Manufacturing Employment Cycle
AbstractThe paper demonstrates that two relatively unknown features of the employment cycle in U.S. manufacturing industries can provide a clue to understanding the role of sectorial shocks in the evolution of aggregate employment. First, interindustry wage differentials rise in expansions and fall in contractions. Second, periods of increasing aggregate employment are associated with relatively good price and productivity shocks to capital-intensive sectors. The paper presents a simple general-equilibrium model where bargaining at the industry level and rents due to sector-specific capital generate a wage structure with higher wages in capital-intensive sectors but where the response of wages to sector-specific shocks is greater in labor intensive sectors. Empirical evidence is presented to support such implications of the model. The asymmetry of wage adjustments imply that aggregate employment responds more to shocks in capital-intensive industries and that procyclical wage differentials can only result from asymmetric disturbances.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 212.
Date of creation: 2002
Date of revision:
Cyclical unemployment; interindustry wage differentials; sector-specific wages;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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