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Wage cyclicality and labour market institutions

Author

Listed:
  • Joao Manuel Rodrigues Pereira
  • Raul Ramos
  • Pedro S. Martins

Abstract

Do labour institutions influence how wages respond to the business cycle? Such responsiveness can then shape several economic outcomes, including unemployment. In this paper, we examine the role of two key labour market institutions – collective bargaining and temporary contracts – upon wage cyclicality. Our evidence is drawn from rich, 2002-2020 matched data from Portugal. We find that workers not covered by collective agreements exhibit much higher wage cyclicality, especially new hires, compared to covered workers. In contrast, workers under temporary contracts do not exhibit sizable differences in cyclicality compared to counterparts under permanent (open-ended) contracts. Our findings highlight a novel angle through which labour institutions influence the labour market and the economy.

Suggested Citation

  • Joao Manuel Rodrigues Pereira & Raul Ramos & Pedro S. Martins, 2024. "Wage cyclicality and labour market institutions," Nova SBE Working Paper Series wp662, Universidade Nova de Lisboa, Nova School of Business and Economics.
    • Handle: RePEc:unl:unlfep:wp662
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    More about this item

    Keywords

    Real wages; Business cycles; Collective bargaining; Temporary contracts; Employment Law; Matched data;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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