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Staggered wages, unanticipated shocks and firms’ adjustments

Author

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  • Caloia, Francesco G.
  • Parlevliet, Jante
  • Mastrogiacomo, Mauro
Abstract
This paper empirically investigates the employment and wage effects of contract staggering, i.e., the asynchronous and infrequent way in which wages adjust to changes in the economic environment. Using an identification strategy based on exogenous start dates of collective agreements around the Great Recession, we estimate the effect of increases in base wages on firms’ labor cost adjustments. Our analysis is based on a large employers-employees dataset merged to collective agreements in the Netherlands, a country in which collective bargaining is dominant and contract staggering is relatively pervasive. The main result is that staggered wage setting has no real effect on employment. We find significant employment losses only in sectors covered by contracts with much longer durations than those normally assumed in macroeconomic models featuring staggered wages. Instead, we show that firms adjust labor costs by curbing other pay components such as bonuses and benefits and incidental pay. The overall result supports the idea that wage rigidities are not the main source of employment fluctuations.

Suggested Citation

  • Caloia, Francesco G. & Parlevliet, Jante & Mastrogiacomo, Mauro, 2023. "Staggered wages, unanticipated shocks and firms’ adjustments," Journal of Macroeconomics, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:jmacro:v:76:y:2023:i:c:s0164070423000216
    DOI: 10.1016/j.jmacro.2023.103521
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    References listed on IDEAS

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    More about this item

    Keywords

    Staggered wages; Wage rigidity; Collective labor agreements;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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