The cyclicality of real wages and the role of heterogeneous firm dynamics

• Main Author: Andrade, Tomás Maria Braula Reis Rebelo de
• Publication Date: 2021
• Format: Master thesis
• Language: eng
• Source: Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
• Download full: http://hdl.handle.net/10362/142247
• topic: Business cycles; Labour economics; Fixed effects; Real wages; Labour market dynamics; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

The objective of this Master’s Thesis is to study the cyclical behaviour of real wages, using data from in Portugal, between 1986 and 2018. This study uses a disaggregated data set which allows to control for worker, firm and job title heterogeneity, and an iterative high-dimensional fixed effects procedure. A procyclical pattern of real wages throughout the cycle is obtained, with a slightly weaker pattern for workers who move from one job to another in two consecutive years. Further-more, a firm level analysis is performed, by obtaining a different coefficient for each firm in the data set, which allows a further investigation of the heterogeneous behaviour of the different establishments. Almost one quarter of the total firms’ wage policies were found to be counter cyclical, where as the degree of cyclicality varied considerably between sectors.