Unemployment Fluctuations, Match Quality, and the Wage Cyclicality of New Hires

• Mark Gertler ^[1] ; Christopher Huckfeldt ^[2] ; Antonella Trigari ^[3]
  1. [1] New York University

     New York University

     Estados Unidos

     
  2. [2] Cornell University

     Cornell University

     City of Ithaca, Estados Unidos

     
  3. [3] Bocconi University

     Bocconi University

     Milán, Italia

     

  Mostrar afiliaciones +
• Localización: Review of economic studies, ISSN 0034-6527, Vol. 87, Nº 4, 2020, págs. 1876-1914
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • We revisit the issue of the high cyclicality of wages of new hires. We show that after controlling for composition effects likely involving procyclical upgrading of job match quality, the wages of new hires are no more cyclical than those of existing workers. The key implication is that the sluggish behaviour of wages for existing workers is a better guide to the cyclicality of the marginal cost of labour than is the high measured cyclicality of new hires wages unadjusted for composition effects. Key to our identification is distinguishing between new hires from unemployment versus those who are job changers. We argue that to a reasonable approximation, the wages of the former provide a composition-free estimate of the wage flexibility, while the same is not true for the latter. We then develop a quantitative general equilibrium model with sticky wages via staggered contracting, on-the-job search, and heterogeneous match quality, and show that it can account for both the panel data evidence and aggregate evidence on labour market volatility.