Financial Markets and Wages / Claudio Michelacci, Vincenzo Quadrini.

Format:

Book

Author/Creator:

Michelacci, Claudio.

Contributor:

National Bureau of Economic Research.

Quadrini, Vincenzo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11050.

NBER working paper series no. w11050

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

We study a labor market equilibrium model in which firms sign optimal long-term contracts with workers. Firms that are financially constrained offer an increasing wage profile: They pay lower wages today in exchange of higher wages once they become unconstrained and operate at a larger scale. In equilibrium, constrained firms are on average smaller and pay lower wages. In this way the model generates a positive relation between firm 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.

Notes:

Print version record

January 2005.