Abstract: We introduce a new dataset of establishment-level posted wages with job titles. We document three new facts implying that nominal new hire wages are rigid, and especially rigid downwards. First, posted wages rarely change between successive vacancies. Second, posted wages are weakly procyclical. Third, nominal posted wages are more rigid downwards than upwards. We plug our estimate of new hire wage rigidity into a standard labour search model. The estimated rigidity generates large and asymmetric unemployment fluctuations.
Abstract: Banks face different but potentially correlated risks from outside the financial system. Financial connections can help hedge these risks, but also create the means by which shocks can propagate. We examine this tradeoff in the context of a new stylised fact we present: German banks are more likely to have financial connections when they face more similar risks—potentially undermining the hedging role of financial connections and contributing to systemic risk. We find that such patterns are socially suboptimal, but can be explained by risk-shifting. Risk-shifting motivates banks to correlate their failures with their counterparties even though it creates systemic risk.