Wage rigidity and job creation |
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| Authors: | Christian Haefke Marcus Sonntag Thijs van Rens |
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| Institution: | 1. IHS Vienna, Austria;2. NYU Abu Dhabi, United Arab Emirates;3. IZA, Germany;4. BofA Merrill Lynch Global Research London, United Kingdom;5. University of Warwick, Department of Economics, Coventry CV4 7AL, United Kingdom;6. CEPR, United Kingdom |
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| Abstract: | Recent research in macroeconomics emphasizes the role of wage rigidity in accounting for the volatility of unemployment fluctuations. We use worker-level data from the CPS to measure the sensitivity of wages of newly hired workers to changes in aggregate labor market conditions. The wage of new hires, unlike the aggregate wage, is volatile and responds almost one-to-one to changes in labor productivity. We conclude that there is little evidence for wage rigidity in the data. |
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| Keywords: | Wage rigidity Search and matching model Business cycle |
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