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Why does the cyclical behavior of real wages change over time?

  • Kevin X.D. Huang
  • Zheng Liu
  • Louis Phaneuf

This paper seeks to understand the evolution of the cyclical behavior of U.S. real wage rates from the interwar period to the post World War II period using a dynamic general equilibrium model that emphasizes demand-driven business cycle fluctuations. In the model, changes in the cyclical behavior of real wages arise endogenously from the interactions between nominal wage and price rigidities and an evolving input-output structure.

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Paper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 02-09.

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Date of creation: 2002
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Handle: RePEc:fip:fedkrw:rwp02-09
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