COHORT EFFECTS WITHIN FIRMS, AND THEIR IMPLICATIONS FOR LABOUR MARKET OUTCOMES AND THE BUSINESS CYCLE

This project analyses the implications for labour markets and the macro-economy of supposing that firms cannot pay similarly qualified employees differently because of when they joined the firm. Thus, for example, if the general situation for workers improves, it may be that a firm seeking to hire new workers feels it needs to pay more to new hires; the supposition is that in fact the firm cannot bring in new workers at a higher wage than it is paying to its existing workers, so it would either have to raise the wage of the incumbents, or not offer as much as it would like to attract new workers. It is hypothesised that wages will be less variable and employment considerably more variable than if labour markets behaved like markets which satisfy the usual laws of supply and demand. Detailed data on individual wages will also be used to try to gauge to what extent this equal treatment is a feature of actual labour markets. The data is drawn from two datasets, one from Portugal and the other from Brazil. Each dataset provide objective records on millions of workers matched with firms over a number of years.