Firm Reluctance to Cut Wages During Recessions
A significant puzzle in labor economics is that firms often do not cut wages during recessions, a phenomenon also known as downward wage rigidity. This observation contradicts the prediction of the standard labor discipline model, which suggests firms would lower wages to maintain a sufficient employment rent. Evidence for this reluctance includes findings from Lazear's study during the 2008 financial crisis and a study by economist Truman Bewley on the early 1990s recession.
0
1
Tags
Library Science
Economics
Economy
Social Science
Empirical Science
Science
CORE Econ
Introduction to Microeconomics Course
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
Related
Increased Employment Rent During a Recession Motivates Greater Worker Effort
Firm Reluctance to Cut Wages During Recessions
Activity: Diagrammatic Analysis of a Firm During a Recession with Fixed Wages
Publication of the Lazear, Shaw, and Stanton (2016) Study on Recessions
A study examined worker productivity at a U.S. technology services firm between 2006 and 2010, a period encompassing a major economic recession. The research found that the productivity of individual employees increased significantly during the recession, even though the firm did not change its wage rates or official internal incentive systems. Which of the following provides the most robust economic explanation for this observed change?
Productivity and the Economic Cycle
Evaluating the Methodology of an Economic Study
A landmark study of a U.S. firm during the 2006-2010 period found that worker productivity rose during the severe economic downturn. Based on the economic principles underlying this finding, it is logical to conclude that a significant, government-led increase in unemployment insurance benefits would likely cause a decrease in worker productivity, assuming the firm makes no changes to its wages.
Analyzing Worker Motivation in Economic Downturns
A notable study analyzed a firm from 2006 to 2010, a period including a major economic recession. Match each component of the situation with the economic principle or description it best represents.
Generalizability of Economic Findings
Evaluating Explanations for Productivity Changes
Applying Economic Research to Business Strategy
An economic study of a single technology firm during a severe recession found that employee productivity increased significantly. Researchers concluded this was because the high unemployment rate in the wider economy made it very difficult for workers to find a new job, thus increasing their incentive to work hard to avoid being laid off. In which of the following scenarios would this specific incentive effect on productivity be LEAST likely to occur?