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“Real wages and the business cycle: Accounting for worker, firm and job heterogeneity”, by A. Carneiro , P. Guimaraes and P. Portugal. Discussion by Pedro S. Martins, Queen Mary University of London Stockholm, September 2010. Summary. Study of:

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“Real wages and the business cycle: Accounting for worker, firm and job heterogeneity”, by A. Carneiro, P. Guimaraes and P. Portugal

Discussion by Pedro S. Martins, Queen Mary University of London

Stockholm, September 2010

summary
Summary
  • Study of:
    • real wage cyclicality in PT, accounting for three sources of heterogeneity;
    • new hires differences;
    • Robustness to different cyclical measures
  • Motivation:
    • countercyclical bias due to composition effects;
    • importance of job differences (train driver...);
    • MP vs Hall/Shimer debate: Nash bargaining generates too little employment variability
  • QP, 1986-2007: 32m observations!
  • Novel iterative approach (GP)
main results
Main results
  • Abundant evidence of procyclicality (in line with US and UK studies); semi-elast > 2.2
  • New hires even more responsive to cycle
  • Collective bargaining determines responsiveness of stayers; firm practices explain new hires result (2.)
  • One-to-one relation between and wages and productivity
  • Role of jobs compositional bias
questions 1 why no control for tenure
Questions: 1. Why no control for tenure?

Importance of jobs could be exaggerated:

  • Tenure is countercyclical
  • Jobs are picking up tenure effect
  • Controlling for jobs removes countercyclical bias...
  • ... but only for stayers, as in the results
2 jobs jobs jobs
2. Jobs, jobs, jobs
  • More info on jobs over cycle would be useful
  • Alternative job measures (chef in restaurant and hotel industry...)
  • “Same firm-job”?
3 why lagged cycle measure
3. Why lagged cycle measure?

“Since wages are set at least six months to one year in advance, there is a delayed relationship between wages and economic growth” (p. 11)

  • Contemporaneous effects more comparable
  • Collective bargaining can take place anytime...
  • ... and typically has immediate effect
    • Sometimes even “backward” effect
  • Related: identification of new-hire effect on bargained wages (and job effects)?
4 why new hires job prob result
4. Why new hires/job prob result?

Insignificant incremental effect for new hires when using job finding/separation probabilities

  • Correlation = -0.36 -> Multicollinearity(“micronumerosity”)?
  • Same if each probability separately?

Evidence of weakened RWC since Euro – and 2010 UR highest ever (11%)

martins solon thomas 2010
Martins, Solon & Thomas, 2010

"Measuring What Employers Really Do about Entry Wages over the Business Cycle," NBER WP 15767

  • QP 1982-2008
  • 1,300 “case studies” combined
  • Identification of “entry jobs”
martins solon thomas 20101
Martins, Solon & Thomas, 2010
  • Identification of “representative wage”
  • Firm/job/job-level fixed effects
  • 2-stage RWC semi-elasticity = -1.8