Publikation: Monographie

Uncovering the mechanism(s): financial constraints and wages

Grunddaten
Abstract
Autoren
Einrichtung

Grunddaten

Titel	Uncovering the mechanism(s): financial constraints and wages
Erscheinungsjahr	2020
Verlag	IZA - Institute of Labor Economics
Verlagsort	Bonn, Germany
Serie	Discussion paper series ; no. 13979
Publikationsform	Elektronische Ressource
Publikationsart	Monographie
Sprache	Englisch
Letzte Änderung	21.04.2022 06:01:47
Bearbeitungsstatus	durch UB Rostock abschließend validiert
Dauerhafte URL	http://purl.uni-rostock.de/fodb/pub/67981
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Abstract

How do wages respond to financial recessions? Based on a dynamic macroeconomic model with frictions in the labor and the financial market, we address two prominent mechanism through which firms' financial constraints amplify unemployment and explore their effect on wages. First, the financial labor wedge reduces wages. Second, financial constraints may interact with aggregate labor market conditions in various ways putting upward or downward pressure on wages. We test partial-equilibrium implications of these theoretical mechanisms based on a large data set for Germany for 2006 to 2014 that combines administrative data on workers and wages with detailed information on the balance sheets of firms. Both mechanisms play a role empirically. Using our estimates as central calibration targets in our model, we document that financial recessions are associated with a substantial decline in both unemployment and wages. Financial constraints therefore weaken the direct link between wage rigidity and unemployment volatility.

Autoren

Arabzadeh, Hamzeh

Balleer, Almut

Gehrke, Britta

Einrichtung

WSF/IfVWL/Angewandte Makroökonomie