Search Results
Author: Runkle, David
Resulting in 1 citation.
| 1. |
Keane, Michael P. Moffitt, Robert A. Runkle, David |
|
Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data Journal of Political Economy 96,6 (December 1988): 1232-1266. Also: http://www.jstor.org/stable/1831950 Cohort(s): Young Men Publisher: University of Chicago Press Keyword(s): Employment, In-School; Heterogeneity; Selectivity Bias/Selection Bias; Wages One of the oldest questions in macroeconomics concerns the correlation between the business cycle and the real wage. The authors provide new evidence on this question by examining the possible bias that arises when: (1) workers have unobserved characteristics that affect their wages; and (2) those workers who move in and out of the workforce over the cycle have systematically different unobserved characteristics than those who stay in. The authors also distinguish between the bias that arises from those unobserved characteristics that are permanent components of wages and those which are transitory. Micro panel data from the Young Men cohort and maximum likelihood selectivity bias techniques were utilized to estimate both the extent of this selectivity-cum- aggregation bias and the true effect of the cycle on real wages. It was found that selectivity bias is present-- workers are more likely to lose employment during a recession if they have high wages, especially if they have a high transitory wage component. The primary source of this selectivity bias is a rigid-wage manufacturing sector in which those with both high permanent and transitory wages are more likely to be laid off. Overall, the effect of selectivity is to bias OLS estimates based only on workers in a procyclical direction. The results show that the true effect of the cycle on wages is still procyclical, but much smaller in magnitude than previous estimates using micro data have suggested. |
|
|
Bibliography Citation
Keane, Michael P., Robert A. Moffitt and David Runkle. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data." Journal of Political Economy 96,6 (December 1988): 1232-1266.
|