TY  - JOUR
AU  - Bils,Mark
TI  - Testing for Contracting Effects on Employment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3051
PY  - 1989
Y2  - July 1989
UR  - http://www.nber.org/papers/w3051
L1  - http://www.nber.org/papers/w3051.pdf
N1  - Author contact info:
Mark Bils
Department of Economics
University of Rochester
Rochester, NY 14627
Tel: 585/275-0488
Fax: 585/256-2309
E-Mail: bils@troi.cc.rochester.edu
AB  - I test the importance of wage rigidities from long-term contracts by observing how employment behaves when firms and workers recontract. If rigidities are important then we should observe employment adjusting after recontracting to undo movements in employment during the past contract that were excessive due to rigid wages. The data are for twelve manufacturing industries that display a strong bargaining pattern. I find that contract rigidities are important, causing considerably larger fluctuations in employment than would occur with flexible wages. By far the most striking case is in motor vehicles where long-term contracts much more than double the size of fluctuations in employment. I also examine the behavior of wage rates when new contracts are introduced. Wage growth does respond to employment growth during the prior contract in several of the industries; but these responses are not related to the pattern of employment responses across industries.
ER  -