Journal Article

Financial Markets and Wages

Claudio Michelacci and Vincenzo Quadrini

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 76, issue 2, pages 795-827
Published in print April 2009 | ISSN: 0034-6527
Published online April 2009 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2008.00524.x
Financial Markets and Wages

More Like This

Show all results sharing these subjects:

  • Firm Objectives, Organization, and Behaviour
  • Particular Labour Markets
  • Wages, Compensation, and Labour Costs

GO

Show Summary Details

Preview

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.

Keywords: J31; J41; L25

Journal Article.  16066 words.  Illustrated.

Subjects: Firm Objectives, Organization, and Behaviour ; Particular Labour Markets ; Wages, Compensation, and Labour Costs

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.