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  3. American Economic Review: Insights
  4. March 2021
  5. The Cyclical Behavior of Job Quality and Real Wage Growth

American Economic Review: Insights

ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)

The Cyclical Behavior of Job Quality and Real Wage Growth

  • Andriana Bellou
  • Bariş Kaymak
American Economic Review: Insights
vol. 3, no. 1, March 2021
(pp. 83–96)
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Abstract

We study the empirical relevance of implicit insurance contracts for wage setting while accounting for cyclical fluctuations in average job quality. Using proxy measures, we find the latter to be acyclical, if not countercyclical, due to the cleansing effects of layoffs during recessions versus quits during expansions. Then, we study the cyclical behavior of wage growth among job stayers to test for contracts, circumventing differences in job quality altogether. Both methods strongly corroborate the prevalence of wage contracts in the labor market and imply a highly procyclical price for labor.

Citation

Bellou, Andriana, and Bariş Kaymak. 2021. "The Cyclical Behavior of Job Quality and Real Wage Growth." American Economic Review: Insights, 3 (1): 83–96. DOI: 10.1257/aeri.20190553

Additional Materials

JEL Classification

  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • E32 Business Fluctuations; Cycles
  • J31 Wage Level and Structure; Wage Differentials
  • J41 Labor Contracts
  • J63 Labor Turnover; Vacancies; Layoffs