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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

    () (European Central Bank)

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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Cited by:
  1. 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.
  2. Chandarath Amarasekara & George Bratsiotis, 2009. "Monetary Policy and Real Wage Cyclicality," Centre for Growth and Business Cycle Research Discussion Paper Series 122, Economics, The Univeristy of Manchester.
  3. Jan Babecky & Kamil Dybczak, 2012. "Real Wage Flexibility in the European Union: New Evidence from the Labour Cost Data," Working Papers 2012/01, Czech National Bank, Research Department.
  4. Andersen, Torben M & Svarer, Michael, 2010. "Business Cycle Dependent Unemployment Insurance," IZA Discussion Papers 5196, Institute for the Study of Labor (IZA).
  5. Fidrmuc, Jarko & Korhonen, Iikka & Bátorová, Ivana, 2008. "China in the world economy: Dynamic correlation analysis of business cycles," BOFIT Discussion Papers 7/2008, Bank of Finland, Institute for Economies in Transition.
  6. Frigyes Ferdinand Heinz & Desislava Rusinova, 2011. "How flexible are real wages in EU countries? A panel investigation," Working Paper Series 1360, European Central Bank.
  7. Andrea Bassanini, 2011. "Aggregate Earnings and Macroeconomic Shocks: The Role of Labour Market Policies and Institutions," OECD Social, Employment and Migration Working Papers 123, OECD Publishing.
  8. 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 2012-31, Mendel University in Brno, Faculty of Business and Economics.
  9. 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).

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