Wage pass-through over the business cycle

This project aims at understanding the mechanism through which firms pass idiosyncratic productivity shocks to their employees' wages over the business cycle.

While there is an extensive literature studying wage pass-through of such shocks, there is not much work analysing this phenomenon over the business cycle, even though some recent findings suggest that it might be different between booms and recessions. This work aims at filling this gap in the literature both empirically and theoretically.

On the empirical side, the plan is to use employer-employee matched data to determine if the pass-through is different or not over the business cycle and, in the affirmative case, the determinants of the diverse response.

On the theoretical side, the plan is to build a search and matching model of the labour market to explain the patters in the data and with which running policy experiments.

In particular, the model will be used to study optimal unemployment insurance over the business cycle in an environment where firms provide wage insurance to their employees.