Dezember 2008

IZA DP No. 3884: Real Wages over the Business Cycle: OECD Evidence from the Time and Frequency Domains

published in: Journal of Economic Dynamics and Control, 2009, 33(6), 1183-1200

We study differences in the adjustment of aggregate real wages in the manufacturing sector over the business cycle across OECD countries, combining results from different data and dynamic methods. Summary measures of cyclicality show genuine cross-country heterogeneity even after controlling for the impact of data and methods. We find that more open economies and countries with stronger unions tend to have less pro-cyclical (or more counter-cyclical) wages. We also find a positive correlation between the cyclicality of real wages and employment, suggesting that policy complementarities may influence the adjustment of both quantities and prices in the labour market.