Financial Markets and Wages

Download or read book Financial Markets and Wages written by Claudio Michelacci and published by . This book was released on 2005 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: "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"--National Bureau of Economic Research web site.