Theoretical and Empirical Analyses of Wage Rigidity During Recession

2014 Fiscal Year Final Research Report

• Project/Area Number: 25885033
• Research Category: Grant-in-Aid for Research Activity Start-up
• Allocation Type: Single-year Grants
• Research Field: Economic policy
• Research Institution: Hitotsubashi University
• Principal Investigator: YOKOYAMA Izumi 一橋大学, 国際・公共政策大学院, 講師 (30712236)
• Project Period (FY): 2013-08-30 – 2015-03-31
• Keywords: 賃金硬直性

Outline of Final Research Achievements

In this project, I implemented a theoretical and empirical analysis of the effect of performance-based layoffs on wage rigidity in the context of performance pay. In the model, it becomes optimal for firms to raise future regular pay to maintain workers' current efforts, which results in downwardly rigid regular pay under the threat of performance-based layoffs. Furthermore, it becomes optimal for firms to base wages less on workers' performance during recessions due to the lower value of productivity. Consequently, wages during recessions also become "rigid" (inflexible) with respect to performance. The Japanese panel dataset supported these theoretical implications.

Free Research Field

労働経済学