Asymmetric wage and employment dynamics in segmented labour markets

초록

Using data from the Indian Annual Survey of Industries, we document that regular workers exhibit asymmetric wage and employment dynamics, while contract workers display asymmetric employment but symmetric wage dynamics. Specifically, (i) the nominal wage growth of regular workers is positively skewed, while that of contract workers is nearly symmetric, and (ii) employment growth for both groups is negatively skewed, with contract employment being less negatively skewed than regular. To account for these patterns, we extend a workhorse business cycle model with asymmetric wage adjustment costs for regular labour and symmetric wage adjustment costs for contract labour, along with symmetric labour adjustment costs for the regular sector. Our calibrated model shows that the presence of contract labour relaxes the constraint imposed by downward nominal wage rigidity, thereby reducing the optimal grease inflation towards zero.

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