Staggered wages, unanticipated shocks and firms’ adjustments

35 Pages Posted: 24 May 2021

See all articles by Francesco Caloia

Francesco Caloia

VU University Amsterdam

Jante Parlevliet

De Nederlandsche Bank

Mauro Mastrogiacomo

De Nederlansdche Bank (DNB); Vrije Universiteit Amsterdam, School of Business and Economics

Date Written: May 18, 2021

Abstract


This paper studies the employment and wage effects of contract staggering, i.e., the staggered nature in which wages adjust to changes in the economic environment. Our analysis is based on a large matched employers employees dataset merged to collective agreements in the Netherlands, a country in which collective bargaining is dominant and contract staggering is relatively pervasive. By exploiting exogenous variation in the start dates of collective agreements around the Great Recession, we estimate the causal effect of increases in base wages mandated by collective agreements signed right before the shock on labour cost adjustments of firms. Our main result is that contract staggering has, on average, no real effect on employment. We find significant employment losses only in sectors covered by contracts with duration larger than thirty months, a rigidity much higher than that assumed in macroeconomic models including staggered wages. Instead, we show that firms were able adjust labour costs by curbing other pay components such as bonuses and benefits and incidental pay.

Keywords: Staggered Wages, Wage Rigidity, Collective Labour Agreements

JEL Classification: J20, J31, J32, J52

Suggested Citation

Caloia, Francesco and Parlevliet, Jante and Mastrogiacomo, Mauro, Staggered wages, unanticipated shocks and firms’ adjustments (May 18, 2021). De Nederlandsche Bank Working Paper No. 711, Available at SSRN: https://ssrn.com/abstract=3849286 or http://dx.doi.org/10.2139/ssrn.3849286

Francesco Caloia

VU University Amsterdam ( email )

Netherlands

Jante Parlevliet

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Mauro Mastrogiacomo (Contact Author)

De Nederlansdche Bank (DNB) ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31(0)20 444 6037 (Phone)
+31(0)20 444 6004 (Fax)

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