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Revisiting the Relationship Between Unemployment and Wages

Author

Listed:
  • Joao Alfredo Galindo da Fonseca

    (University of British Columbia, Vancouver School of Economics)

  • Giovanni Gallipoli

    (University of British Columbia)

  • Yaniv Yedid-Levi

    (University of British Columbia, Vancouver School of Economics)

Abstract

We revisit the empirical relationship between wages and labor market conditions. Following work histories in the NLSY79 we document that the relationship between wages and unemployment rate differs across occupations. The results hold after controlling for unobserved match quality. This suggests that evidence about history-dependence of wages obtained from pooled samples conceals significant differences and may provide an imprecise description of earning dynamics. Similar discrepancies emerge when we group workers by education. Sensitivity of wages to unemployment appears related to whether total remuneration entails performance pay components.

Suggested Citation

  • Joao Alfredo Galindo da Fonseca & Giovanni Gallipoli & Yaniv Yedid-Levi, 2016. "Revisiting the Relationship Between Unemployment and Wages," Working Papers 2016-001, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2016-001
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    References listed on IDEAS

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    1. David H. Autor & David Dorn, 2013. "The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market," American Economic Review, American Economic Association, vol. 103(5), pages 1553-1597, August.
    2. Guido Matias Cortes & Giovanni Gallipoli, 2018. "The Costs of Occupational Mobility: An Aggregate Analysis," Journal of the European Economic Association, European Economic Association, vol. 16(2), pages 275-315.
    3. Darren Grant, 2003. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from the National Longitudinal Surveys," ILR Review, Cornell University, ILR School, vol. 56(3), pages 393-408, April.
    4. Guido Matias Cortes & Giovanni Gallipoli, 2014. "The Costs of Occupational Mobility: An Aggregate Analysis," Working Papers 2014-015, Human Capital and Economic Opportunity Working Group.
    5. Baris Kaymak & Andriana Bellou, 2010. "Wage Growth over the Business Cycle: Contractual versus Spot Markets," 2010 Meeting Papers 1289, Society for Economic Dynamics.
    6. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 535-560, June.
    7. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-688, August.
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    Cited by:

    1. Gottfries, A. & Teulings, T., 2017. "Wage Posting, Nominal Rigidity, and Cyclical Inefficiencies," Cambridge Working Papers in Economics 1736, Faculty of Economics, University of Cambridge.
    2. Bauer, Anja & Lochner, Benjamin, 2016. "History dependence in wages and cyclical selection: evidence from Germany," IAB Discussion Paper 201629, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Gottfries, Axel & Teulings, Coen N, 2017. "Wage posting, nominal rigidity, and cyclical inefficiencies," CEPR Discussion Papers 12316, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    wages; unemployment; occupation;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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