Asymmetries and Rigidities in Wage Adjustments by Firms
Harry J. Holzer
Edward B. Montgomery
In this paper we use micro data from the Employment Opportunity Pilot
Project (EOPP) surveys of firms in 1980 and 1982 to test for labor market
rigidities and asymmetries in response to demand shifts. We analyze wage and
employment adjustments to positive and negative shifts, as measured by sales
growth between 1979 and 1981. The analysis is done for both entire sample of
firms and for selected subsamples based on firm size, unionization, industry and
The results show that wage adjustments appear to be fairly rigid, compared
with employment adjustments. They also appear to be quite asymmetric, with
significant adjustments in response to positive shifts but little adjustment in
response to negative shifts. These asymmetries are not more pronounced in large
firms, manufacturing, heavily-waged or highly-skilled industries than in other
firms or industries.
pattern of asymmetry.
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