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Micro-components of aggregate wage dynamics

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  • Kauhanen, Antti
  • Maliranta, Mika

Abstract

Abstract: We propose an approach for measuring and analyzing the dynamics of standard aggregate wage growth of macro statistics with micro-data. Our method decomposes aggregate wage growth to the wage growth of job stayers and to various terms related to job and worker restructuring. This method produces explicit expressions with clear interpretations for the various restructuring components and therefore opens new opportunities for a deeper analysis of various micro-level mechanisms and their cyclicality. The methodology also allows us to study many topics simultaneously that have previously been studied in isolation. Using comprehensive longitudinal employer-employee data over an extended period of time, we study how job and worker restructuring influences aggregate wage growth and its cyclicality. We show that wage formation is significantly more flexible than suggested by the aggregate numbers, and we identify the microlevel mechanisms that explain the greater flexibility. This version: December 7, 2012

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Bibliographic Info

Paper provided by The Research Institute of the Finnish Economy in its series ETLA Working Papers with number 1.

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Length: 54 pages
Date of creation: 07 Dec 2012
Date of revision:
Handle: RePEc:rif:wpaper:1

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  1. Böckerman, Petri & Maliranta, Mika, 2003. "The Micro-level Dynamics of Regional Productivity Growth: The Source of Divergence in Finland," Discussion Papers 854, The Research Institute of the Finnish Economy.
  2. Böckerman, Petri & Laaksonen, Seppo & Vainiomäki, Jari, 2006. "Micro-level evidence on wage rigidities in Finland," MPRA Paper 1811, University Library of Munich, Germany.
  3. Maliranta, Mika & Böckerman, Petri, 2009. "Globalization, Creative Destruction, and Labor Share Change: Evidence on the Determinants and Mechanism from Longitudinal Plant-level Data," Discussion Papers 1178, The Research Institute of the Finnish Economy.
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