Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200247
Authors: 
Bauer, Anja
Lochner, Benjamin
Year of Publication: 
2019
Series/Report no.: 
FAU Discussion Papers in Economics 05/2019
Abstract: 
Using administrative employer-employee data from Germany, we investigate the relationship between wages and past and present labor market conditions. Furthermore, we revisit recent findings of greater wage cyclicality of new hires. Overall, we find strong evidence for history dependent wages, manifested in both hiring and retention premiums - which is consistent with a variety of contract models. Taking into account composition effects as well as cyclical variation in unobserved match quality, we find that wages of new hires from unemployment are no more cyclical, but those of job changers are more cyclical than those of existing workers. We argue that much of the excess wage cyclicality of new hires discussed by the literature can be explained by cyclical job ladder movements in match quality of new hires from employment. In a novel empirical approach, where we further take into account occupational selection, we show that if job ladder movements accompany a simultaneous change of employers and occupations, the resulting wages are particularly cyclical sensitive.
Subjects: 
Business Cycle
Wage
Wage Rigidity
Implicit Contracts
Match Quality
JEL: 
E24
E32
J31
J41
Document Type: 
Working Paper
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