Template-Type: ReDIF-Paper 1.0
Title: Staggered Contracts and Unemployment During Recessions
Author-Name: Effrosnyi Adamopoulou
Author-Email: adamopoulou@uni-mannheim.de
Author-Name: Luis Diez-Catalan
Author-Email: luismiguel.diez@bbva.com
Author-Name: Ernesto Villanueva
Author-Email: ernesto.villanueva@bde.es
Classification-JEL: J23, J31, J50
Keywords: Employment, Job Separation, Collective Bargaining, Wage Rigidity, Staggering, Social Security Data

Abstract: This paper studies the impact of downward wage rigidity on wage and employment
dynamics after the outbreak of major recessions in Spain. Downward wage rigidity stems
from collective agreements, which set province-sector-skill specific minimum wage floors
for all workers. By exploiting variation in the renewal of collective contracts, we find that
agreements signed before the onset of recessions settle on higher nominal negotiated wage
growth than agreements signed after. Leveraging Social Security data and the distribution
of the worker-level bite of minimum wage floors, we document that the negotiated wage
rigidity translated into higher wage growth mainly among workers with wages close to
the floors. Consequently, these workers experienced a substantial and highly persistent
increase in the probability of non-employment but only if they were covered by collective
agreements of long duration. Our findings highlight the interplay between rigidity at different
parts of the wage distribution and labor market institutions and identify conditions
under which collective contract staggering and the inability to renegotiate may amplify
aggregate shocks.

Note: 
Length: 71
Creation-Date: 2024-03
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp379
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2022_379v2