Aggregate wages display little cyclicality compared with what a standard model would predict. Wage rigidities are an obvious candidate, but a recent strand of the literature has emphasized the need to take into account the growing importance of worker composition effects during downturns. With...

This paper analyses wage dynamics in Italy in the last 25 years with special focus on the recent recession. Using linked employer-employee data we document the presence of a trade-off between wage and employment adjustments: firms experiencing more wage rigidities exhibit more employment...