NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Christopher K. Huckfeldt

Department of Economics, Cornell University
404 Uris Hall
Ithaca, NY 14853

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NBER Working Papers and Publications

June 2016Unemployment Fluctuations, Match Quality, and the Wage Cyclicality of New Hires
with Mark Gertler, Antonella Trigari: w22341
Macroeconomic models often incorporate some form of wage stickiness to help account for employment fluctuations. However, a recent literature calls in to question this approach, citing evidence of new hire wage cyclicality from panel data studies as evidence for contractual wage flexibility for new hires, which is the relevant margin for employment volatility. We analyze data from the SIPP and find that the wages for new hires coming from unemployment are no more cyclical than those of existing workers, suggesting wages are sticky at the relevant margin. The new hire wage cyclicality found in earlier studies instead appears to reflect cyclical average wage gains of workers making job-to-job transitions, which we interpret as evidence of procyclical match quality for new hires from employme...
 
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