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The cyclicality of effective wages within employer-employee matches: evidence from German panel data

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  • Anger, Silke

Abstract

Using individual based micro-data from the German Socio Economic Panel Study (SOEP), I analyse the cyclicality of real wages for male workers within employer-employee matches over the period 1984-2004, and compare different wage measures: the standard hourly wage rate, hourly wage earnings including overtime and bonus payments, and the effective wage, which takes into account not only paid overtime, but also unpaid working hours. None of the hourly wage measures is shown to exhibit cyclicality except for the group of salaried workers with unpaid overtime. Their effective wages react strongly to changes in unemployment in a pro-cyclical way. Despite a-cyclical wage rates, salaried workers without unpaid hours but with income from extra payments, such as bonuses, experienced pro-cyclical earnings movements. Monthly earnings were also pro-cyclical for hourly paid workers who received overtime payments. The pro-cyclicality of earnings revealed for Germany is of comparable size with the one in the U.S. JEL Classification: E32, J31

Suggested Citation

  • Anger, Silke, 2007. "The cyclicality of effective wages within employer-employee matches: evidence from German panel data," Working Paper Series 783, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2007783
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    4. Paula Garda & Volker Ziemann, 2014. "Economic Policies and Microeconomic Stability: A Literature Review and Some Empirics," OECD Economics Department Working Papers 1115, OECD Publishing.

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    More about this item

    Keywords

    bonus payments; effective wages; firm stayers; unpaid overtime; wage cyclicality;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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