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Cyclical Comovements in Industrial Labor and Product Markets: Theory and Evidence

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  • Kandil, Magda
  • Woods, Jeffrey G

Abstract

The authors establish the theoretical connection between industrial labor and product markets within the contractual wage-rigidity new Keynesian explanation of business cycles. They estimate time-series and cross-sectional regressions for twenty-eight private two-digit (S.I.C.) industries and find that greater uncertainty is associated with upward flexibility of the nominal wage and moderates the countercyclical response of the real wage to aggregate demand shocks; an upwardly rigid nominal wage response to energy price shocks reduces the real contractionary effects of these shocks; and downwardly inflexible nominal wages are associated with downwardly rigid prices in response to productivity shocks. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Kandil, Magda & Woods, Jeffrey G, 1997. "Cyclical Comovements in Industrial Labor and Product Markets: Theory and Evidence," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 725-744, October.
    • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:4:p:725-44
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    Cited by:

    1. Magda Kandil, 2006. "On the transmission of exchange rate fluctuations to the macroeconomy: Contrasting evidence for developing and developed countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(1), pages 101-127.
    2. Kandil, Magda, 2007. "The wage-price spiral: International evidence and implications," Journal of Economics and Business, Elsevier, vol. 59(3), pages 212-240.
    3. Magda Kandil, 2001. "Variation in the Effects of Aggregate Demand Shocks: Evidence and Implications across Industrial Countries," Southern Economic Journal, John Wiley & Sons, vol. 67(3), pages 552-577, January.
    4. Kandil, Magda & Mirzaie, Ida Aghdas, 2003. "The effects of dollar appreciation on sectoral labor market adjustments: Theory and evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 89-117.
    5. Magda Kandil, 2010. "Demand Shocks and the Cyclical Behavior of the Real Wage: Some International Evidence," Journal of Applied Economics, Taylor & Francis Journals, vol. 13(1), pages 135-158, May.
    6. Magda Kandil, 2004. "Exchange Rate Fluctuations And Economic Activity In Developing Countries: Theory And Evidence," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 85-108, June.
    7. Kandil, Magda & Mirzaie, Aghdas, 2002. "Exchange rate fluctuations and disaggregated economic activity in the US: theory and evidence," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 1-31, February.
    8. Kandil, Magda, 2006. "Variation in the effects of government spending shocks with methods of financing: Evidence from the U.S," International Review of Economics & Finance, Elsevier, vol. 15(4), pages 463-486.
    9. Magda Kandil, 2006. "Nominal Wage Flexibility and Economic Performance: Evidence and Implications Across Industrial Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 58(1), pages 25-49, January.
    10. Kandil, Magda & Woods, Jeffrey G., 2002. "Convergence of the gender gap over the business cycle: a sectoral investigation," Journal of Economics and Business, Elsevier, vol. 54(3), pages 271-292.

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