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Implicit Contracts and Asymmetric Pass-through of Productivity Shocks

Author

Listed:
  • Stuart A. Breslin

    (School of Economics, University of Edinburgh)

  • Andy Snell

    (School of Economics, University of Edinburgh)

  • Heiko Stueber

    (University of Applied Labour Studies (UALS), Institute for Employment Research (IAB), Friedrich-Alexander-Universitaet Erlangen-Nuernberg (FAU), IZA)

  • Jonathan P. Thomas

    (School of Economics, University of Edinburgh)

Abstract

We document distinctive empirical features of wage pass-through in Germany that are consistent with Thomas-Worrall wage contracting in the presence of both idiosyncratic and nonstationary aggregate productivity components. These empirical features are hard to reconcile with the predictions of search models based on period-by-period Nash bargaining over match surplus and with the predictions of financial models where risk neutral firms may costlessly shield risk averse workers from idiosyncratic shocks (Guiso, Pistaferri et al. 2005).

Suggested Citation

  • Stuart A. Breslin & Andy Snell & Heiko Stueber & Jonathan P. Thomas, 2023. "Implicit Contracts and Asymmetric Pass-through of Productivity Shocks," Edinburgh School of Economics Discussion Paper Series 312, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:312
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    File URL: http://www.econ.ed.ac.uk/papers/id312_esedps.pdf
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    References listed on IDEAS

    as
    1. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
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    More about this item

    Keywords

    Labour contracts; pass-through; limited commitment; asymmetric shocks;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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