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Fixed and Flexible Wages: Evidence from Panel Data

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  • Wendy L. Rayack

Abstract

Using data for the years 1968–84 from the Michigan Panel Study of Income Dynamics, this study analyzes differential flexibility in nominal wages by tenure and occupation. The results show that short-run sensitivity to both unemployment and inflation is confined largely to low-tenure workers and that the cyclical upgrading and downgrading of employment opportunities makes a significant contribution to flexibility in nominal wages. The findings are consistent with a model in which long-term commitments insulate the wages of senior workers from short-run swings in economic conditions and in which nominal wages are largely noncyclical but employment opportunities shrink and expand.

Suggested Citation

  • Wendy L. Rayack, 1991. "Fixed and Flexible Wages: Evidence from Panel Data," ILR Review, Cornell University, ILR School, vol. 44(2), pages 288-298, January.
    • Handle: RePEc:sae:ilrrev:v:44:y:1991:i:2:p:288-298
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    Cited by:

    1. Trejo, Stephen J, 1997. "Why Do Mexican Americans Earn Low Wages?," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1235-1268, December.

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