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Skill Levels and the Cyclical Variability of Employment, Hours, and Wages

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Author Info

  • Michael Keane

    (International Monetary Fund)

  • Eswar Prasad

    (International Monetary Fund)

Abstract

This paper uses microeconomic panel data to examine differences in the cyclical variability of employment, hours, and real wages for skilled and unskilled workers. Contrary to conventional wisdom, it finds that, at the aggregate level, skilled and unskilled workers are subject to the same degree of cyclical variation in wages. However, the quality of labor input is found to rise in recessions, inducing a countercyclical bias in aggregate measures of the real wage. The paper also finds substantial differences across industries in the cyclical variation of employment, hours, and wage differentials, indicating important interindustry differences in labor contracting.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

Volume (Year): 40 (1993)
Issue (Month): 4 (December)
Pages: 711-743

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Handle: RePEc:pal:imfstp:v:40:y:1993:i:4:p:711-743

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Cited by:
  1. Toshihiko Mukoyama & Aysegül Sahin, 2005. "The cost of business cycles for unskilled workers," Staff Reports 214, Federal Reserve Bank of New York.
  2. Lindquist, Matthew J., 2002. "Capital-Skill Complementarity and Inequality Over the Business Cycle," Research Papers in Economics 2002:14, Stockholm University, Department of Economics, revised 01 Sep 2003.
  3. Pourpourides, Panayiotis M., 2011. "Implicit contracts and the cyclicality of the skill-premium," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 963-979, June.
  4. Humburg Martin & Grip Andries de & Velden Rolf van der, 2012. "Which skills protect graduates against a slack labour market?," Research Memoranda 002, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  5. Linda Goldberg & Joseph Tracy, 2001. "Exchange rates and wages," Staff Reports 116, Federal Reserve Bank of New York.
  6. Christopher Otrok & Panayiotis M. Pourpourides, 2011. "On the Cyclicality of Real Wages and Wage Differentials," Working Papers 2011-4, Central Bank of Cyprus.
  7. Carlén, Björn, 2002. "Exclusionary Manipulation of Carbon Permit Markets: A Laboratory Test," Research Papers in Economics 2002:15, Stockholm University, Department of Economics.
  8. Manuel A. Hidalgo, 2008. "Wage Inequality in Spain, 1980-2000," Working Papers 08.08, Universidad Pablo de Olavide, Department of Economics.
  9. Devereux, Paul J., 2000. "Task assignment over the business cycle," Open Access publications from University College Dublin urn:hdl:10197/313, University College Dublin.
  10. Mukoyama, Toshihiko & Sahin, Aysegul, 2006. "Costs of business cycles for unskilled workers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2179-2193, November.
  11. Chang, Yongsung, 2000. "Wages, business cycles, and comparative advantage," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 143-171, August.
  12. Christopher Otrok & Panayiotis M. Pourpourides, 2011. "On The Cyclicality of Real Wages and Wage Di¤erentials," Working Papers 1116, Department of Economics, University of Missouri.
  13. Kula, Ferit & Aslan, Alper, 2008. "Hysteresis vs. natural rate of unemployment: One, the other, or both?," MPRA Paper 14054, University Library of Munich, Germany.

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