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We propose a theory of low-frequency movements in unemployment based on asymmetric real wage rigidities. The theory generates two main predictions: long-run unemployment increases with (i) a fall in long-run productivity growth and (ii) a rise in the variance of productivity growth. Evidence based on U.S. time series and on an international panel strongly supports these predictions. The empirical specifications featuring the variance of productivity growth can account for two U.S. episodes which a linear model based only on long-run productivity growth cannot fully explain. These are the decline in long-run unemployment over the 1980s and its rise during the late 2000s.

Labor --- Production and Operations Management --- Macroeconomics: Production --- Unemployment: Models, Duration, Incidence, and Job Search --- Wages, Compensation, and Labor Costs: General --- Wage Level and Structure --- Wage Differentials --- Labour --- income economics --- Macroeconomics --- Productivity --- Unemployment --- Real wages --- Unemployment rate --- Wage rigidity --- Industrial productivity --- Wages --- United States

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Using a stochastic general equilibrium model with overlapping generations, this paper studies a policy rule for the retirement age aiming at offsetting the effects on the supply of labor following fertility changes. The authors find that the retirement age should increase more than proportionally to the direct fall in labor supply caused by a fall in fertility. The robustness of this result is checked against alternative model specifications and parameter values. The efficacy of the policy rule depends crucially on the link between the preference for leisure and the response of the intensive margin of labor supply to changes in the statutory retirement age. The model has subsequently been calibrated for Brazil by Jorgensen (2010), in the context of the Brazil Aging Study.

Aggregate Income --- Business cycle --- Contribution rate --- Downward pressure --- Early retirement --- Economic Theory & Research --- Exogenous shock --- Exogenous variable --- General equilibrium --- Health, Nutrition and Population --- Human capital --- Labor economics --- Labor force --- Labor Markets --- Labor Policies --- Labor supply --- Labour --- Macroeconomics and Economic Growth --- Market equilibrium --- Payroll tax --- Pensions & Retirement Systems --- Population Policies --- Real wages --- Retirement --- Social Protections and Labor --- Wage rate --- Worker --- Workers

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It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage rigidity in both real and nominal terms. The authors analyse which firm-level and institutional factors are associated with wage rigidity. The results indicate that it is related to workforce composition at the establishment level in a manner that is consistent with related theoretical models (e.g. efficiency wage theory, insider-outsider theory). The analysis also finds that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations.

Bargaining power --- Central banks --- Collective bargaining --- Efficiency wage theory --- Employment --- Environment --- Environmental Economics & Policies --- Income --- Labor Markets --- Labor markets --- Labor Policies --- Labour --- Labour markets --- Macroeconomics and Economic Growth --- Markets and Market Access --- Nominal wages --- Real income --- Real wages --- Rents --- Rigid wages --- Skilled workers --- Social Protections and Labor --- Unemployment --- Wage flexibility --- Wage increases --- Wage rigidities --- Wage rigidity --- Wages

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It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage rigidity in both real and nominal terms. The authors analyse which firm-level and institutional factors are associated with wage rigidity. The results indicate that it is related to workforce composition at the establishment level in a manner that is consistent with related theoretical models (e.g. efficiency wage theory, insider-outsider theory). The analysis also finds that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations.

Bargaining power --- Central banks --- Collective bargaining --- Efficiency wage theory --- Employment --- Environment --- Environmental Economics & Policies --- Income --- Labor Markets --- Labor markets --- Labor Policies --- Labour --- Labour markets --- Macroeconomics and Economic Growth --- Markets and Market Access --- Nominal wages --- Real income --- Real wages --- Rents --- Rigid wages --- Skilled workers --- Social Protections and Labor --- Unemployment --- Wage flexibility --- Wage increases --- Wage rigidities --- Wage rigidity --- Wages

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Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. This paper broadens the analysis beyond downward rigidity in base wages by investigating the use of other margins of labor cost adjustment at the firm level. Using data from a unique survey, the authors find that firms make frequent use of other, more flexible, components of compensation to adjust the cost of labor. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. The paper also shows how the margins of adjustment chosen are affected by firm and worker characteristics.

Early retirement --- Economic shocks --- Economic Theory & Research --- Employee --- Employment --- Environment --- Environmental Economics & Policies --- Finance and Financial Sector Development --- Firm level --- Firm survey --- High wage --- Labor cost --- Labor Markets --- Labor markets --- Labor Policies --- Labour --- Labour cost --- Labour costs --- Labour market --- Labour market institutions --- Labour markets --- Macroeconomics and Economic Growth --- Microfinance --- Real wages --- Retirement --- Social Protections and Labor --- Wage level --- Worker --- Workers