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Financial Markets and Wages

descriptionPublicationkeyboard_double_arrow_right Article , Preprint 01 Apr 2009 English Publisher:Oxford University Press (OUP)Journal:Review of Economic Studies, volume 76, pages 795-827 (issn: 0034-6527, eissn: 1467-937X,

Authors: Claudio Michelacci; Vincenzo Quadrini;

doi: 10.1111/j.1467-937x.2008.00524.x

Financial Markets and Wages

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Abstract

We study a labor market equilibrium model in which flrms sign optimal long-term contracts with workers. Firms that are flnancially constrained ofier an increasing wage proflle: They pay lower wages today in exchange of higher wages once they become unconstrained and operate at a larger scale. In equilibrium, constrained flrms are on average smaller and pay lower wages. In this way the model generates a positive relation between flrm size and wages. Using data from the National Longitudinal Survey of Youth (NLSY) we show that the key dynamic properties of the model are supported by the data. JEL classiflcation: G31, J31, E24

Related Organizations

CEMFI
Spain
University of California System
United States

Keywords

investment financing; long-term contracts; wages, jel: jel:G31, jel: jel:J31, jel: jel:E24

Impact byBIP!

	citations This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).	52
	popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.	Top 10%
	influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).	Top 10%
	impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.	Top 10%