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Why Are the Wages of Job Changers So Procyclical?

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  • Barlevy, Gadi

Abstract

Evidence on wage cyclicality shows job changers have more procyclical wages than job stayers. Previous work argued this arises because workers gain greater access to jobs in sectors such as manufacturing that offer high wages. This article argues that workers who switch jobs in booms enter temporary jobs with unemployment risk and are merely compensated for subsequent losses. I demonstrate that the two explanations can be distinguished using the relationship between unemployment insurance and wage cyclicality among job changers. The evidence supports the compensation hypothesis; that is, that job changers might not experience real gains from higher-paying jobs in booms. Copyright 2001 by University of Chicago Press.

Suggested Citation

  • Barlevy, Gadi, 2001. "Why Are the Wages of Job Changers So Procyclical?," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 837-878, October.
  • Handle: RePEc:ucp:jlabec:v:19:y:2001:i:4:p:837-78
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    References listed on IDEAS

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    1. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-688, August.
    2. Rebecca M. Blank & David E. Card, 1991. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1157-1189.
    3. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 1-25.
    4. Barry T. Hirsch & David A. Macpherson, 1993. "Union Membership and Coverage Files from the Current Population Surveys: Note," ILR Review, Cornell University, ILR School, vol. 46(3), pages 574-578, April.
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    Citations

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    Cited by:

    1. Shigeru Fujita & Garey Ramey, 2006. "The cyclicality of job loss and hiring," Working Papers 06-17, Federal Reserve Bank of Philadelphia.
    2. Leena Rudanko, 2011. "Aggregate and Idiosyncratic Risk in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 101(6), pages 2823-2843, October.
    3. Anabela Carneiro & Pedro Portugal, 2004. "Workers' Flows and Real Wage Cyclicality," Working Papers w200409, Banco de Portugal, Economics and Research Department.
    4. Lei Fang & Pedro Silos, 2012. "Wages and unemployment across business cycles: a high-frequency investigation," FRB Atlanta Working Paper 2012-16, Federal Reserve Bank of Atlanta.
    5. Christopher Huckfeldt & Antonella Trigari & Mark Gertler, 2015. "Unemployment Fluctuations, Match Quality, and the Wage Cyclicality of New Hires," 2015 Meeting Papers 438, Society for Economic Dynamics.
    6. Anger, Silke, 2007. "The cyclicality of effective wages within employer-employee matches: evidence from German panel data," Working Paper Series 783, European Central Bank.
    7. Mário Centeno, 2004. "The Match Quality Gains from Unemployment Insurance," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
    8. Galuscak, Kamil & Keeney, Mary & Nicolitsas, Daphne & Smets, Frank & Strzelecki, Pawel & Vodopivec, Matija, 2012. "The determination of wages of newly hired employees: Survey evidence on internal versus external factors," Labour Economics, Elsevier, vol. 19(5), pages 802-812.
    9. Haefke, Christian & Sonntag, Marcus & van Rens, Thijs, 2013. "Wage rigidity and job creation," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 887-899.
    10. Martin, Daniel & Pierrard, Olivier, 2014. "On-the-job search and cyclical unemployment: Crowding out vs. vacancy effects," Journal of Economic Dynamics and Control, Elsevier, vol. 44(C), pages 235-250.
    11. Andrew Figura, 2006. "Explaining Cyclical Movements in Employment: Creative-Destruction or Changes in Utilization?," Working Papers 06-25, Center for Economic Studies, U.S. Census Bureau.
    12. Summerfield, Fraser, 2014. "Labor Market Conditions, Skill Requirements and Education Mismatch," CLSSRN working papers clsrn_admin-2014-19, Vancouver School of Economics, revised 28 Apr 2014.
    13. Figura, Andrew, 2009. "Explaining cyclical movements in employment: Creative-destruction or changes in utilization?," Labour Economics, Elsevier, vol. 16(4), pages 429-439, August.
    14. Anabela Carneiro & Paulo Guimarães & Pedro Portugal, 2009. "Real Wages and the Business Cycle: Accounting for Worker and Firm Heterogeneity," Working Papers w200910, Banco de Portugal, Economics and Research Department.
    15. Anger, Silke, 2011. "The Cyclicality of Effective Wages within Employer–Employee Matches in a Rigid Labor Market," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 786-797.
    16. Pedro S. Martins, 2007. "Heterogeneity In Real Wage Cyclicality," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 684-698, November.
    17. Fei Peng & W. Stanley Siebert, 2008. "Real Wage Cyclicality in Italy," LABOUR, CEIS, vol. 22(4), pages 569-591, December.
    18. Andrew Figura, 2006. "Explaining cyclical movements in employment: creative destruction or changes in utilization," Finance and Economics Discussion Series 2006-23, Board of Governors of the Federal Reserve System (U.S.).
    19. Oliver Ruf, 2008. "Effects of Firm Size and Business Cycle on Earning Losses of Displaced Workers," IEW - Working Papers 366, Institute for Empirical Research in Economics - University of Zurich.
    20. Shin, Donggyun & Shin, Kwanho, 2008. "Why Are The Wages Of Job Stayers Procyclical?," Macroeconomic Dynamics, Cambridge University Press, vol. 12(01), pages 1-21, February.
    21. Lydon, Reamonn & Lozej, Matija, 2016. "Flexibility of new hires' earnings in Ireland," Research Technical Papers 06/RT/16, Central Bank of Ireland.

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