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In Search of a Stylised Fact: Do Real Wages Exhibit a Consistent Pattern of Cyclical Variability?

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  • A Brandolini

Abstract

The paper surveys the studies on the cyclical behaviour of real wages published from the twenties onwards. The traditional simple neoclassical model of the labour market suggests that real wages tend to move countercyclically. However, from a theoretical viewpoint, there are few reasons to expect this behaviour, once the simple model is extended to account for imperfect competition, uncertainty, lagged responses, or contracting between firms and workers. Empirical studies give different answers to the problem. The contributions reviewed in the paper are arranged roughly in a chronological order: the interwar period, the postwar pre-econometric studies, the econometric work using aggregate data,, the evidence produced on the basis of longitudinal data, the analyses of the shock-responsiveness of real wages, and, finally, the most recent papers attempting a reconciliation of the somewhat conflicting evidence derived from aggregate and panel data.

Suggested Citation

  • A Brandolini, 1993. "In Search of a Stylised Fact: Do Real Wages Exhibit a Consistent Pattern of Cyclical Variability?," CEP Discussion Papers dp0112, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0112
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    Cited by:

    1. Christopher A. Pissarides, 2007. "Unemployment And Hours Of Work: The North Atlantic Divide Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 1-36, February.
    2. Rodolphe Dos Santos Ferreira, 1999. "La relations salaire-emploi sous l'éclairage de la concurrence imparfaite," Cahiers d'Économie Politique, Programme National Persée, vol. 34(1), pages 15-40.
    3. Chandranath Amarasekara & George J. Bratsiotis, 2012. "Monetary policy and real wage cyclicality," Applied Economics, Taylor & Francis Journals, vol. 44(33), pages 4391-4408, November.
    4. Jean-Bernard Chatelain, 1999. "Taux de marge et structure financière," Annals of Economics and Statistics, GENES, issue 53, pages 127-147.
    5. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    6. Andrea Bassanini, 2012. "Aggregate Earnings and Macroeconomic Shocks: the Role of Labour Market Policies and Institutions," Review of Economics and Institutions, Università di Perugia, vol. 3(3).
    7. Martyna Marczak & Thomas Beissinger, 2013. "Real wages and the business cycle in Germany," Empirical Economics, Springer, vol. 44(2), pages 469-490, April.
    8. Stirati, Antonella, 2014. "Real wages in the business cycle: an unresolved conflict between theory and facts in mainstream macroeconomics," MPRA Paper 53743, University Library of Munich, Germany.
    9. Grace Weishi Gu & Eswar Prasad, 2018. "New Evidence on Cyclical Variation in Labor Costs in the U.S," NBER Working Papers 24266, National Bureau of Economic Research, Inc.
    10. Bertola, Giuseppe & Rogerson, Richard, 1997. "Institutions and labor reallocation," European Economic Review, Elsevier, vol. 41(6), pages 1147-1171, June.
    11. Nicolas Petrosky-Nadeau, 2014. "Credit, Vacancies and Unemployment Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 191-205, April.
    12. 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.
    13. Sophia Dimelis, 1997. "Cyclical and causal relations between real wages and employment in the EU," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 311-324.
    14. Antonella Stirati, 2016. "Real wages in the business cycle and the theory of income distribution: an unresolved conflict between theory and facts in mainstream macroeconomics," Cambridge Journal of Economics, Oxford University Press, vol. 40(2), pages 639-661.
    15. Marczak, Martyna & Gómez, Víctor, 2015. "Cyclicality of real wages in the USA and Germany: New insights from wavelet analysis," Economic Modelling, Elsevier, vol. 47(C), pages 40-52.
    16. Anabela Carneiro & Pedro Portugal, 2004. "Workers' Flows and Real Wage Cyclicality," Working Papers w200409, Banco de Portugal, Economics and Research Department.
    17. repec:eee:labchp:v:3:y:1999:i:pc:p:2985-3028 is not listed on IDEAS
    18. Dongya Koh & Raül Santaeulàlia-Llopis, 2017. "Countercyclical Elasticity of Substitution," Working Papers 946, Barcelona Graduate School of Economics.
    19. repec:hal:journl:halshs-00118639 is not listed on IDEAS
    20. Rodolphe Dos Santos Ferreira & Philippe Michel, 2013. "Keynes' Wage–Price Dynamics," Metroeconomica, Wiley Blackwell, vol. 64(1), pages 44-72, February.
    21. Hie Joo Ahn & Ling Shao, 2017. "Precautionary On-the-Job Search over the Business Cycle," Finance and Economics Discussion Series 2017-025, Board of Governors of the Federal Reserve System (U.S.).
    22. Schlitzer, Giuseppe, 1996. "Business cycles in Italy: A statistical investigation," European Journal of Political Economy, Elsevier, vol. 11(4), pages 683-698, April.

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