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Wage Adjustment in the Great Recession and Other Downturns: Evidence from the United States and Great Britain

In: Labor Markets in the Aftermath of the Great Recession

Author

Listed:
  • Michael W. L. Elsby
  • Donggyun Shin
  • Gary Solon

Abstract

Using 1979-2012 CPS data for the United States and 1975-2012 NES data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real wages varies across recessions, and does so differently between the two countries, in ways that defy simple explanations. We devote particular attention to the hypothesis that downward nominal wage rigidity plays an important role in cyclical employment and unemployment fluctuations. We conclude that downward wage rigidity may be less binding and have lesser allocative consequences than is often supposed.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Michael W. L. Elsby & Donggyun Shin & Gary Solon, 2013. "Wage Adjustment in the Great Recession and Other Downturns: Evidence from the United States and Great Britain," NBER Chapters, in: Labor Markets in the Aftermath of the Great Recession, pages 246-291, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13287
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    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
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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