Firm productivity shocks , pass-through , employer-employee data , skill complementarities , incomplete-market model
Abstract:
Minimum wages generate an asymmetric pass-through of firm shocks across work-
ers. We establish this result leveraging employer-employee data on Italian metal-
manufacturing firms, which face different wage floors that vary within occupa-
tions. In response to negative firm productivity shocks, workers close to the wage
floors experience higher job separations but no wage loss. However, the wage of
high-paid workers decreases, and more so in firms with higher incidence of min-
imum wages. A neoclassical model with complementarities across workers with
different skills rationalizes these findings. Our results uncover a novel channel
that tilts the welfare gains of minimum wages toward low-paid worker
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