Advanced Search
MyIDEAS: Login

Measuring What Employers Do about Entry Wages over the Business Cycle: A New Approach

Contents:

Author Info

  • Pedro S. Martins
  • Gary Solon
  • Jonathan P. Thomas

Abstract

Rigidity in real hiring wages plays a crucial role in some recent macroeconomic models. But are hiring wages really so noncyclical? We propose using employer/employee longitudinal data to track the cyclical variation in the wages paid to workers newly hired into specific entry jobs. Illustrating the methodology with 1982-2008 data from the Portuguese census of employers, we find real entry wages were about 1.8 percent higher when the unemployment rate was 1 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. (JEL E24, E32, J31, J64)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mac.4.4.36
Download Restriction: no

File URL: http://www.aeaweb.org/aej/mac/data/2010-0083_data.zip
Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 4 (2012)
Issue (Month): 4 (October)
Pages: 36-55

as in new window
Handle: RePEc:aea:aejmac:v:4:y:2012:i:4:p:36-55

Note: DOI: 10.1257/mac.4.4.36
Contact details of provider:
Email:
Web page: http://www.aeaweb.org/aej-macro
More information through EDIRC

Order Information:
Web: http://www.aeaweb.org/subscribe.html

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. John Kennan, 2005. "Private Information, Wage Bargaining and Employment Fluctuations," 2005 Meeting Papers 555, Society for Economic Dynamics.
  2. Perry, Motty & Solon, Gary, 1985. "Wage Bargaining, Labor Turnover, and the Business Cycle: A Model with Asymmetric Information," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 421-33, October.
  3. Melissa Bjelland & Bruce Fallick & John Haltiwanger & Erika McEntarfer, 2010. "Employer-to-Employer Flows in the United States: Estimates Using Linked Employer-Employee Data," Working Papers 10-26, Center for Economic Studies, U.S. Census Bureau.
  4. Rudanko, Leena, 2009. "Labor market dynamics under long-term wage contracting," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 170-183, March.
  5. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October.
  6. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  7. MarkMcLaughlin Bils & Kenneth J., 1992. "Inter-industry Mobility and the Cyclical Upgrading of Labor," University of Chicago - George G. Stigler Center for Study of Economy and State 81, Chicago - Center for Study of Economy and State.
  8. Gary Solon & Warren Whatley & Ann Huff Stevens, 1997. "Wage changes and intrafirm job mobility over the business cycle: Two case studies," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(3), pages 402-415, April.
  9. Robert Shimer, 2004. "The Consequences of Rigid Wages in Search Models," NBER Working Papers 10326, National Bureau of Economic Research, Inc.
  10. Anabela Carneiro & Paulo Guimar´┐Żes & Pedro Portugal, 2012. "Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 133-52, April.
  11. Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the Cyclicality of Real Wages: How Important Is Composition Bias?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 1-25, February.
  12. Bonggeun Kim & Gary Solon, 2005. "Implications of Mean-Reverting Measurement Error for Longitudinal Studies of Wages and Employment," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 193-196, February.
  13. Ana Rute Cardoso & Pedro Portugal, 2005. "Contractual Wages and the Wage Cushion under Different Bargaining Settings," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 875-902, October.
  14. Arthur M. Okun, 1973. "Upward Mobility in a High-Pressure Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 207-262.
  15. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
  16. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-88, August.
  17. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 305-316, July.
  18. Shin Donggyun, 2012. "Cyclicality of Real Wages in Korea," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-19, January.
  19. Peng, Fei & Siebert, W. Stanley, 2007. "Real Wage Cyclicality in Germany and the UK: New Results Using Panel Data," IZA Discussion Papers 2688, Institute for the Study of Labor (IZA).
  20. Robert E. Hall, 1980. "Employment Fluctuations and Wage Rigidity," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(1, Tenth ), pages 91-142.
  21. Marianna Kudlyak, 2011. "The cyclicality of the user cost of labor with search and matching," Working Paper 09-12, Federal Reserve Bank of Richmond.
  22. Paulo Soares Esteves & Gabriela Lopes de Castro, 2004. "Quarterly Series for the Portuguese Economy: 1977-2003," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  23. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  24. Marianna Kudlyak, 2010. "The cyclical price of labor when wages are smoothed," Working Paper 10-13, Federal Reserve Bank of Richmond.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Giulio Fella, 2012. "Matching, Wage Rigidities and Efficient Severance Pay," Working Papers 698, Queen Mary, University of London, School of Economics and Finance.
  2. Daniel Tortorice, 2010. "Endogenous Separation, Wage Rigidity and the Dynamics of Unemployment," Working Papers 07, Brandeis University, Department of Economics and International Businesss School.
  3. Tatsiramos, Konstantinos & van Ours, Jan C., 2012. "Labor Market Effects of Unemployment Insurance Design," IZA Discussion Papers 6950, Institute for the Study of Labor (IZA).
  4. Michael W. Elsby & Donggyun Shin & Gary Solon, 2013. "Wage Adjustment in the Great Recession," NBER Working Papers 19478, National Bureau of Economic Research, Inc.
  5. Pedro S. Martins, 2014. "30,000 minimum wages: The economic effects of collective agreement extensions," Working Papers 51, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aea:aejmac:v:4:y:2012:i:4:p:36-55. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.