I test the importance of wage rigidities from long-term contracts by
observing how employment behaves when firms and workers recontract. If
rigidities are important then we should observe employment adjusting after
recontracting to undo movements in employment during the past contract
that were excessive due to rigid wages.
The data are for twelve manufacturing industries that display a
strong bargaining pattern.
I find that contract rigidities are important, causing considerably
larger fluctuations in employment than would occur with flexible wages.
By far the most striking case is in motor vehicles where long-term
contracts much more than double the size of fluctuations in employment. I
also examine the behavior of wage rates when new contracts are introduced.
Wage growth does respond to employment growth during the prior contract in
several of the industries; but these responses are not related to the
pattern of employment responses across industries.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.