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American Economic Journal: Macroeconomics: Vol. 4 No. 2 (April 2012)

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Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity

Article 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.4.2.133

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)

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Authors

Carneiro, Anabela (Centre for Economic and Finance, U Porto)
Guimarães, Paulo (Centre for Economic and Finance, U Porto and U SC)
Portugal, Pedro (Bank of Portugal)

JEL Classifications

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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American Economic Journal: Macroeconomics


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