Measuring the Cyclicality of Real Wages: How Important Is the Firm's Point of View?

Eric Swanson

The Review of Economics and Statistics, 2004, vol. 86, issue 1, 362-377

Abstract: There is a growing consensus among economists that real wages in the postwar United States have been procyclical, greatly bolstering technology-driven theories of business cycles at the expense of more classical models. This paper makes the point that technological movements in firm's labor demand curves should be tested with a wage that is deflated by the firm's own price of output, with appropriate controls for intermediate inputs, and with respect to the cyclical state of the firm's own industry, as opposed to the state of the aggregate economy. Failure to control for these factors is found to lead to substantial overrejection of the classical model. In detailed industry data, with controls for changes in worker composition, I find that a vast majority of sectors have paid real product wages that vary inversely (that is, countercyclically) with the state of their industry. 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/003465304323023877 link to full text (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:86:y:2004:i:1:p:362-377

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().