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Manufacturing Employment Cycle

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Author Info
Sebastián Claro () (Instituto de Economía. Pontificia Universidad Católica de Chile.)
Abstract

The 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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Publisher Info
Paper provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 212.

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Date of creation: 2002
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Handle: RePEc:ioe:doctra:212

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Related research
Keywords: Cyclical Unemployment; Interindustry Wage Differentials; Sector-Specific Wages;

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: 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

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.:

  1. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-37, March. [Downloadable!] (restricted)
    Other versions:
  2. Edward E. Leamer, 1999. "Effort, Wages, and the International Division of Labor," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1127-1162, December. [Downloadable!] (restricted)
    Other versions:
  3. McLaughlin, Kenneth J & Bils, Mark, 2001. "Interindustry Mobility and the Cyclical Upgrading of Labor," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 94-135, January. [Downloadable!] (restricted)
    Other versions:
  4. Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-66, December. [Downloadable!] (restricted)
  5. Steven J. Davis & John Haltiwanger, 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation," American Economic Review, American Economic Association, vol. 89(5), pages 1234-1258, December. [Downloadable!] (restricted)
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  6. Rosen, Sherwin, 1987. "The theory of equalizing differences," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 12, pages 641-692 Elsevier. [Downloadable!] (restricted)
  7. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
  8. Janet Currie & Sheena McConnell, 1992. "Firm-Specific Determinants of the Real Wage," NBER Working Papers 4023, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Robert E. Hall, 1975. "The Rigidity of Wages and the Persistence of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1975-2), pages 301-350. [Downloadable!]
  10. Wachter, Michael L, 1970. "Cyclical Variation in the Interindustry Wage Structure," American Economic Review, American Economic Association, vol. 60(1), pages 75-84, March. [Downloadable!] (restricted)
  11. Robert E. Hall, 1998. "Labor-Market Frictions and Employment Fluctuations," NBER Working Papers 6501, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Abraham, Katharine G & Katz, Lawrence F, 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 507-22, June. [Downloadable!] (restricted)
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  13. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September. [Downloadable!] (restricted)
  14. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989-1), pages 1-76. [Downloadable!]
  15. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Sebastián Claro, 2003. "Wages and Unemployment in the United States: Reviving a Wage Gap Explanation," Documentos de Trabajo 235, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
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