A shift in the design of labor compensation occurred at around the mid-1980s in the U.S. and deals with an increased role of performance pay in driving the cyclical movements of wages. Using a DSGE model we show that this structural change accounts at least qualitatively for many observed changes in the U.S. labor market dynamics. It generates the disappearance of the procyclical response of labor productivity to non-technology shocks and the reduction of the contractionary effects of technology shocks on hours. Moreover, it is conducive to a drop in the volatility of output, a parallel increase in the volatility of wages and to changes in unconditional correlations consistent with what documented in the U.S. between the pre- and post-1984 periods. (C) 2013 Elsevier B.V. All rights reserved.

Performance pay and changes in US labor market dynamics / Nucci, Francesco; Marianna, Riggi. - In: JOURNAL OF ECONOMIC DYNAMICS & CONTROL. - ISSN 0165-1889. - STAMPA. - 37:12(2013), pp. 2796-2813. [10.1016/j.jedc.2013.07.006]

Performance pay and changes in US labor market dynamics

NUCCI, Francesco;
2013

Abstract

A shift in the design of labor compensation occurred at around the mid-1980s in the U.S. and deals with an increased role of performance pay in driving the cyclical movements of wages. Using a DSGE model we show that this structural change accounts at least qualitatively for many observed changes in the U.S. labor market dynamics. It generates the disappearance of the procyclical response of labor productivity to non-technology shocks and the reduction of the contractionary effects of technology shocks on hours. Moreover, it is conducive to a drop in the volatility of output, a parallel increase in the volatility of wages and to changes in unconditional correlations consistent with what documented in the U.S. between the pre- and post-1984 periods. (C) 2013 Elsevier B.V. All rights reserved.
2013
performance pay; procyclical productivity; wage rigidity
01 Pubblicazione su rivista::01a Articolo in rivista
Performance pay and changes in US labor market dynamics / Nucci, Francesco; Marianna, Riggi. - In: JOURNAL OF ECONOMIC DYNAMICS & CONTROL. - ISSN 0165-1889. - STAMPA. - 37:12(2013), pp. 2796-2813. [10.1016/j.jedc.2013.07.006]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/535608
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