The Life-Cycle and the Business-Cycle of Wage Risk: A Cross-Country Comparison
AbstractThis paper provides a cross-country comparison of life-cycle and business-cycle fluctuations in the dispersion of household-level wage innovations. We draw our inference from household panel data sets for the US, the UK, and Germany. First, we find that household characteristics explain about 25% of the dispersion in wages within an age group in all three countries. Second, the cross-sectional variance of wages is almost linearly increasing in household age in all three countries, but with increments being smaller in the European data. Third, we find that wage risk is procyclical in Germany while it is countercyclical in the US and acyclical in the UK, pointing towards labor market institutions being pivotal in determining the cyclical properties of labor market risk.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4402.
Length: 23 pages
Date of creation: Sep 2009
Date of revision:
Publication status: published in: Economics Letters, 2012, 117 (3), 831-833
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Find related papers by JEL classification:
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-10 (All new papers)
- NEP-BEC-2009-10-10 (Business Economics)
- NEP-EEC-2009-10-10 (European Economics)
- NEP-MAC-2009-10-10 (Macroeconomics)
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