Manufacturing Employment Cycle
The paper demonstrates that two relatively unknown features of the employment cycle in U.S. manufacturing industries can provide a clue to understanding the role of sectorial shocks in the evolution of aggregate employment. First, interindustry wage differentials rise in expansions and fall in contractions. Second, periods of increasing aggregate employment are associated with relatively good price and productivity shocks to capital-intensive sectors. The paper presents a simple general-equilibrium model where bargaining at the industry level and rents due to sector-specific capital generate a wage structure with higher wages in capital-intensive sectors but where the response of wages to sector-specific shocks is greater in labor intensive sectors. Empirical evidence is presented to support such implications of the model. The asymmetry of wage adjustments imply that aggregate employment responds more to shocks in capital-intensive industries and that procyclical wage differentials can only result from asymmetric disturbances.
|Date of creation:||2002|
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- Abraham, Katharine G & Katz, Lawrence F, 1986.
"Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?,"
Journal of Political Economy,
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- Katharine G. Abraham & Lawrence F. Katz, 1984. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," NBER Working Papers 1410, National Bureau of Economic Research, Inc.
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- Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-1266, December.
- Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-137, March.
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- Ricardo J. Caballero & Eduardo Engel & John Haltiwanger, 1996. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," Documentos de Trabajo 6, Centro de Economía Aplicada, Universidad de Chile.
- Sebastián Claro, 2003. "Wages and Unemployment in the United States: Reviving a Wage Gap Explanation," Documentos de Trabajo 235, Instituto de Economia. Pontificia Universidad Católica de Chile.. Full references (including those not matched with items on IDEAS)
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