Adjusting to economic downturns in the Catalan textile sector, 1880-1913

"This paper studies the way workers and firms behaved in a highly cyclical sector such as the cotton textile industry, which encompassed 1/5th of the Catalan industrial workforce in the early twentieth century. Using firm level evidence, the paper shows that, in spite of weak unionisation and the lack of regional or local collective bargaining institutions, piece rates in cotton spinning and weaving were not subject to competitive rate cuts and remained fixed over the cycle. When facing a negative demand shock, firms adjusted by reducing output, hours of work, labour productivity and employment. In contrast to existing theories explaining nominal wage stickiness which stress informational asymmetries or insiders’ bargaining power, I argue that in the Catalan case the stability of piece rate lists depended on a highly flexible labour market for female workers, limiting the pressure of unemployed workers on prevailing wages, and on the fact that firms did not compete over prices."