What Can We Learn from Idiosyncratic Wage Changes?

I document six facts about wage changes. First, most pay revisions occur at yearly frequency, but a small proportion occur at idiosyncratic times. Second, idiosyncratic pay changes are larger and more dispersed than year-end pay changes and resemble more pay changes occurring at job-to-job transitions. Third, idiosyncratic pay changes are more common for workers with less experience and, fourth, in firms higher on the job-ladder. Fifth, industries in which the incidence of idiosyncratic raises have risen have experienced greater declines in labor share. Sixth, industries in which more firms report willingness to negotiate wages have greater concentrations of idiosyncratic revisions. An on-the-job search model with heterogeneous wage contracts can rationalize these facts.

Flexibility and Informalisation of Labour: Intangible Assets, Family and the Informal Economy in India

In this article, I demonstrate, through the use of the life course perspective, how informal work in the form of verbal wage contracts might lead to dignity and autonomy amongst the rural poor. The article draws attention to a broader comparative context of how indigenous autonomies are produced. In that they have the relative freedom to engage in a range of informal work as discussed, the Gonds’ autonomy in a neoliberal sense consists of self-governance, which draws attention to the indigenous community’s conception of the self as an economic and autonomous entity that is sustained by a range of social networks.

The Cyclical Behavior of Job Quality and Real Wage Growth

We study the empirical relevance of implicit insurance contracts for wage setting while accounting for cyclical fluctuations in average job quality. Using proxy measures, we find the latter to be acyclical, if not countercyclical, due to the cleansing effects of layoffs during recessions versus quits during expansions. Then, we study the cyclical behavior of wage growth among job stayers to test for contracts, circumventing differences in job quality altogether. Both methods strongly corroborate the prevalence of wage contracts in the labor market and imply a highly procyclical price for labor. (JEL E24, E32, J31, J41, J63)

A business-cycle model with a modified cash-in-advance feature, government sector and one-period nominal wage contracts: the case of Bulgaria

A business-cycle model with a modified cash-in-advance feature, government sector and one-period nominal wage contracts: the case of Bulgaria

Fixed-Wage Contracts and Monetary Non-neutrality

We study the importance of wage rigidities for the monetary policy transmission mechanism. Using uniquely rich micro data on Swedish wage negotiations, we isolate periods when the labor market is covered by fixed-wage contracts. Importantly, negotiations are coordinated in time but their seasonal patterns are far from deterministic. Using a two-regime VAR model, we document that monetary policy shocks have a larger impact on production during fixed-wage episodes as compared to the average response. The results do not seem to be driven by the periodic structure, nor the seasonality, of the renegotiation episodes. (JEL E23, E24, E52, J31, J41)

A Foundation for Efficiency Wage Contracts

In many jobs, the worker generates only subjective performance measures privately observed by the employer, and contracts must rely on employer reports about these measures. This setting is a game with private monitoring, and prior work suggests that the optimal contract may be complex and non-recursive. I introduce a novel equilibrium refinement and show that the optimal contract simplifies to an efficiency wage contract: The worker receives a wage above his outside option and reports take a pass-fail form. Each report depends only on performance since the previous report, and effort incentives are provided purely through the threat of termination. (JEL D86, J41)