The Department of Economics invites you to a Macro, Risk and Sustainability Seminar with Maria Olsson, BI Norwegian Business School.
We study the intensive-margin variability of hours and hourly pay. We set out a model of rigid wage contracts in which firms have the right to manage hours within the contract spell. The model implies that the slope of an estimated wage--hours locus is a variance-weighted average of a supply slope and a demand slope, so the locus rotates with the demand share of hours variation. Using the universe of monthly Norwegian pay slips, 2018--2023, we show that the match-level relationship between hours and hourly pay becomes more upward-sloping at higher frequencies and under more rigid wage contracts. An instrumental-variables design that exploits firm-by-occupation demand shocks implies that nearly all monthly variation in hours among permanently employed salaried workers is demand-driven. Finally, we use the model to assess the welfare cost of rigid wage contracts.