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Pedro Portugal

26 February 2010
WORKING PAPER SERIES - No. 1159
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Abstract
In this paper a simultaneous-equations model of firm closing and wage determination is specified in order to analyse how wages adjust to unfavorable product demand shocks that raise the risk of displacement through firm closing, and to what extent an exogenous wage change affects the exit likelihood. Using a longitudinal matched worker-firm data set from Portugal, the estimation results suggest that, under the existence of noncompetitive rents, the fear of job loss leads workers to accept wage concessions, even though a compensating differential for the ex ante risk of displacement might exist. A novel result that emerges from this study is that firms with a higher incidence of minimum wage earners are more vulnerable to adverse shocks due to their inability to adjust wages downward. Indeed, minimum wage restrictions were seen to increase the failure rates.
JEL Code
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
J65 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Unemployment Insurance, Severance Pay, Plant Closings
Network
Wage dynamics network
16 July 2010
WORKING PAPER SERIES - No. 1225
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Abstract
This paper brings together empirical research on price and wage dynamics for the Portuguese economy based both on micro and macro data. As regards firms' pricing behaviour the most noticeable finding is that prices in Portugal are somewhat less flexible than in the United States but more flexible than in the Euro Area. Regarding firms' wage setting practices, we uncover evidence favouring the hypothesis of aggregate and disaggregate wage flexibility. Despite the existence of mandatory minimum wages, the presence of binding wage floors and the general use of extension mechanisms, the firms still retain some ability to circumvent collective agreements via the mechanism of the wage cushion. The evidence also suggests that Portuguese wages behave in a fashion consistent with the wage curve literature, but the responsiveness of real wages to unemployment changes may have declined over the last decade.
JEL Code
C42 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Survey Methods
D40 : Microeconomics→Market Structure and Pricing→General
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
Network
Wage dynamics network