We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Wage smoothing as a signal of quality.
- Authors
Giammarino, Ronald M.; Nosal, Ed
- Abstract
We provide an explanation for firms smoothing wages over the business cycle that is based on asymmetric information about the quality of a firm's management team and does not depend upon the workers being risk averse. When firms pay their workers the full information profit maximizing wage, higher quality firms will attract more workers and earn greater profits than lower quality firms. This provides a rationale for wage smoothing when quality is not observable to workers: Lower quality firms will resist cutting wages to the full information level in an economic downturn in an attempt to convince workers that they are of higher quality.
- Subjects
WAGES; BUSINESS cycles
- Publication
Canadian Journal of Economics, 1990, Vol 23, Issue 1, p159
- ISSN
0008-4085
- Publication type
Article
- DOI
10.2307/135525