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Author: Gary Solon Publisher: ISBN: Category : Business cycles Languages : en Pages : 60
Book Description
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: Gary Solon Publisher: ISBN: Category : Business cycles Languages : en Pages : 60
Book Description
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: Haoming Liu Publisher: London : Department of Economics, University of Western Ontario ISBN: Category : Business & Economics Languages : en Pages : 52
Author: Donggyun Shin Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
In the most thorough study to date on wage cyclicality among job stayers, Devereux%u2019s (2001) analysis of men in the Panel Study of Income Dynamics produced two puzzling findings: (1) the real wages of salaried workers are noncyclical, and (2) wage cyclicality among hourly workers differs between two alternative wage measures. We examine these puzzles with additional evidence from other sources. Devereux%u2019s finding of noncyclical real wages among salaried job stayers is not replicated in the National Longitudinal Survey of Youth data. The NLSY data, however, do corroborate his finding of a discrepancy for hourly workers between the cyclicality of the two alternative wage measures. Evidence from the PSID Validation Study contradicts Devereux%u2019s conjecture that the discrepancy might be due to a procyclical bias from measurement error in average hourly earnings. Evidence from the Bureau of Labor Statistics establishment survey supports his hypothesis that overtime work accounts for part (but not all) of the discrepancy. We conclude that job stayers%u2019 real average hourly earnings are substantially procyclical and that an important portion of that procyclicality probably is due to compensation beyond base wages.
Author: Pedro Silva Martins Publisher: ISBN: Category : Business cycles Languages : en Pages : 36
Book Description
In models recently published by several influential macroeconomic theorists, rigidity in the real wages that firms pay newly hired workers plays a crucial role in generating realistically large cyclical fluctuations in unemployment. There is remarkably little evidence, however, on whether employers' hiring wages really are invariant to business cycle conditions. We review the small empirical literature and show that the methods used thus far are poorly suited for identifying employers' wage practices. We propose a simpler and more relevant approach -- use matched employer/employee longitudinal data to identify entry jobs and then directly track the cyclical variation in the real wages paid to workers newly hired into those jobs. We illustrate the methodology by applying it to data from an annual census of employers in Portugal over the period 1982-2007. We find that real entry wages in Portugal over this period tend to be about 1.8 percent higher when the unemployment rate is one percentage point lower. Like most recent evidence on other aspects of wage cyclicality, our results suggest that the cyclical elasticity of wages is similar to that of employment.
Author: Cyrus Farsian Publisher: ISBN: Category : Languages : en Pages :
Book Description
Composition bias in aggregate wages is often a scapegoat for the apparent unresponsiveness of wages over the cycle. Since Bils (1985) and in particular Solon et al. (1994), who find that that real wages are highly pro-cyclical a general consensus has emerged that the observed 'mild' cyclicality in real wages is due to composition effects which cause counter-cyclical biases because low wage jobs are the first to be destroyed during recessions (Pissarides, 2009). In this paper, it is argued that the results of Solon et al. (1994) and other papers using similar techniques cannot possibly disentangle the true effect of composition bias. This is because the assignment of fixed weights used to keep the composition of the work force constant is arbitrary and imposes a particular direction to the bias. Thus, rather than determining the bias it only serves to show the possible magnitude once having assumed the way the bias works. As in Blundell et al. (2003) we can unravel the bias into three interpretable parts. That is biases due to individual movement in and out of work, changes in the variation of hours worked and changes in the variance of wages over the cycle. The findings show that aggregate real wages become cyclically less responsive over the cycle and no evidence of 'counter-cyclical' composition bias. -- Aggregate Real Wage Index ; Endogenous Selection ; Composition Bias ; Wage Dispersion.
Author: Gary Solon
Author: Gary Solon
Author: Eric T. Swanson
Author: Haoming Liu
Author: Donggyun Shin
Author: 
Author: Pedro Silva Martins
Author: Cyrus Farsian
Author: Julián Messina
Author: Donggyun Shin
Author: Robert A. Hart