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Wage Cyclicalities and Labor Market Dynamics at the Establishment Level: Theory and Evidence

Christian Merkl () and Heiko Stüber ()

No 11051, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using the new AWFP dataset that covers all German establishments, we document a substantial cross-sectional heterogeneity of establishments' average real wages over the business cycle. While the median establishments' real wages are procyclical, there is a large fraction of establishments with countercyclical real wages. We are the first to show that establishments with more procyclical wages have a less procyclical hires rate and employment behavior. We propose a labor market flow model that is able to replicate these facts and thereby allows us to run counterfactual exercises. When we set the wage cyclicalities of all establishments to the one of the most procyclical establishments, labor market volatilities drop by more than 50 percent.

Keywords: wage cyclicality; labor market flow model; labor market dynamics; establishments; administrative data; job and worker flows (search for similar items in EconPapers)
JEL-codes: E32 E24 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur and nep-mac
Date: 2017-09
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Related works:
Working Paper: Wage Cyclicalities and Labor Market Dynamics at the Establishment Level: Theory and Evidence (2017) Downloads
Working Paper: Wage cyclicalities and labor market dynamics at the establishment level: Theory and evidence (2016) Downloads
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