Spot market wages, implicit contracts and technological change: skill-level evidence from Finland

Abstract

This article investigates the relevance of the theories of implicit contracts and spot market model to the skill-level wages in Finland. We use linked worker-firm panel data over the period from 1991 to 2004, which included major institutional and technological changes. We find similar patterns in the wage flexibility of primary and highly educated workers: their wages increased with the decreasing spot market unemployment rate after the EU membership still exhibiting some weak backward linkages. The wages of the secondaryeducated did not follow the decreasing spot market unemployment, but instead some signs of the full commitment risk sharing were found.