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The Behavior of the Aggregate U.S. Wage Markdown

Hashmat Khan () and Konstantinos Metaxoglou ()
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Konstantinos Metaxoglou: Department of Economics, Carleton University,

No 21-06, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: We estimate the aggregate U.S. wage markdown for 1987–2018 using the KLEMS data and the approach in Hershbein, Macaluso and Yeh (2020). Building on the existing literature, our markdown estimates depend on output elasticities of inputs and their shares of gross output. We identify four salient features of the markdown. First, the markdown is above 1, implying an average wage below the competitive level. Second, the markdown has increased over time, mainly during the 2000–2015 period. Third, the variation of the markdown is mostly driven by the input shares and not the output elasticities. Fourth, the markdown is strongly procyclical, implying a larger deviation of wages from their competitive levels during expansions.

Keywords: Employer Market Power; Monopsony; Markdowns; Business Cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2021-07-06
New Economics Papers: this item is included in nep-com and nep-mac
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Published: Carleton Economics Papers

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