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  4. May 2017
  5. Do Job-to-Job Transitions Drive Wage Fluctuations over the Business Cycle?

Do Job-to-Job Transitions Drive Wage Fluctuations over the Business Cycle?

  • Fatih Karahan
  • Ryan Michaels
  • Benjamin Pugsley
  • Ayşegül Şahin
  • Rachel Schuh
American Economic Review
vol. 107, no. 5, May 2017
(pp. 353-57)
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Abstract

We investigate the importance of job-to-job (JJ) transitions for cyclical wage dynamics. By exploiting cross-state variation, we find that wage growth is tightly linked to variation in the JJ transition probability, and conditional on this, the job finding probability of the unemployed has no explanatory power. We investigate the robustness of our results to several caveats and find the result to hold. Finally, we discuss the implications of our findings for competing theories of wage dynamics.

Citation

Karahan, Fatih, Ryan Michaels, Benjamin Pugsley, Ayşegül Şahin, and Rachel Schuh. 2017. "Do Job-to-Job Transitions Drive Wage Fluctuations over the Business Cycle?" American Economic Review, 107 (5): 353-57. DOI: 10.1257/aer.p20171076

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
  • J64 Unemployment: Models, Duration, Incidence, and Job Search