Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295911 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 16888
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
In employment relationships, a wage is an installment payment on an implicit long-term agreement between a worker and a firm. The price of labor that impacts firm's hiring decisions, instead, reflects the hiring wage as well as the impact of economic conditions at the time of hiring on future wages. Measured by the labor's user cost, the price of labor is substantially more pro-cyclical than the new-hire wage or the average wage. The strong procyclicality of the price of labor calls for other forces for cyclical labor demand to explain employment fluctuations.
Subjects: 
user cost of labor
wages
cyclicality
wage rigidity
unemployment
JEL: 
E24
E32
J30
J41
J63
J64
Document Type: 
Working Paper

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