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American Economic Review: Vol. 93 No. 4 (September 2003)

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Interpreting Aggregate Wage Growth: The Role of Labor Market Participation

Article Citation

Blundell, Richard, Howard Reed, and Thomas M. Stoker. 2003. "Interpreting Aggregate Wage Growth: The Role of Labor Market Participation." The American Economic Review, 93(4): 1114-1131.

DOI: 10.1257/000282803769206223

Abstract

A new and easily implementable framework for the empirical analysis of the relationship between aggregate and individual wages is developed. Aggregate real wages are shown to contain three important bias terms: one associated with the dispersion of individual wages, a second deriving from compositional changes in the (selected) sample of workers, and a third reflecting the distribution of working hours. Their importance for interpreting the path of aggregate wages and of the returns to education for recent experience in Britain is highlighted. A close correspondence between the estimated biases and the patterns of differences shown by aggregate wages is established. (JEL C34, E24, J31)

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Authors

Blundell, Richard
Reed, Howard
Stoker, Thomas M.


American Economic Review



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