labor hours. Unobserved differences in productivity, such as varying job quality, or match-speci?c productivity are not likely to explain this variation. The results instead point to the importance of contractual arrangements in wage determination. In economies with decentralized bargaining practices, such arrangements resemble self-enforcing insurance contracts with onesided commitment (by the employer). On the other hand, in countries with strong unions and centralized wage bargaining, wage behavior is better approximated by full-commitment insurance contracts.

Keywords: Business Cycles; Wage Rigidity; Implicit Contracts (search for similar items in EconPapers)
JEL-codes: E32 J31 J41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011-01
New Economics Papers: this item is included in nep-bec, nep-cis, nep-eec, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Wages, implicit contracts, and the business cycle: Evidence from a European panel (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:irs:cepswp:2011-13

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