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Wage Adjustment and Productivity Shocks

35 Pages Posted: 26 Sep 2016  

Mikael Carlsson

Sveriges Riksbank - Research Department; Sveriges Riksbank

Julian Messina

Inter-American Development Bank (IDB) - Research Department

Oskar Nordstrom Skans

IFAU - Office of Labour Market Policy Evaluation; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: September 2016

Abstract

We study how workers’ wages respond to changes in firm‐level physical productivity using Swedish data. We find that technology shocks affect workers’ wages through both internal and external forces. Wages respond three times as much to physical productivity shocks that are shared with outside firms within the same sector as they do to firm‐level physical productivity shocks. The larger impact of sectoral physical productivity is related to the degree of within‐sector labour mobility, suggesting that the productivity evolution among firms that draw their labour from the same market segment is a crucial determinant of the wage growth of incumbent workers.

Suggested Citation

Carlsson, Mikael and Messina, Julian and Nordstrom Skans, Oskar, Wage Adjustment and Productivity Shocks (September 2016). The Economic Journal, Vol. 126, Issue 595, pp. 1739-1773, 2016. Available at SSRN: https://ssrn.com/abstract=2842845 or http://dx.doi.org/10.1111/ecoj.12214

Mikael Carlsson

Sveriges Riksbank - Research Department ( email )

S-103 37 Stockholm
Sweden

HOME PAGE: http://www.riksbank.com/research/carlsson

Sveriges Riksbank ( email )

Brunkebergstorg 11
SE-103 37 Stockholm
Sweden

Julian Messina (Contact Author)

Inter-American Development Bank (IDB) - Research Department ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

Oskar Nordstrom Skans

IFAU - Office of Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden
+46 18 471 70 79 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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