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Publisher: Kiel Institute for the World Economy (IfW) Kiel
Languages: English
Types: Research
Subjects: search and matching model, Volatilität, E24, J41, J64, business cycle, Macroeconomics and International Economics, Matching, business cycle; search and matching models; wage rigidity, Arbeitslosigkeit, Business Cycle, Wage Rigidity, Search and Matching Model, Business Cycle, Search and Matching Model, wage rigidity, search and matching model, business cycle, USA, search model, cyclical properties, wage rigidities, volatility, wages, Arbeitsuche, E32, Lohnrigidität, J31, wage rigidity, Wage rigidity, Wage Rigidity, Arbeitsangebot, Konjunkturelle Arbeitslosigkeit, HB, Lohnbildung
jel: jel:E32, jel:J31, jel:J30, jel:J64, jel:E24, jel:J41
ddc: ddc:330
Shimer (2005) and Hall (2005) have documented the failure of standard labor market search models to match business cycle fluctuations in employment and unemployment. They argue that it is likely that wages are not adjusted as regularly as suggested by the model, which would explain why employment is more volatile than the model predicts. We explore whether this explanation is consistent with the data. The main insight is that the relevant wage data for the search model are not aggregate wages, but wages of newly hired workers. Preliminary results show that wages for those workers are much more volatile than aggregate wages, suggesting that other (real) frictions might be more important than wage stickiness
  • The results below are discovered through our pilot algorithms. Let us know how we are doing!

    • Abowd, John M. and Arnold Zellner (1985). Estimating Gross Labor-Force Flows, Journal of Business and Economic Statistics, 3(3), pp.254-283
    • Abraham, Katharine G, James R. Spletzer and Jay C. Stewart (1999). Why Do Di¤erent Wage Series Tell Di¤erent Stories? American Economic Review, 89(2), pp. 34-39
    • Andolfatto, David (1996). Business Cycles and Labor-Market Search. American Economic Review, 86(1), pp.112-132
    • Baker, George, Michael Gibbs and Bengt Holmstrom (1994). The Wage Policy of a Firm, Quarterly Journal of Economics, 109(4), pp.921-955
    • Barlevy, Gadi (2001). Why Are the Wages of Job Changers So Procyclical, Journal of Labor Economics, 19(4), pp.837-878
    • Barro, Robert J. (1977). Long-Term Contracting, Sticky Prices, and Monetary Policy. Journal of Monetary Economics, 3(3)
    • Beaudry, Paul and John DiNardo (1991). The E¤ect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data, Journal of Political Economy, 99(4), pp.665-688
    • Bils, Mark J. (1985). Real Wages Over the Business Cycle: Evidence From Panel Data, Journal of Political Economy, 93(4), pp.666-689
    • Blanchard, Olivier and Jordi Galí (2007). Real Wage Rigidities and the New Keynesian Model, Journal of Money, Credit, and Banking, 39(1) suppl, pp.35-66
    • BLS (2000). Bureau of Labor Statistics and US Census Bureau, Current Population Survey: Design and Methodology, CPS Technical Paper 63RV
    • Boldrin, Michael and Michael Horvath (1995). Labor Contracts and Business Cycles, Journal of Political Economy, 103(5), pp 972-1004
    • Braun, Helge (2006). Unemployment Dynamics: The Case of Monetary Policy Shocks, mimeo Northwestern University
    • Card, David (1999). The Causal E¤ect of Education on Earnings, in Handbook of Labor Economics (O. Ashenfelter and D. Card, eds), volume 3A, pp.1801-1863
    • Carneiro, Anabela, Paulo Guimarães and Pedro Portugal (2012). Real Wages and the Business Cycle: Accounting for Worker and Firm Heterogeneity, American Economic Journal: Macroeconomics, 4(2), pp.133-152
    • Champagne, Julien and André Kurmann (2011). The Great Increase in Relative Volatility of Real Wages in the United States, CIRPEE Cahiers de Recherche 1010
    • Cooley, Thomas F., ed. (1995). Frontiers of Business Cycle Research, Princeton University Press
    • Costain, James S. and Michael Reiter (2008), Business Cycles, Unemployment Insurance, and the Calibration of Matching Models, Journal of Economic Dynamics and Control, 32(4), pp.1120-1155
    • Devereux, Paul J. (2001). The Cyclicality of Real Wages Within Employer-Employee Matches, Industrial and Labor Relations Review, 54(4), pp.835-850
    • Devereux, Paul J. and Robert A. Hart (2006). Real Wage Cyclicality of Job Stayers, WithinCompany Job Movers, and Between-Company Job Movers, Industrial and Labor Relations Review, 60(1), pp.105-119
    • Dunlop, John T. (1938). The Movement of Real and Money Wage Rates, Economic Journal, 48(191), pp.413-434
    • Ebell, Monique and Christian Haefke (2009). Product Market Deregulation and the US Employment Miracle, Review of Economic Dynamics, 12, pp.479-504
    • Farmer, Roger E.A. and Andrew Hollenhorst (2006). Shooting the Auctioneer, NBER Working paper 12584
    • Basu, Susanto, John G. Fernald and Miles S. Kimball (2006). Are Technology Improvements Contractionary? American Economic Review, 96(5), pp.1418-1448
    • Fernald, John G. (2007). Trend Breaks, Long-Run Restrictions, and Contractionary Technology Improvements, Journal of Monetary Economics, 54(8), pp.2467-2485
    • Galí, Jordi and Luca Gambetti (2009). On the Sources of the Great Moderation, American Economic Journal: Macroeconomics, 1(1), pp.26-57
    • Galí, Jordi and Thijs van Rens (2010). The Vanishing Procyclicality of Labor Productivity, IZA Discussion Paper 5099
    • Galušµcák, Kamil, Mary Keeney, Daphne Nicolitsas, Frank Smets, Pawel Strzelecki and Matija Vodopivec (2010). The Determination of Wages of Newly Hired Employees - Survey Evidence on Internal versus External Factors, ECB Working Paper 1153
    • Gertler, Mark and Antonella Trigari (2009). Unemployment Fluctuations with Staggered Nash Wage Bargaining, Journal of Political Economy, 117(1), pp.38-86
    • Grant, Darren (2003). The E¤ect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from the National Longitudinal Surveys, Industrial and Labor Relations Review, 56(3), pp.393-408
    • Haefke, Christian and Michael Reiter (2011). What Do Participation Fluctuations Tell Us About Labor Supply Elasticities? IZA Discussion Paper 6039
    • Hagedorn, Marcus and Iourii Manovskii (2008). The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited, American Economic Review, 98(4), pp.1692-1706
    • Hall, Robert E. (2005). Employment Fluctuations with Equilibrium Wage Stickiness, American Economic Review, 95(1), pp.50-65
    • Hall, Robert E. (2007). How Much Do We Understand about the Modern Recession? Brookings Papers on Economic Activity, 2007(2), pp.13-28
    • Hall, Robert E. and Paul R. Milgrom (2008). The Limited In‡uence of Unemployment on the Wage Bargain, American Economic Review, 98(4), pp.1653-1674
    • Hirsch, Barry T. and Edward J. Schumacher (2004). Match Bias in Wage Gap Estimates Due to Earnings Imputation, Journal of Labor Economics, 22(3), pp.689-722
    • Hornstein, Andreas, Per Krusell and Giovanni L. Violante (2005). Unemployment and Vacancy Fluctuations in the Matching Model: Inspecting the Mechanism, Economic Quarterly (Federal Reserve Bank of Richmond), 91(3), pp.19-51
    • Jaeger, David A. (1997). Reconciling the Old and the New Census Bureau Education Questions: Recommendations for Researchers, Journal of Business and Economic Statistics, 15(3), pp.300-309
    • Kennan, John (2010). Private Information, Wage Bargaining and Employment Fluctuations, Review of Economic Studies, 77(2), pp.633-664
    • Kudlyak, Marianna (2009). The Cyclicality of the User Cost of Labor with Search and Matching, Richmond Fed Working Paper 09-12
    • Madrian, Brigitte C. and Lars J. Lefgren (2000). An Approach to Longitudinally Matching Current Population Survey (CPS) Respondents, Journal of Economic and Social Measurement, 26(1), pp.31-62
    • MacLeod, W. Bentley and James M. Malcomson (1993). Investments, Holdup, and the Form of Market Contracts, American Economic Review, 83(4), pp.811-837
    • Malcomsom, James M. (1999). Individual Employment Contracts, Chapter 35 in the Handbook of Labor Economics (O. Ashenfelter and D. Card, eds), Volume 3, pp.2291-2372
    • Merz, Monica (1995). Search in the Labor Market and the Real Business Cycle, Journal of Monetary Economics, 36, pp.269-300
    • Moen, Espen R. and Åsa Rosen (2006). Incentives in Competitive Search Equilibrium and Wage Rigidity, CEPR Discussion paper 5554
    • Menzio, Guido (2005). High-Frequency Wage Rigidity, mimeo University of Pennsylvania
    • Menzio, Guido and Shouyon Shi (2010). Directed Search on the Job, Heterogeneity and Aggregate Fluctuations, American Economic Review, 100(2), pp.327-332
    • Merkl, Christian and Thijs van Rens (2012). Selective Hiring and Welfare Analysis in Labor Market Models, IZA Discussion Paper 6294
    • Mortensen, Dale T. and Christopher A. Pissarides (1994). Job creation and job destruction in the theory of unemployment. Review of Economic Studies, 61(3), pp.397-415
    • Mortensen, Dale T. and Éva Nagypál (2007). More on Unemployment and Vacancy Fluctuations, Review of Economic Dynamics, 10(3), pp.327-347
    • Nucci, Francesco and Marianna Riggi (2011). Performance Pay and Shifts in Macroeconomic Correlations, Bank of Italy Working Paper 800
    • Oswald, Andrew J. (1985). The Economic Theory of Trade Unions: An Introductory Survey, Scandinavian Journal of Economics, 87(2), pp.160-93
    • Pissarides, Christopher A. (1985). Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages, American Economic Review, 75(4), pp.676-690
    • Rudanko, Leena (2009). Labor Market Dynamics under Long Term Wage Contracting, Journal of Monetary Economics, 56(2)
    • Schmitt, John (2003). Creating a consistent hourly wage series from the Current Population Survey's Outgoing Rotation Group, 1979-2002, mimeo CEPR
    • Shimer, Robert (2004). The Consequences of Rigid Wages in Search Models, Journal of the European Economic Association, 2(2-3), pp.469-479
    • Shimer, Robert (2005). The Cyclical Behavior of Equilibrium Unemployment and Vacancies, American Economic Review, 95(1), pp.25-49
    • Shimer, Robert (2010). Labor Markets and Business Cycles, CREI lectures in Macroeconomics, Princeton University Press
    • Simon, Curtis J. (2001). The Supply Price of Labor During the Great Depression, Journal of Economic History, 61(4), pp.877-903
    • Shin, Donggyun and Gary Solon (2007). New Evidence on Real Wage Cyclicality within EmployerEmployee Matches, Scottish Journal of Political Economy, 54(5), pp.648-660
    • Solon, Gary, Robert Barsky and Jonathan A. Parker (1994). Measuring the Cyclicality of Real Wages: How Important is Composition Bias?, Quarterly Journal of Economics, 109(1), pp.1- 25
    • Stock, James H. and Mark W. Watson (2003). Has the Business Cycle Changed and Why? NBER Macroeconomics Annual, volume 17, pp.159-218
    • Tarshis, Lorie (1939). Changes in Real and Money Wages, Economic Journal, 49(193), pp.150-154
    • Thomas, Jonathan and Tim Worrall (1988). Self-enforcing Wage Contracts, Review of Economic Studies, 55(4), pp.541-554
    • Yellen, Janet L. (1984). E¢ciency Wage Models of Unemployment, American Economic Review, 74(2), pp.200-205
    • All workers New hires 0.24 0.79 0.14 0.40
    • All workers New hires 0.18 0.49 0.11 0.32 Earnings per person
    • All workers New hires 0.37 0.83 0.17 0.51
    • All workers New hires 0.20 0.30 0.10 0.35
    • Abowd, John M. and Arnold Zellner (1985). Estimating Gross Labor-Force Flows, Journal of Business and Economic Statistics, 3(3), pp.254-283
    • Abraham, Katharine G, James R. Spletzer and Jay C. Stewart (1999). Why Do Different Wage Series Tell Di¤erent Stories? American Economic Review, 89(2), pp. 34-39
    • Andolfatto, David (1996). Business Cycles and Labor-Market Search. American Economic Review, 86(1), pp.112-132
    • Baker, George, Michael Gibbs and Bengt Holmstrom (1994). The Wage Policy of a Firm, Quarterly Journal of Economics, 109(4), pp.921-955
    • Barlevy, Gadi (2001). Why Are the Wages of Job Changers So Procyclical, Journal of Labor Economics, 19(4), pp.837-878
    • Barro, Robert J. (1977). Long-Term Contracting, Sticky Prices, and Monetary Policy. Journal of Monetary Economics, 3(3)
    • Beaudry, Paul and John DiNardo (1991). The E¤ect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data, Journal of Political Economy, 99(4), pp.665-688
    • Bewley, Truman F. (1999). Why Wages Don't Fall During a Recession, Harvard University Press
    • Bils, Mark J. (1985). Real Wages Over the Business Cycle: Evidence From Panel Data, Journal of Political Economy, 93(4), pp.666-689
    • Blanchard, Olivier and Jordi Galí (2007). Real Wage Rigidities and the New Keynesian Model, Journal of Money, Credit, and Banking, 39(1) suppl, pp.35-66
    • Boldrin, Michael and Michael Horvath (1995). Labor Contracts and Business Cycles, Journal of Political Economy, 103(5), pp 972-1004
    • Card, David (1999). The Causal E¤ect of Education on Earnings, in Handbook of Labor Economics (O. Ashenfelter and D. Card, eds), volume 3A, pp.1801-1863
    • Carneiro, Anabela, Paulo Guimarães and Pedro Portugal (2012). Real Wages and the Business Cycle: Accounting for Worker and Firm Heterogeneity, American Economic Journal: Macroeconomics, 4(2), pp.133-152
    • Cooley, Thomas F., ed. (1995). Frontiers of Business Cycle Research, Princeton University Press
    • Costain, James S. and Michael Reiter (2008), Business Cycles, Unemployment Insurance, and the Calibration of Matching Models, Journal of Economic Dynamics and Control, 32(4), pp.1120-1155
    • Devereux, Paul J. (2001). The Cyclicality of Real Wages Within Employer-Employee Matches, Industrial and Labor Relations Review, 54(4), pp.835-850
    • Devereux, Paul J. and Robert A. Hart (2006). Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers, Industrial and Labor Relations Review, 60(1), pp.105-119
    • Dunlop, John T. (1938). The Movement of Real and Money Wage Rates, Economic Journal, 48(191), pp.413-434
    • Ebell, Monique and Christian Haefke (2009). Product Market Deregulation and the US Employment Miracle, Review of Economic Dynamics, 12, pp.479-504
    • Farmer, Roger E.A. and Andrew Hollenhorst (2006). Shooting the Auctioneer, NBER Working paper 12584
    • Basu, Susanto, John G. Fernald and Miles S. Kimball (2006). Are Technology Improvements Contractionary? American Economic Review, 96(5), pp.1418-1448
    • Fernald, John G. (2007). Trend Breaks, Long-Run Restrictions, and Contractionary Technology Improvements, Journal of Monetary Economics, 54(8), pp.2467-2485
    • Galí, Jordi and Luca Gambetti (2009). On the Sources of the Great Moderation, American Economic Journal: Macroeconomics, 1(1), pp.26-57
    • Galí, Jordi and Thijs van Rens (2010). The Vanishing Procyclicality of Labor Productivity, IZA Discussion Paper 5099
    • Hall, Robert E. (2005). Employment Fluctuations with Equilibrium Wage Stickiness, American Economic Review, 95(1), pp.50-65
    • Hall, Robert E. (2007). How Much Do We Understand about the Modern Recession? Brookings Papers on Economic Activity, 2007(2), pp.13-28
    • Hall, Robert E. and Paul R. Milgrom (2008). The Limited In‡uence of Unemployment on the Wage Bargain, American Economic Review, 98(4), pp.1653-1674
    • Hirsch, Barry T. and Edward J. Schumacher (2004). Match Bias in Wage Gap Estimates Due to Earnings Imputation, Journal of Labor Economics, 22(3), pp.689- 722
    • Hornstein, Andreas, Per Krusell and Giovanni L. Violante (2005). Unemployment and Vacancy Fluctuations in the Matching Model: Inspecting the Mechanism, Economic Quarterly (Federal Reserve Bank of Richmond), 91(3), pp.19-51
    • Jaeger, David A. (1997). Reconciling the Old and the New Census Bureau Education Questions: Recommendations for Researchers, Journal of Business and Economic Statistics, 15(3), pp.300-309
    • Kennan, John (2010). Private Information, Wage Bargaining and Employment Fluctuations, Review of Economic Studies, 77(2), pp.633-664
    • Kudlyak, Marianna (2009). The Cyclicality of the User Cost of Labor with Search and Matching, Richmond Fed Working Paper 09-12
    • Madrian, Brigitte C. and Lars J. Lefgren (2000). An Approach to Longitudinally Matching Current Population Survey (CPS) Respondents, Journal of Economic and Social Measurement, 26(1), pp.31-62
    • MacLeod, W. Bentley and James M. Malcomson (1993). Investments, Holdup, and the Form of Market Contracts, American Economic Review, 83(4), pp.811-837
    • Malcomsom, James M. (1999). Individual Employment Contracts, Chapter 35 in the Handbook of Labor Economics (O. Ashenfelter and D. Card, eds), Volume 3, pp.2291-2372
    • Merz, Monica (1995). Search in the Labor Market and the Real Business Cycle, Journal of Monetary Economics, 36, pp.269-300
    • Moen, Espen R. and Åsa Rosen (2006). Incentives in Competitive Search Equilibrium and Wage Rigidity, CEPR Discussion paper 5554
    • Menzio, Guido (2005). High-Frequency Wage Rigidity, mimeo University of Pennsylvania
    • Menzio, Guido and Shouyon Shi (2010). Directed Search on the Job, Heterogeneity and Aggregate Fluctuations, American Economic Review, 100(2), pp.327-332
    • Mortensen, Dale T. and Éva Nagypál (2007). More on Unemployment and Vacancy Fluctuations, Review of Economic Dynamics, 10(3), pp.327-347
    • Nucci, Francesco and Marianna Riggi (2011). Performance Pay and Shifts in Macroeconomic Correlations, Bank of Italy Working Paper 800
    • Oswald, Andrew J. (1985). The Economic Theory of Trade Unions: An Introductory Survey, Scandinavian Journal of Economics, 87(2), pp.160-93
    • Pissarides, Christopher A. (1985). Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages, American Economic Review, 75(4), pp.676-690
    • Stock, James H. and Mark W. Watson (2003). Has the Business Cycle Changed and Why? NBER Macroeconomics Annual, volume 17, pp.159-218
    • Tarshis, Lorie (1939). Changes in Real and Money Wages, Economic Journal, 49(193), pp.150-154
    • Thomas, Jonathan and Tim Worrall (1988). Self-enforcing Wage Contracts, Review of Economic Studies, 55(4), pp.541-554
    • Abowd, John M. and Arnold Zellner (1985). Estimating Gross Labor-Force Flows, Journal of Business and Economic Statistics, 3(3), pp.254-283
    • Abraham, Katharine G, James R. Spletzer and Jay C. Stewart (1999). Why Do Different Wage Series Tell Di¤erent Stories? American Economic Review, 89(2), pp. 34-39
    • Baker, George, Michael Gibbs and Bengt Holmstrom (1994). The Wage Policy of a Firm, Quarterly Journal of Economics, 109(4), pp.921-955
    • Barlevy, Gadi (2001). Why Are the Wages of Job Changers So Procyclical, Journal of Labor Economics, 19(4), pp.837–878
    • Beaudry, Paul and John DiNardo (1991). The E¤ect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data, Journal of Political Economy, 99(4), pp.665-688
    • Card, David (1999). The Causal E¤ect of Education on Earnings, in Handbook of Labor Economics, volume 3A, pp.1801-1863
    • Devereux, Paul J. (2001). The Cyclicality of Real Wages Within Employer-Employee Matches, Industrial and Labor Relations Review, 54(4), pp.835-850
    • Devereux, Paul J. and Robert A. Hart (2006). Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers, Industrial and Labor Relations Review, 60(1), pp.105-119
    • Dunlop, John T. (1938). The Movement of Real and Money Wage Rates, Economic Journal, 48(191), pp.413–434
    • Basu, Susanto, John G. Fernald and Miles S. Kimball (2006). Are Technology Improvements Contractionary? American Economic Review, 96(5), pp.1418-1448
    • Fernald, John G. (2007). Trend Breaks, Long-Run Restrictions, and Contractionary Technology Improvements, Journal of Monetary Economics, 54(8), pp.2467-2485
    • Shimer, Robert (2004). The Consequences of Rigid Wages in Search Models, Journal of the European Economic Association, 2(2-3), pp.469–479
    • Shimer, Robert (2005). The Cyclical Behavior of Equilibrium Unemployment and Vacancies, American Economic Review, 95(1), pp.25-49
    • Beaudry, Paul and John DiNardo (1991). The E¤ect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data” Journal of Political Economy, 99(4), pp.665-88.
    • Bewley, Truman F. (1998). Why not cut pay? European Economic Review, 42(3-5), pp.459-90.
    • Bewley, Truman F. (1999). Why Wages Don’t Fall During a Recession, Harvard University Press.
    • Costain, James S. and Michael Reiter (2005), Business Cycles, Unemployment Insurance, and the Calibration of Matching Models. UPF working paper 872.
    • Hall, Robert E. (2005). Employment Fluctuations with Equilibrium Wage Stickiness. American Economic Review, 95(1), pp.50-65.
    • Kennan, John (2006). Private Information, Wage Bargaining, and Employment Fluctuations. mimeo, University of Wisconsin Madison.
    • MacLeod, W.B. and J.M. Malcomson, J.M. (1993). Investments, Holdup, and the Form of Market Contracts. American Economic Review, 83(4), pp.811-37.
    • Malcomson, James M. (1999). Individual Employment Contracts, in: Orley Ashenfelter and David Card (eds.), Handbook of Labor Economics, 3B. New York: North-Holland.
    • Mortensen, Dale T. and Christopher Pissarides (1994). Job creation and job destruction in the theory of unemployment. Review of Economic Studies, 61, pp.397-415.
    • Yellen, Janet L. (1984). E¢ ciency Wage Models of Unemployment. American Economic Review, 74(2), Papers and Proceedings of the NinetySixth Annual Meeting of the American Economic Association, pp.200- 205.
  • No related research data.
  • Discovered through pilot similarity algorithms. Send us your feedback.