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Real Wage Cyclicality In The Panel Study Of Income Dynamics

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  • Eric T. Swanson

Abstract

Previous studies of real wage cyclicality have made only sparing use of the micro‐data detail that is available in the Panel Study of Income Dynamics (PSID). The present paper brings to bear this additional detail to investigate the robustness of the previous results and to examine whether there are important cross‐sectional and demographic differences in wage cyclicality. Although real wages were procyclical across the entire distribution of workers from 1967 to 1991, the wages of lower‐income, younger, and less‐educated workers exhibited greater procyclicality. However, workers' straight‐time hourly pay rates have been acyclical, suggesting that more variable pay margins such as bonuses, overtime, late shift premia, and commissions have played a substantial if not primary role in generating procyclicality.

Suggested Citation

  • Eric T. Swanson, 2007. "Real Wage Cyclicality In The Panel Study Of Income Dynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 617-647, November.
    • Handle: RePEc:bla:scotjp:v:54:y:2007:i:5:p:617-647
    DOI: 10.1111/j.1467-9485.2007.00433.x
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    Cited by:

    1. Artz, Benjamin & Heywood, John S., 2025. "Does Performance Pay Deter Job Quits?," IZA Discussion Papers 17791, IZA Network @ LISER.
    2. Meghana Gaur & John R. Grigsby & Jonathon Hazell & Abdoulaye Ndiaye, 2023. "Bonus Question: How Does Flexible Incentive Pay Affect Wage Rigidity?," NBER Working Papers 31722, National Bureau of Economic Research, Inc.
    3. Heywood, John S. & Nießen, Anna, 2025. "Performance Appraisal and Quits: Does Performance Pay Add Anything?," GLO Discussion Paper Series 1687, Global Labor Organization (GLO).
    4. Meghana Gaur & John Grigsby & Jonathon & Abdoulaye Ndiaye, 2023. "Bonus Question: Does Flexible Incentive Pay Dampen Unemployment Dynamics?," Discussion Papers 2321, Centre for Macroeconomics (CFM).
    5. Hart, Robert A. & Roberts, J. Elizabeth, 2010. "Real Wages, Working Time, and the Great Depression: What Does Micro Evidence Tell Us?," IZA Discussion Papers 4977, IZA Network @ LISER.
    6. João Pereira & Raul Ramos & Pedro S. Martins, 2025. "Wage Cyclicality and Labor Market Institutions," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 64(4), pages 598-615, October.
    7. Anger, Silke, 2011. "The Cyclicality of Effective Wages within Employer–Employee Matches in a Rigid Labor Market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 18(6), pages 786-797.
    8. Cantarella, Michele & Strozzi, Chiara, 2022. "Piecework and Job Search in the Platform Economy," IZA Discussion Papers 15775, IZA Network @ LISER.
    9. Hermann Gartner & Thorsten Schank & Claus Schnabel, 2013. "Wage Cyclicality Under Different Regimes of Industrial Relations," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 52(2), pages 516-540, April.
    10. Verdugo, Gregory, 2016. "Real wage cyclicality in the Eurozone before and during the Great Recession: Evidence from micro data," European Economic Review, Elsevier, vol. 82(C), pages 46-69.
    11. Mary C. Daly & Bart Hobijn & Theodore S. Wiles, 2011. "Aggregate Real Wages: Macro Fluctuations and Micro Drivers," Tinbergen Institute Discussion Papers 11-158/3, Tinbergen Institute.
    12. Shuhei Takahashi, 2020. "Time-Varying Wage Risk, Incomplete Markets, and Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 37, pages 195-213, July.
    13. Robert A. Hart & J. Elizabeth Roberts, 2013. "Real wage cyclicality and the Great Depression: evidence from British engineering and metal working firms," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 197-218, April.
    14. Sekyu Choi & Benjamin Villena-Roldan & Nincen Figueroa, 2025. "Posted Wage Cyclicality: Evidence from High-Quality Vacancy Data," Bristol Economics Discussion Papers 25/812, School of Economics, University of Bristol, UK.
    15. Choi, Sekyu & Figueroa, Nincen & Villena-Roldán, Benjamin, 2020. "Wage Cyclicality Revisited: The Role of Hiring Standards," MPRA Paper 98240, University Library of Munich, Germany.
    16. Gu, Ran, 2019. "Specific Capital, Firm Insurance, and the Dynamics of the Postgraduate Wage Premium," MPRA Paper 96254, University Library of Munich, Germany.
    17. Artz, Benjamin & Heywood, John S., 2025. "Performance pay and job quits," Journal of Economic Behavior & Organization, Elsevier, vol. 239(C).
    18. repec:ces:ceswps:_11273 is not listed on IDEAS
    19. Mary C. Daly & Bart Hobijn, 2016. "The intensive and extensive margins of real wage adjustment," Working Paper Series 2016-4, Federal Reserve Bank of San Francisco.
    20. Ran Gu, 2023. "Human Capital and the Business Cycle Effects on the Postgraduate Wage Premium," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 345-376, April.
    21. Gu, Ran, 2019. "Specific Human Capital and Real Wage Cyclicality: An Application to Postgraduate Wage Premium," MPRA Paper 98027, University Library of Munich, Germany.

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