Research
Research
Exploiting Separation Dynamics over Wage Spells: A Test for Sticky Wages (Draft available upon request)
Abstract:
I test the impact of wage stickiness on job separations by exploiting predictions costly wage adjustment imposes on wage spells and job separations. First, the longer a wage remains unchanged, the more likely it becomes mispriced. This obsolescence of wage should create more job separations if costly wage adjustment prevents wage resets. Second, as the wage approaches its next scheduled change, separations due to wage stickiness should decline as the wage will reset soon. Estimation results show a longer wage spell generates more separations for hourly workers, especially for low wage hourly workers, but not for salaried workers. But contrary to the second prediction, the proximity to the next wage change increases job separation rates. I interpret this finding as reflecting imperfect information on match productivity, with information bursts before scheduled wage changes. Estimation by job characteristics supports this claim: the rise in separations toward the next scheduled wage change periods is only prominent for workers with high uncertainty about their individual productivity, salaried workers performing abstract tasks. I confirm the importance of wage stickiness and informational frictions in a Mortensen-Pissarides type search model with sticky wages and endogenous separations. Sticky wages are necessary to generate the wage obsolescence effect while information frictions explain the rise in separations as wage resetting approaches.
Estimation of Current Account Benchmarks via Bayesian Model Averaging, (with Min-Ho Nam), 2014, Economic Analysis, Economic Research Institute, Bank of Korea, vol. 20(3), 39-74, (in Korean)
Analysis of Effects of Increased Overseas Direct Investment on the Current Account Position (with Dongjoon Park and Youngjun Choi), 2012, Monthly Bulletin, Bank of Korea (in Korean)
Heterogeneous Agent Economy, Monetary Policy and the Cyclicality of Labor Productivity