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Real Wage Cyclicality in Germany and the UK: New Results Using Panel Data

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Author Info
Fei Peng () (University of Birmingham Business School)
W. Stanley Siebert () (University of Birmingham Business School and IZA)

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Abstract

This paper compares the cyclical behaviour of male real wages in Germany and the UK using the German Socio-Economic Panel 1984-2002 and the British Household Panel Survey 1991-2004. We distinguish between job stayers (remaining in the same job), and within- and between-company job movers. Stayers are the large majority in both countries. Using changes in the unemployment rate as the cyclical measure, we find real wages of stayers in the private sector in West Germany - but not East Germany - to be procyclical, and quite sensitive to unemployment, comparable to the US and the UK. We find cyclicality in the public sector in neither country. Thus real wage flexibility is similar in the two countries, apart from East Germany, despite apparent differences in wage-setting institutions.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2688.

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Length: 16 pages
Date of creation: Mar 2007
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Handle: RePEc:iza:izadps:dp2688

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Related research
Keywords: real wage cyclicality; job stayers; Germany; United Kingdom; GSOEP; BHPS;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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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. Paul J. Devereux, 2001. "The Cyclicality of real wages within employer-employee matches," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 54(4), pages 835-850, July.
  2. Steinar Holden & Fredrik Wulfsberg, 2007. "Downward nominal wage rigidity in the OECD," Working Paper Series 777, European Central Bank. [Downloadable!]
    Other versions:
  3. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julián Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2006. "How Wages Change: Micro Evidence from the International Wage Flexibility Project," IZA Discussion Papers 2487, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Virginia Doellgast & Ian Greer, 2007. "Vertical Disintegration and the Disorganization of German Industrial Relations-super-1," British Journal of Industrial Relations, Blackwell Publishers Ltd/London School of Economics, vol. 45(1), pages 55-76, 03. [Downloadable!] (restricted)
  5. Bernhard Ebbinghaus & Werner Eichhorst, 2006. "Employment Regulation and Labor Market Policy in Germany, 1991-2005," IZA Discussion Papers 2505, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Wolfgang Ochel, 2005. "Decentralizing Wage Bargaining in Germany - A Way to Increase Employment?," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 19(1), pages 91-121, 03. [Downloadable!] (restricted)
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  7. Paul J. Devereux & Robert A. Hart, 2005. "Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers," IZA Discussion Papers 1651, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Fei Peng & W. Stanley Siebert, 2006. "Real Wage Cyclicality in Italy," IZA Discussion Papers 2465, Institute for the Study of Labor (IZA). [Downloadable!]
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    • Fei Peng & W. Stanley Siebert, 2008. "Real Wage Cyclicality in Italy," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 22(4), pages 569-591, December. [Downloadable!] (restricted)
  9. Gary Solon & Warren Whatley & Ann Huff Stevens, 1997. "Wage changes and intrafirm job mobility over the business cycle: Two case studies," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 50(3), pages 402-415, April.
  10. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October. [Downloadable!] (restricted)
  11. Donggyun Shin & Gary Solon, 2006. "New Evidence on Real Wage Cyclicality within Employer-Employee Matches," NBER Working Papers 12262, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Ball, Laurence & Romer, David, 1991. "Sticky Prices as Coordination Failure," American Economic Review, American Economic Association, vol. 81(3), pages 539-52, June. [Downloadable!] (restricted)
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  13. Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the Cyclicality of Real Wages: How Important Is Composition Bias?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 1-25, February. [Downloadable!] (restricted)
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Full references

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. Messina, Julián & Strozzi, Chiara & Turunen, Jarkko, 2008. "Real Wages over the Business Cycle: OECD Evidence from the Time and Frequency Domains," IZA Discussion Papers 3884, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Christopher A. Pissarides, 2007. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," CEP Discussion Papers dp0839, Centre for Economic Performance, LSE. [Downloadable!]
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