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The Behavior of the Aggregate U.S. Wage Markdown

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Abstract

We estimate the aggregate U.S. wage markdown for 1987–2018 using the KLEMS data and the approach in Hershbein, Macaluso and Yeh (2020). Building on the existing literature, our markdown estimates depend on output elasticities of inputs and their shares of gross output. We identify four salient features of the markdown. First, the markdown is above 1, implying an average wage below the competitive level. Second, the markdown has increased over time, mainly during the 2000–2015 period. Third, the variation of the markdown is mostly driven by the input shares and not the output elasticities. Fourth, the markdown is strongly procyclical, implying a larger deviation of wages from their competitive levels during expansions.

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  • Hashmat Khan & Konstantinos Metaxoglou, 2021. "The Behavior of the Aggregate U.S. Wage Markdown," Carleton Economic Papers 21-06, Carleton University, Department of Economics.
    • Handle: RePEc:car:carecp:21-06
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    More about this item

    Keywords

    Employer Market Power; Monopsony; Markdowns; Business Cycles;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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