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Why Does the Cyclical Behavior of Real Wages Change Over Time?

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  • Kevin X.D. Huang
  • Zheng Liu
  • Louis Phaneuf

Abstract

The cyclical behavior of real wages has evolved from mildly countercyclical during the interwar period to modestly procyclical in the postwar era. This paper presents a general-equilibrium business-cycle model that helps explain the evolution. In the model, changes in the real wage cyclicality arise from interactions between nominal wage and price rigidities and an evolving input-output structure.

Suggested Citation

  • Kevin X.D. Huang & Zheng Liu & Louis Phaneuf, 2004. "Why Does the Cyclical Behavior of Real Wages Change Over Time?," American Economic Review, American Economic Association, vol. 94(4), pages 836-856, September.
  • Handle: RePEc:aea:aecrev:v:94:y:2004:i:4:p:836-856
    Note: DOI: 10.1257/0002828042002552
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