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Why are Wages Cyclical in the 1970's?

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Author Info
Rebecca M. Blank

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Abstract

This paper investigates cyclicality in real wages between 1969 and 1982, using 14 years of data from the Panel Survey of Income Dynamics. First, it investigates the extent to which movements in and out of the labor market created apparent wage cyclicality. Second, it investigates whether cyclical movements of workers between heterogeneous wage sectors within the labor market created cyclicality. Little evidence of the first effect is found. The second effect is much more important, and cyclicality clearly occurs in the movement of workers between different labor market sectors. However, sector selection is not correlated with wage determination. Thus, individual wage change estimates of cyclicality need to control for sector location, but need not account for sector selection. The third conclusion of the paper is that cyclicality is present in real wages even within sectors over this time period, and is the result of both cyclicality in overall wage levels (cyclicality in the constant term in wage equations), as well as in the coefficients associated with particular worker characteristics.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2396.

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Date of creation: Oct 1987
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Handle: RePEc:nbr:nberwo:2396

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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. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-94, July. [Downloadable!] (restricted)
  2. Abowd, John M & Card, David, 1987. "Intertemporal Labor Supply and Long-term Employment Contracts," American Economic Review, American Economic Association, vol. 77(1), pages 50-68, March. [Downloadable!] (restricted)
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  3. Rebecca M. Blank, 1985. "An analysis of workers' choice between employment in the public and private sectors," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 38(2), pages 211-224, January.
  4. Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-66, December. [Downloadable!] (restricted)
  5. Raisian, John, 1983. "Contracts, Job Experience, and Cyclical Labor Market Adjustments," Journal of Labor Economics, University of Chicago Press, vol. 1(2), pages 152-70, April. [Downloadable!] (restricted)
  6. 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)
  7. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-44, December. [Downloadable!] (restricted)
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  8. Altonji, Joseph & Ashenfelter, Orley, 1980. "Wage Movements and the Labour Market Equilibrium Hypothesis," Economica, London School of Economics and Political Science, vol. 47(187), pages 217-45, August. [Downloadable!] (restricted)
  9. Geary, Patrick T & Kennan, John, 1982. "The Employment-Real Wage Relationship: An International Study," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 854-71, August. [Downloadable!] (restricted)
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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. Silke Anger, 2007. "The Cyclicality of Effective Wages within Employer-Employee Matches: Evidence from German Panel Data," SOEPpapers 34, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
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  2. Enisse Kharroubi, 2004. "Wages, risk sharing and economic fluctuations," DELTA Working Papers 2004-33, DELTA (Ecole normale supérieure). [Downloadable!]
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