This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. AEA Papers and Proceedings
  4. May 2022
  5. Do Bonuses Offset the Allocative Effects of Downward Rigid Base Wages?

Do Bonuses Offset the Allocative Effects of Downward Rigid Base Wages?

  • Anne Kathrin Funk
  • Daniel Kaufmann
AEA Papers and Proceedings
vol. 112, May 2022
(pp. 486-90)
Download Full Text PDF

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.

Citation

Funk, Anne Kathrin, and Daniel Kaufmann. 2022. "Do Bonuses Offset the Allocative Effects of Downward Rigid Base Wages?" AEA Papers and Proceedings, 112: 486-90. DOI: 10.1257/pandp.20221097

Additional Materials

JEL Classification

  • E31 Price Level; Inflation; Deflation
  • J31 Wage Level and Structure; Wage Differentials
  • J33 Compensation Packages; Payment Methods