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New Evidence on Real Wage Cyclicality within Employer-Employee Matches

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Author Info
Donggyun Shin
Gary Solon
Abstract

In the most thorough study to date on wage cyclicality among job stayers, Devereux%u2019s (2001) analysis of men in the Panel Study of Income Dynamics produced two puzzling findings: (1) the real wages of salaried workers are noncyclical, and (2) wage cyclicality among hourly workers differs between two alternative wage measures. We examine these puzzles with additional evidence from other sources. Devereux%u2019s finding of noncyclical real wages among salaried job stayers is not replicated in the National Longitudinal Survey of Youth data. The NLSY data, however, do corroborate his finding of a discrepancy for hourly workers between the cyclicality of the two alternative wage measures. Evidence from the PSID Validation Study contradicts Devereux%u2019s conjecture that the discrepancy might be due to a procyclical bias from measurement error in average hourly earnings. Evidence from the Bureau of Labor Statistics establishment survey supports his hypothesis that overtime work accounts for part (but not all) of the discrepancy. We conclude that job stayers%u2019 real average hourly earnings are substantially procyclical and that an important portion of that procyclicality probably is due to compensation beyond base wages.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12262.

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Date of creation: May 2006
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Handle: RePEc:nbr:nberwo:12262

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Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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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. Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-57, July. [Downloadable!] (restricted)
  2. 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.
  3. Mayshar, Joram & Solon, Gary, 1993. "Shift Work and the Business Cycle," American Economic Review, American Economic Association, vol. 83(2), pages 224-28, May. [Downloadable!] (restricted)
  4. Bound, John & Krueger, Alan B, 1991. "The Extent of Measurement Error in Longitudinal Earnings Data: Do Two Wrongs Make a Right?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 1-24, January. [Downloadable!] (restricted)
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  5. Dickins, William T, 1990. "Error Components in Grouped Data: Is It Ever Worth Weighting?," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 328-33, May. [Downloadable!] (restricted)
  6. Bonggeun Kim & Gary Solon, 2005. "Implications of Mean-Reverting Measurement Error for Longitudinal Studies of Wages and Employment," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 193-196, December. [Downloadable!] (restricted)
  7. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August. [Downloadable!] (restricted)
  8. Shin, Donggyun, 2000. "Gender and Industry Differences in Employment Cyclicality: Evidence Over the Postwar Period," Economic Inquiry, Oxford University Press, vol. 38(4), pages 641-50, October.
  9. Amemiya, Takeshi, 1978. "A Note on a Random Coefficients Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 793-96, October. [Downloadable!] (restricted)
  10. 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.
  11. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October. [Downloadable!] (restricted)
  12. Gary Solon & Robert Barsky & Jonathan A. Parker, 1992. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias," NBER Working Papers 4202, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Robert B. Barsky & Gary Solon, 1989. "Real Wages Over The Business Cycle," NBER Working Papers 2888, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
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  1. Christopher A. Pissarides, 2007. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," CEP Discussion Papers dp0839, Centre for Economic Performance, LSE. [Downloadable!]
  2. Fei Peng & W. Stanley Siebert, 2007. "Real Wage Cyclicality in Germany and the UK: New Results Using Panel Data," IZA Discussion Papers 2688, Institute for the Study of Labor (IZA). [Downloadable!]
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