TY  - JOUR
AU  - Michelacci,Claudio
AU  - Quadrini,Vincenzo
TI  - Financial Markets and Wages
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11050
PY  - 2005
Y2  - January 2005
UR  - http://www.nber.org/papers/w11050
L1  - http://www.nber.org/papers/w11050.pdf
N1  - Author contact info:
Claudio Michelacci
CEMFI, Calle Casado del Alisal 5
Madrid, SPAIN
Tel: 0034-91-4290-551
Fax: 0034-91-4291-056
E-Mail: c.michelacci@cemfi.es

Vincenzo Quadrini
Department of Finance and Business Economics
Marshall School of Business
University of Southern California
701 Exposition Boulevard
Los Angeles, CA 90089
Tel: 213/740-6521
Fax: 213/740-6650
E-Mail: quadrini@usc.edu
AB  - We study a labor market equilibrium model in which firms sign optimal long-term contracts with workers. Firms that are financially constrained offer an increasing wage profile: They pay lower wages today in exchange of higher wages once they become unconstrained and operate at a larger scale. In equilibrium, constrained firms are on average smaller and pay lower wages. In this way the model generates a positive relation between firm size and wages. Using data from the National Longitudinal Survey of Youth (NLSY) we show that the key dynamic properties of the model are supported by the data.
ER  -