Affiliation:
1. KOF Swiss Economic Institute, ETH Zurich (email: )
2. University of Neuchâtel, Institute of Economic Research (email: )
Abstract
We measure the labor market outcomes of employees with downward rigid base wages after an unexpected deflationary shock in Switzerland using a firm survey matched with Social Security register data. The employees that additionally receive downward flexible compensation, such as bonuses, are less likely to lose their job after a deflationary shock than those only receiving a base wage. Only a modest share of employees receives downward flexible compensation, however. Therefore, these compensation schemes do not offset the overall allocative effects of downward rigid base wages.
Publisher
American Economic Association