Advanced Search
MyIDEAS: Login

Real Wages Over The Business Cycle

Contents:

Author Info

  • Robert B. Barsky
  • Gary Solon

Abstract

This paper is an examination of cyclical real wage behavior in the United States since World War II. Like most previous aggregate studies. ours finds little cyclicalitv in aggregate industry real wage data. On the other hand, our analysis of longitudinal microdata from the Panel Study of Income Dynamics reveals substantial procyclicality. We find that this procyclicality is obscured in industry average wage statistics, and to a lesser extent in economywide averages, because those statistics are constructed in a way that gives greater weight to low-wage workers during expansions. The almost complete absence of evidence for countercyclical real wages suggests that movements along labor demand curves have not played a dominant role in cyclical employment fluctuations over the last 40 years. Instead, the procyclicality of real wages indicates that cyclical employment fluctuations have been generated mainly by shifts in labor demand. The sources of these shifts and of the positive slope of the effective labor supply curve, however, remain open to alternative interpretations.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w2888.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2888.

as in new window
Length:
Date of creation: Mar 1989
Date of revision:
Publication status: published as With Jeffrey A. Miron, published as "The Seasonal Cycle and the Business Cycle", Journal of Political Economy, Vol. 97, no. 3 (1989): 503-534.
Handle: RePEc:nbr:nberwo:2888

Note: EFG
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

References

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.:
as in new window
  1. Kennan, John, 1988. "An Econometric Analysis of Fluctuations in Aggregate Labor Supply and Demand," Econometrica, Econometric Society, vol. 56(2), pages 317-33, March.
  2. Barsky, Robert B & Miron, Jeffrey A, 1989. "The Seasonal Cycle and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 503-34, June.
  3. David Card, 1988. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," Working Papers 612, Princeton University, Department of Economics, Industrial Relations Section..
  4. Robert E. Hall, 1974. "The Process of Inflation in the Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 5(2), pages 343-410.
  5. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," NBER Working Papers 2115, National Bureau of Economic Research, Inc.
  6. Orley Ashenfelter, 1984. "Macroeconomic Analyses and Microeconomic Analyses of Labor Supply," Working Papers 553, Princeton University, Department of Economics, Industrial Relations Section..
  7. Richard B. Freeman & James L. Medoff, 1979. "New estimates of private sector unionism in the United States," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 32(2), pages 143-174, January.
  8. Ham, John C, 1986. "Testing Whether Unemployment Represents Intertemporal Labour Supply Behaviour," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 559-78, August.
  9. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
  10. 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.
  11. Kydland, Finn E., 1984. "Labor-force heterogeneity and the business cycle," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 21(1), pages 173-208, January.
  12. Neftci, Salih N, 1978. "A Time-Series Analysis of the Real Wages-Employment Relationship," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 281-91, April.
  13. Joseph Altonji, 1984. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Working Papers 562, Princeton University, Department of Economics, Industrial Relations Section..
  14. Chirinko, Robert S, 1980. "The Real Wage Rate over the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 459-61, August.
  15. Raisian, John, 1979. "Cyclic Patterns in Weeks and Wages," Economic Inquiry, Western Economic Association International, vol. 17(4), pages 475-95, October.
  16. Orley Ashenfelter & James N. Brown, 1985. "Testing the Efficiency of Employment Contracts," Working Papers 573, Princeton University, Department of Economics, Industrial Relations Section..
  17. Leamer, Edward E, 1981. "Is It a Demand Curve, or Is It a Supply Curve? Partial Identification through Inequality Constraints," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 319-27, August.
  18. Edward C. Prescott, 1986. "Response to a skeptic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 28-33.
  19. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
  20. Arthur M. Okun, 1973. "Upward Mobility in a High-Pressure Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 207-262.
  21. John M. Abowd & David Card, 1986. "Intertemporal Labor Supply and Long Term Employment Contracts," NBER Working Papers 1831, National Bureau of Economic Research, Inc.
  22. 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.
  23. Barro, Robert J & King, Robert G, 1984. "Time-separable Preferences and Intertemporal-Substitution Models of Business Cycles," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 817-39, November.
  24. Kniesner, Thomas J & Goldsmith, Arthur H, 1987. "A Survey of Alternative Models of the Aggregate U.S. Labor Market," Journal of Economic Literature, American Economic Association, vol. 25(3), pages 1241-80, September.
  25. Lucas, Robert E, Jr, 1970. "Capacity, Overtime, and Empirical Production Functions," American Economic Review, American Economic Association, vol. 60(2), pages 23-27, May.
  26. Hart, Oliver D, 1983. "Optimal Labour Contracts under Asymmetric Information: An Introduction," Review of Economic Studies, Wiley Blackwell, vol. 50(1), pages 3-35, January.
  27. 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.
  28. Kim B. Clark & Lawrence H. Summers, 1980. "Demographic Differences in Cyclical Employment Variation," NBER Working Papers 0514, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2888. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.