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Establishing downward nominal wage rigidity through cyclical changes in the wage distribution

Author

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  • Yoon J. Jo

    (Texas A&M University, Department of Economics)

Abstract

I examine the cyclical properties of nominal wage change distributions across time and US states using nationally representative household surveys from 1979 to 2018. The novel finding is that the share of workers with no wage changes, which accounts for the large spike at zero in the nominal wage change distribution, is more countercyclical than the share of workers with wage cuts. I analyze heterogeneous agent models with six alternative wage-setting schemes and conclude that the model with downward nominal wage rigidity is the most consistent with empirical findings regarding the shape and cyclicality of wage change distributions.

Suggested Citation

  • Yoon J. Jo, 2021. "Establishing downward nominal wage rigidity through cyclical changes in the wage distribution," Working Papers 20211216-001, Texas A&M University, Department of Economics.
    • Handle: RePEc:txm:wpaper:20211216-001
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    File URL: https://pvsessions.tamu.edu/RePEc/jo_establishingDNWRthroughcyclicalchangesinthewagechangedistribution.pdf
    File Function: First version, 2021
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    Cited by:

    1. Born, Benjamin & D'Ascanio, Francesco & Müller, Gernot & Pfeifer, Johannes, 2019. "Mr. Keynes meets the Classics: Government Spending and the Real Exchange Rate," CEPR Discussion Papers 14073, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Downward nominal wage rigidity; nominal wage change distribution; wage stickiness; business cycle.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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