Rigid Wages and Contracts: Time- versus State-Dependent Wages in the Netherlands

55 Pages Posted: 4 Sep 2019

See all articles by Anderson Grajales

Anderson Grajales

Tilburg University

Burak Uras

Tilburg University - Center for Economic Research (CentER); Tilburg University - Department of Economics

Nathanael Vellekoop

University of Toronto; Goethe University Frankfurt - Research Center SAFE; Netspar

Multiple version iconThere are 2 versions of this paper

Date Written: September 2019

Abstract

We study nominal wage rigidity in the Netherlands using administrative data, which has three key features: (1) high-frequency (monthly), (2) high-quality (administrative records), and (3) high coverage (the universe of workers and the universe of firms). We find wage rigidity patterns in the data that are similar to wage behavior documented for other European countries. In particular we find that the hazard function has two spikes, one at 12 months and another one at 24 months and wage changes have time and state dependency components. As a novel and important piece of evidence we also uncover substantial heterogeneity in the frequency of wage changes due to explicit terms of the labor contract. In particular, contracts featuring flexible hours, such as on-call contracts, exhibit a higher probability of a change in the contract wage compared to fixed hour contracts. Once we split the sample based on contract characteristics, we also find that the response of wage changes to the time and state component is heterogeneous across different type of contracts - with relatively more downward adjustments in flexible-hour contract wages in response to aggregate unemployment.

Keywords: wage rigidity, microdata, time dependency, state dependency, flexible-hour contracts

JEL Classification: E24, J31

Suggested Citation

Grajales, Anderson and Uras, Burak R. and Vellekoop, Nathanael, Rigid Wages and Contracts: Time- versus State-Dependent Wages in the Netherlands (September 2019). SAFE Working Paper No. 258 (2019). Available at SSRN: https://ssrn.com/abstract=3446617 or http://dx.doi.org/10.2139/ssrn.3446617

Anderson Grajales

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Burak R. Uras

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Nathanael Vellekoop (Contact Author)

University of Toronto ( email )

Max Gluskin House
150 St George st
Toronto, Ontario M5S 3G7
Canada

HOME PAGE: http://www.nvellekoop.nl

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.nvellekoop.nl

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