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Do Bonuses Offset the Allocative Effects of Downward Rigid Base Wages?

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  • Anne Kathrin Funk
  • Daniel Kaufmann

Abstract

We measure the labor market outcomes of employees with downward rigid base wages after an unexpected deflationary shock in Switzerland using a firm survey matched with Social Security register data. The employees that additionally receive downward flexible compensation, such as bonuses, are less likely to lose their job after a deflationary shock than those only receiving a base wage. Only a modest share of employees receives downward flexible compensation, however. Therefore, these compensation schemes do not offset the overall allocative effects of downward rigid base wages.

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  • Anne Kathrin Funk & Daniel Kaufmann, 2022. "Do Bonuses Offset the Allocative Effects of Downward Rigid Base Wages?," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 486-490, May.
    • Handle: RePEc:aea:apandp:v:112:y:2022:p:486-90
    DOI: 10.1257/pandp.20221097
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    1. Anne Kathrin Funk & Daniel Kaufmann, 2022. "Do Sticky Wages Matter? New Evidence from Matched Firm Survey and Register Data," Economica, London School of Economics and Political Science, vol. 89(355), pages 689-712, July.
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    Cited by:

    1. Anne Kathrin Funk & Daniel Kaufmann, 2022. "Do Sticky Wages Matter? New Evidence from Matched Firm Survey and Register Data," Economica, London School of Economics and Political Science, vol. 89(355), pages 689-712, July.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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