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Real earnings and business cycles: new evidence


Hart, Robert A; Malley, James R; Woitek, Ulrich (2008). Real earnings and business cycles: new evidence. Empirical Economics, 37(1):51-71.

Abstract

In the time domain, the observed cyclical behavior of the real wage hides a range of economic influences that give rise to cycles of differing lengths and strengths. This may serve to produce a distorted picture of wage cyclicality. Here, we employ frequency domain methods that allow us to assess the relative contribution of cyclical frequency bands
on real wage earnings. Earnings are decomposed into standard and overtime components. We also distinguish between consumption and production wages. Frequency domain analysis is carried out in relation to wages alone and to wages in relation to output and employment cycles. Our univariate analysis suggests that, in general, the dominant
cycle followed by output, employment, real consumer and producer wages and their components is 5-7 years. Consistent with previous findings reported in the macro-level literature, our bi-variate results show that the various measures of the wage are generally not linked
to the employment cycle. However, and in sharp contrast with previous macro-level studies we find strong procyclical links between the consumer wage and its overtime components and the output cycle, especially at the 5-7 years frequency.

Abstract

In the time domain, the observed cyclical behavior of the real wage hides a range of economic influences that give rise to cycles of differing lengths and strengths. This may serve to produce a distorted picture of wage cyclicality. Here, we employ frequency domain methods that allow us to assess the relative contribution of cyclical frequency bands
on real wage earnings. Earnings are decomposed into standard and overtime components. We also distinguish between consumption and production wages. Frequency domain analysis is carried out in relation to wages alone and to wages in relation to output and employment cycles. Our univariate analysis suggests that, in general, the dominant
cycle followed by output, employment, real consumer and producer wages and their components is 5-7 years. Consistent with previous findings reported in the macro-level literature, our bi-variate results show that the various measures of the wage are generally not linked
to the employment cycle. However, and in sharp contrast with previous macro-level studies we find strong procyclical links between the consumer wage and its overtime components and the output cycle, especially at the 5-7 years frequency.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
06 Faculty of Arts > Institute of History
Dewey Decimal Classification:900 History
330 Economics
Language:English
Date:2008
Deposited On:30 Jan 2009 07:29
Last Modified:05 Apr 2016 12:54
Publisher:Springer
ISSN:0377-7332
Additional Information:The original publication is available at www.springerlink.com
Publisher DOI:https://doi.org/10.1007/s00181-008-0222-1

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