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Changes in the Cyclical Sensitivity of Wages in the United States, 1891-1987

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  • Allen, Steven G.

Abstract

The conventional wisdom among economists today is that wages have become less sensitive to aggregate economic conditions, mainly because of changes in labor market structure and changes in wage contracting mechanisms brought about by countercyclical policy and social insurance. This is re-examined here by using a wider range of data sets and a longer time frame than in any previous study and by paying close attention to differences in the way the prewar and postwar wage series were constructed and the effects of aggregation across industries. The results show that the response of nominal wages to unemployment and output, conditional on previous inflation, is about the same today as it was 100 years ago.

Suggested Citation

  • Allen, Steven G., 1989. "Changes in the Cyclical Sensitivity of Wages in the United States, 1891-1987," Department of Economics and Business - Archive 259452, North Carolina State University, Department of Economics.
  • Handle: RePEc:ags:ncbuar:259452
    DOI: 10.22004/ag.econ.259452
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    File URL: https://ageconsearch.umn.edu/record/259452/files/magr-northcarolinastate-035.pdf
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    References listed on IDEAS

    as
    1. Weir, David R., 1986. "The Reliability of Historical Macroeconomic Data for Comparing Cyclical Stability," The Journal of Economic History, Cambridge University Press, vol. 46(2), pages 353-365, June.
    2. Geoffrey H. Moore & Victor Zarnowitz, 1986. "Appendix A: The Development and Role of the National Bureau of Economic Research's Business Cycle Chronologies," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 735-780, National Bureau of Economic Research, Inc.
    3. O'Brien, Anthony, 1985. "The Cyclical Sensitivity of Wages [The Changing Cyclical Behavior of Wages and Prices: 1890-1976] [Cross-Country and Cross-Temporal Differences in Inflation Responsiveness]," American Economic Review, American Economic Association, vol. 75(5), pages 1124-1132, December.
    4. Sachs, Jeffrey, 1980. "The Changing Cyclical Behavior of Wages and Prices: 1890-1976," American Economic Review, American Economic Association, vol. 70(1), pages 78-90, March.
    5. Santomero, Anthony M & Seater, John J, 1978. "The Inflation-Unemployment Trade-off: A Critique of the Literature," Journal of Economic Literature, American Economic Association, vol. 16(2), pages 499-544, June.
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