Micro-components of aggregate wage dynamics

Antti Kauhanen () and Mika Maliranta

No 1, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Abstract: We propose an approach for measuring and analyzing the dynamics of standard aggregate wage growth of macro statistics with micro-data. Our method decomposes aggregate wage growth to the wage growth of job stayers and to various terms related to job and worker restructuring. This method produces explicit expressions with clear interpretations for the various restructuring components and therefore opens new opportunities for a deeper analysis of various micro-level mechanisms and their cyclicality. The methodology also allows us to study many topics simultaneously that have previously been studied in isolation. Using comprehensive longitudinal employer-employee data over an extended period of time, we study how job and worker restructuring influences aggregate wage growth and its cyclicality. We show that wage formation is significantly more flexible than suggested by the aggregate numbers, and we identify the microlevel mechanisms that explain the greater flexibility. This version: December 7, 2012

Pages: 54 pages
Date: 2012-12-07
New Economics Papers: this item is included in nep-lab and nep-lma
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Citations: View citations in EconPapers (1)

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