We study the time-series properties of firm effects in the two-way fixed effects model popularized by Abowd, Kramarz, and Margolis (1999) (AKM) using two approaches. The first—the rolling AKM approach (R-AKM)—estimates AKM models separately for successive two-year intervals. The second—the...

This paper tests the hypothesis that rising earnings profiles are a mechanism by which individuals engage in forced saving. It does this by examining the cross-sectional relationship between overwithholding on income tax payments--behavior that is consistent with a preference for forced...

A small interview survey was undertaken to see how actual wage-setters would react to the central. ideas of several economic theories of wage stickiness. Wage cuts were surprisingly prevalent in recent years, despite the booming economy. The strongest finding was that managers believe that...

The idea that wages rise relative to alternatives as job seniority accumulates is the foundation of the theory of specific human capital, as well as other widely accepted theories of compensation. The fact that persons with longer job tenures typically earn higher wages tends to support these...

This paper explores the role of wage fund as the basic source of credit, capital or finance in a dynamic Ricardian model, which consists of three classes of agents: the workers, the capitalist, and the producers of goods. We introduce and develop an elaborate dynamic wage fund model in the...

This paper examines the productivity (and wage) gains from locating in dense, urban environments. We distinguish between three potential explanations of why firms are willing to pay urban workers more: (1) the urban wage premium is spurious and is the result of omitted ability measures, (2) the...

We present a model of the labor market with asymmetric information in which the equilibrium of the' market generates unemployment and job queues so that wages may serve as an effective screening device. This happens because more productive workers -- within any group of individuals with a given...

Building on earlier work by Eichengreen and Sachs, we use data for 22 countries to study the role of wage stickiness in propagating the Great Depression. Recent research suggests that monetary shocks, transmitted internationally by the gold standard, were a major cause of the Depression....

We analyze involuntary unemployment based on consumers’ utility maximization and firms’ profit maximization behavior with ongoing nominal wage rate decline. We consider a three-periods overlapping generations (OLG) model with a childhood period as well as younger and older periods under...

Using a matched employer-employee data set of manufacturing plants in three sub-Saharan countries, I compare the marginal productivity of different categories of workers with the wages they earn. Under certain conditions, the wage premiums for worker characteristics should equal the productivity...

Numerous studies have shown large differences in wages for apparently similar workers across industries. These findings pose a challenge to standard model s of labor market behavior. A problem with past studies of industry wage differences is that they have failed to distinguish between union...

The paper argues that wage determination is best seen as a kind of rent sharing in which workers' bargaining power is influenced by conditions in the external labour market. It uses British establishment data from 1984 to show that pay depends upon a blend of insider pressure (including the...

This paper shows the wage offer distribution can be nonparametrically identified from the gaps between any two wage offers received by a worker for those who received two or more offers in a short period of time. While nonparametric estimation is infeasible in practice because it requires an...

This paper investigates equilibria in a labor market where firms post wage/tenure contracts and risk-averse workers, both employed and unemployed, search for better paid job opportunities. Different firms typically offer different contracts. Workers accumulate general human capital through...

This paper analyzes the impact of workplace characteristics on individual wages based on a unique cross-section matched employer-employee dataset for the Israeli private manufacturing sector in 1995; especially, we examine the effects of the interaction between rent-sharing and wages on the gender...

This paper reviews the literature on the effects of low steady-state inflation on wage formation, focusing on four different effects. First, under low inflation, downward nominal wage rigidity (DNWR) may prevent real wage cuts that would have happened had inflation been higher. Second, wages...

We analyze a model of directed search in which unemployed job seekers observe all posted wages. We allow for the possibility of multiple applications by workers and ex post competition among vacancies. For any number of applications, there is a unique symmetric equilibrium in which vacancies...

In search of a macroeconomic theory of wage determination, the agnostic reader should be puzzled by the apparent contradiction between two influential theories. On one hand, in the standard search-matching theory with wage bargaining, hiring cost and constant returns of labor, the bargaining...

We present a model of wage contract violation that implies a possibility of multiple equilibria in the level of arrears. Positive feedback arises because each employer's arrears affect the costs of late payment faced by other employers operating in the same labor market, resulting in a network...

We investigate the relationship between the slope of the wage-tenure profile and the level of monitoring across two cross sections of matched employer-employee British data. Our theoretical model predicts that increased monitoring leads to a decline in the slope of the wage-tenure profile. Our...

The vast literature on human capital and earnings assumes that individuals know in advance that they will complete a particular program of schooling. This paper treats education as a sequential choice that is made under uncertainty. A simple two period structural model is used to explore the...

Fluctuations in the equilibrium rate of unemployment can only be understood within a theory of the natural or equilibrium rate. It is not enough to say that unemployment is the difference between supply and demand in the labor market, though of course it always will be. In equilibrium, no...

We develop a model in which firms set impersonal salary levels before matching with workers.Salaries fall relative to any competitive equilibrium while profits rise by almost as much, implyinglittle inefficiency. Furthermore, the best firms gain the most from the system while wages...

Several empirical regularities motivate most theories of the distribution of labor earnings. Earnings distributions tend to be skewed to the right and display a long right tail. The are leptokurtic (positive fourth cumulant) and have a fat tail. Mean earnings always exceed median earnings and...

This paper surveys recent developments in the literature on efficiency wage theories of unemployment. Efficiency wage models have in common the property that in equilibrium firms may find it profitable to pay wages in excess of market clearing. High wages can help reduce turnover, elicit worker...

Bargaining models suggest that firm-specific variables play an important role in wage determination. Yet previous empirical studies of wage determination have largely ignored these variables. Our analysis of a large panel data set of U.S. wage contracts suggests that firm-specific variables...

We study the time-series properties of firm effects in the two-way fixed effects models popularized by Abowd, Kramarz, and Margolis (1999) (AKM) using two approaches. The first--the rolling AKM approach (R-AKM)--estimates AKM models separately for successive two-year intervals. The second--the...

We introduce a form of downward nominal wage rigidity that can vary in intensity across a continuum of labor varieties. The model delivers a static wage Phillips curve linking current wage inflation to current unemployment. For standard parameterizations, the dynamics of the model are...

Using administrative payroll data from the largest U.S. payroll processing company, we document a series of new facts about nominal wage adjustments in the United States. The data allow us to define a worker's per-period base contract wage separately from other forms of compensation such as...

We analyze the empirical content of the Roy model, stripped down to its essential features, namely sector specific unobserved heterogeneity and self-selection on the basis of potential outcomes. We characterize sharp bounds on the joint distribution of potential outcomes and testable...

Using administrative payroll data from the largest U.S. payroll processing company, we document a series of new facts about nominal wage adjustments in the United States. The data allow us to define a worker's per-period base contract wage separately from other forms of compensation such as...

This paper explores the relationship between the duration of a vacancy and the starting wage of a new job, using unusually informative data comprising detailed information on vacancies, the establishments posting the vacancies and the workers eventually filling the vacancies. We find that...

This paper explores the relationship between the duration of a vacancy and the starting wage of a new job, using unusually informative data comprising detailed information on vacancies, the establishments posting the vacancies, and the workers eventually filling the vacancies. We find that...

We adapt the wage contracting structure in Chari (1983) to a dynamic, balanced-growth setting with re-contracting à la Calvo (1983). The resulting wage-rigidity framework delivers a model very similar to that in Jaimovich and Rebelo (2009), with their habit parameter replaced by our probability...

This paper explores the relationship between the duration of a vacancy and the starting wage of a new job, using unusually informative data comprising detailed information on vacancies, the establishments posting the vacancies, and the workers eventually filling the vacancies. We find that...

This paper explores the relationship between the duration of a vacancy and the starting wage of a new job, using unusually informative data comprising detailed information on vacancies, the establishments posting the vacancies and the workers eventually filling the vacancies. We find that...

This paper explores the relationship between the duration of a vacancy and the starting wage of a new job, using unusually informative data comprising detailed information on vacancies, the establishments posting the vacancies and the workers eventually filling the vacancies. We find that...