Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity
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Abstract
Using a longitudinal matched employer-employee dataset for Portugal over the 1986-2007 period, this study analyzes the wage responses to aggregate labor market conditions for newly hired workers and existing workers within the same firm. Accounting for worker, firm, and job title heterogeneity, the data support the hypothesis that entry wages are more procyclical than wages of stayers. A one point increase in the unemployment rate decreases wages of newly hired workers within a given firm-job title by around 2.7 percent and by 2.2 percent for stayers within the same firm-job title. Finally, the results reveal a one-for-one wage response to changes in labor productivity. (JEL: E24, E32, J64)Citation
Carneiro, Anabela, Paulo Guimarães, and Pedro Portugal. 2012. "Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity." American Economic Journal: Macroeconomics, 4 (2): 133-52. DOI: 10.1257/mac.4.2.133Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E32 Business Fluctuations; Cycles
- J64 Unemployment: Models, Duration, Incidence, and Job Search
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