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Real Wages over the Business Cycle: OECD Evidence from the Time and Frequency Domains

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  • Messina, Julián

    ()
    (World Bank)

  • Strozzi, Chiara

    ()
    (University of Modena and Reggio Emilia)

  • Turunen, Jarkko

    ()
    (International Monetary Fund)

Abstract

We study differences in the adjustment of aggregate real wages in the manufacturing sector over the business cycle across OECD countries, combining results from different data and dynamic methods. Summary measures of cyclicality show genuine cross-country heterogeneity even after controlling for the impact of data and methods. We find that more open economies and countries with stronger unions tend to have less pro-cyclical (or more counter-cyclical) wages. We also find a positive correlation between the cyclicality of real wages and employment, suggesting that policy complementarities may influence the adjustment of both quantities and prices in the labour market.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3884.

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Length: 45 pages
Date of creation: Dec 2008
Date of revision:
Publication status: published in: Journal of Economic Dynamics and Control, 2009, 33(6), 1183-1200
Handle: RePEc:iza:izadps:dp3884

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Keywords: labour market institutions; real wages; business cycle; dynamic correlation;

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References

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Citations

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Cited by:
  1. Jarko Fidrmuc & Iikka Korhonen & Ivana Bátorová, 2013. "China in the World Economy: Dynamic Correlation Analysis of Business Cycles," CESifo Economic Studies, CESifo, CESifo, vol. 59(2), pages 392-411, June.
  2. Cervini-Plá, María & Silva, José I. & López-Villavicencio, Antonia, 2012. "Labor disruption costs and real wages cyclicality," MPRA Paper 42366, University Library of Munich, Germany.
  3. Heinz, Frigyes Ferdinand & Rusinova, Desislava, 2011. "How flexible are real wages in EU countries? A panel investigation," Working Paper Series, European Central Bank 1360, European Central Bank.
  4. Svatopluk Kapounek & Jitka Pomenkova, 2012. "The Endogeneity of Optimum Currency Areas Criteria in the Context of Financial Crisis: Evidence from Time-Frequency Domain Analysis," MENDELU Working Papers in Business and Economics, Mendel University in Brno, Faculty of Business and Economics 2012-31, Mendel University in Brno, Faculty of Business and Economics.
  5. Marczak, Martyna & Beissinger, Thomas, 2010. "Real Wages and the Business Cycle in Germany," IZA Discussion Papers 5199, Institute for the Study of Labor (IZA).
  6. Girardi, Riccardo & Paruolo, Paolo, 2013. "Wages and prices in Europe before and after the onset of the Monetary Union," Economic Modelling, Elsevier, Elsevier, vol. 35(C), pages 643-653.
  7. Torben M. Andersen & Michael Svarer, 2010. "Business Cycle Dependent Unemployment Insurance," Economics Working Papers, School of Economics and Management, University of Aarhus 2010-16, School of Economics and Management, University of Aarhus.
  8. Karoly Fazekas & Gyorgy Molnar (ed.), 2011. "The Hungarian Labour Market 2011," The Hungarian Labour Market Yearbooks, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, number 2011, January.
  9. Chandarath Amarasekara & George Bratsiotis, 2009. "Monetary Policy and Real Wage Cyclicality," Centre for Growth and Business Cycle Research Discussion Paper Series, Economics, The Univeristy of Manchester 122, Economics, The Univeristy of Manchester.
  10. Rhee, Hyuk-jae & Turdaliev, Nurlan, 2013. "Optimal monetary policy in a small open economy with staggered wage and price contracts," Journal of International Money and Finance, Elsevier, Elsevier, vol. 37(C), pages 306-323.
  11. Marczak, Martyna & Gómez, Víctor, 2012. "Cyclicality of real wages in the USA and Germany: New insights from wavelet analysis," FZID Discussion Papers 50-2012, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  12. Jan Babecky & Kamil Dybczak, 2012. "Real Wage Flexibility in the European Union: New Evidence from the Labour Cost Data," Working Papers, Czech National Bank, Research Department 2012/01, Czech National Bank, Research Department.
  13. Köllő, János, 2010. "Vállalati reakciók a gazdasági válságra, 2008-2009
    [Corporate reactions to the economic crisis, 2008-9]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1045-1064.
  14. Bassanini, Andrea, 2012. "Aggregate Earnings and Macroeconomic Shocks: The Role of Labour Market Policies and Institutions," IZA Discussion Papers 6918, Institute for the Study of Labor (IZA).

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