Working Paper: NBER ID: w2396
Authors: Rebecca M. Blank
Abstract: This paper investigates cyclicality in real wages between 1969 and 1982, using 14 years of data from the Panel Survey of Income Dynamics. First, it investigates the extent to which movements in and out of the labor market created apparent wage cyclicality. Second, it investigates whether cyclical movements of workers between heterogeneous wage sectors within the labor market created cyclicality. Little evidence of the first effect is found. The second effect is much more important, and cyclicality clearly occurs in the movement of workers between different labor market sectors. However, sector selection is not correlated with wage determination. Thus, individual wage change estimates of cyclicality need to control for sector location, but need not account for sector selection. The third conclusion of the paper is that cyclicality is present in real wages even within sectors over this time period, and is the result of both cyclicality in overall wage levels (cyclicality in the constant term in wage equations), as well as in the coefficients associated with particular worker characteristics.
Keywords: wages; cyclicality; labor market; real wages; economic conditions
JEL Codes: J30; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| movements in and out of the labor market (J69) | wage cyclicality (J31) |
| cyclical movements of workers between heterogeneous wage sectors (J69) | wage cyclicality (J31) |
| worker movements between sectors (J62) | aggregate wage estimates (J39) |
| cyclicality in real wages within sectors (J39) | wage levels and coefficients associated with worker characteristics (J31) |
| macroeconomic activity (E39) | wage changes (J31) |