Financial Markets and Wages
We study a labour market equilibrium model in which firms sign optimal long-term contracts with workers. Firms that are financially constrained offer an increasing wage profile: they pay lower wages today in exchange for higher future wages once they become unconstrained. Because constrained firms grow faster, the model predicts a positive correlation between the growth of wages and the growth of the firm. Under some conditions, the model also generates a positive relation between firm size and wages. Using matched employer-employee data from Finland and the National Longitudinal Survey of Youth for the U.S., we show that the key dynamic properties of the model are supported by the data. Copyright © 2009 The Review of Economic Studies Limited.
Year of publication: |
2009
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Authors: | MICHELACCI, CLAUDIO ; QUADRINI, VINCENZO |
Published in: |
Review of Economic Studies. - Wiley Blackwell, ISSN 0034-6527. - Vol. 76.2009, 2, p. 795-827
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Publisher: |
Wiley Blackwell |
Saved in:
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