Labor Quality and the Cyclicality of Real Wages PDF Download

Author: Haoming Liu
Publisher: London : Department of Economics, University of Western Ontario
ISBN:
Category : Business & Economics
Languages : en
Pages : 52

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Author: Gary Solon
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 60

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In the period since the 1960's, as in other periods, aggregate time series on real wages have displayed only modest cyclicality. Macroeconomists therefore have described weak cyclicality of real wages as a salient feature of the business cycle. Contrary to this conventional wisdom, our analysis of longitudinal microdata indicates that real wages have been substantially procyclical since the 1960's. We also find that the substantial procyclicality of men's real wages pertains even to workers that stay with the same employer and that women's real wages are less procyclical than men's. Numerous longitudinal studies besides ours have documented the substantial procyclicality of real wages, but none has adequately explained the discrepancy with the aggregate time series evidence. In accordance with a conjecture by Stockman (I983), we show that the true procyclicality of real wages is obscured in aggregate time series because of a composition bias: the aggregate statistics are constructed in a way that gives more weight to low-skill workers during expansions than during recessions. We conclude that, because real wages actually are much more procyclical than they appear in aggregate statistics, theories designed to explain the supposed weakness of real wage cyclicality may be unnecessary. and theories that predict substantially procyclical real wages become more credible.

Author: Christopher Otrok
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 34

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Author: Mr.Bas B. Bakker
Publisher: International Monetary Fund
ISBN: 1513599380
Category : Business & Economics
Languages : en
Pages : 60

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This paper argues that the sharp increase in unemployment in a number of advanced countries during the Great Recession was not just cyclical (the result of a lack of aggregate demand); the degree of adjustment of real wages and the impact this had on labor productivity also played a role. In many countries, post-2007 employment losses were modest, as real wages adjusted when the economy slowed down. But in some countries real wage growth stayed too high for too long. The result was large-scale labor shedding, which boosted labor productivity but also contributed to a sharp rise in unemployment. In this context, the paper discusses the different experiences of the UK (where employment increased) and Spain (where it fell sharply), and finds that almost two thirds of the employment losses in Spain resulted from the failure of real wages to adjust adequately.

Author: Andrea Brandolini
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 108

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Author: Donggyun Shin
Publisher:
ISBN:
Category :
Languages : en
Pages : 176

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Author: Haoming Liu
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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This paper contains the first cross-country comparison of the cyclical behaviour of real wages using microdata. After controlling for changes in labour quality, I find that real wages are strongly procyclical in Canada, the United Kingdom, and the United States. In contrast, the cyclicality of government-published real aggregate hourly wages varies substantially across these three countries. The disparity suggests that a direct comparison of the cyclical behaviour of real aggregate wages is misleading. Finally, I show that variations in labour quality also bias the cross-country correlation of several key labour market variables.

Author: Eric T. Swanson
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 50

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Author: Mr.Eswar Prasad
Publisher: International Monetary Fund
ISBN: 1451974620
Category : Business & Economics
Languages : en
Pages : 38

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This paper uses micro panel data to examine differences in the cyclical variability of employment, hours, and real wages for skilled and unskilled workers. Contrary to conventional wisdom, we find that, at the aggregate level, skilled and unskilled workers are subject to essentially the same degree of cyclical variation in wages. However, important differences emerge in the patterns of employment and hours variation for skilled versus unskilled workers, especially when a college degree is used as a proxy for skills. We find that the quality of labor input per manhour tends to rise in recessions, thereby inducing a countercyclical bias in aggregate measures of the real wage. We also find substantial differences across industries in the cyclical variation of employment, hours, and wage differentials, which we interpret as indicative of important inter-industry differences in labor contracting.

Author: Marcello M. Estevao
Publisher:
ISBN:
Category : Labor supply
Languages : en
Pages : 26

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