Real Wages over the Business Cycle

Edward Gamber and Fred Joutz
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Edward Gamber: Congressional Budget Office

Eastern Economic Journal, 1997, vol. 23, issue 3, 277-291

Abstract: The real wage is acyclical. This fact is inconsistent with standard theories which assume a single shock drives the cycle and predict either a strong pro or countercyclical real wage. This paper tests the hypothesis that the real wage is acyclical because there are several shocks, some with opposing effects on the real wage, driving the business cycle. We find evidence in support of this hypothesis. In particular, we find real wages are procyclical in response to labor demand shocks and countercyclical in response to labor supply, aggregate demand and oil price shocks with the strongest countercyclical movements arising from aggregate demand.

Keywords: Business Cycles; Countercyclical; Cycle; Procyclical; Wage (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:23:y:1997:i:3:p:277-291

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