Interpreting aggregate wage growth

Richard Blundell (), Howard Reed and Thomas M. Stoker ()
Additional contact information
Howard Reed: Institute for Fiscal Studies
Thomas M. Stoker: Institute for Fiscal Studies and MIT

No W99/13, IFS Working Papers from Institute for Fiscal Studies

Abstract: This paper analyzes the relationship between aggregate wages and individual wages when there is time series variation in employment and in the dispersion of wages. A new and easily implementable framework for the empirical analysis of aggregation biases is developed. Aggregate real wages are shown to contain three important bias terms: one associated with the dispersion of individual wages, a second reflecting the distribution of working hours, and a third deriving from compositional changes in the (selected) sample of workers. Noting the importance of these issues for recent experience in Britain, data on real wages and participation for British male workers over the period 1978-1996 are studied. A close correspondence between the estimated biases and the patterns of differences shown by aggregate wages is established. This is shown to have important implications for the interpretation of real wage growth over this period.

Keywords: Aggregate Real Earnings; Participation; Wage Distribution (search for similar items in EconPapers)
JEL-codes: C34 E24 J31 (search for similar items in EconPapers)
Pages: 67 pp
Date: 1999-09-01
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (14)

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