Wages, Implicit Contracts and the Business Cycle: Evidence from Canadian Micro Data

Evidence of macroeconomic conditions impacting the earnings of men in Canada in a manner consistent with an implicit contracting framework is found using data from eleven cross-sectional surveys spanning the years 1981-1992. The estimates are similar to those found by Beaudry and DiNardo (1991) using U.S. data. Their analysis is extended to incestigate whether the effects of macroeconomic conditions differ by age. Evidence is found that the wages of young men and men near retirement are most sensitive to changes in the macroeconomic conditions over their job tenure.