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In search of a stylised fact: do real wages exhibit a consistent pattern of cyclical variability?

By Andrea Brandolini


The paper surveys the studies on the cyclical behaviour of real wages published from the twenties onwards. The traditional simple neoclassical model of the labour market suggests that real wages tend to move countercyclically. However, from a theoretical viewpoint, there are few reasons to expect this behaviour, once the simple model is extended to account for imperfect competition, uncertainty, lagged responses, or contracting between firms and workers. Empirical studies give different answers to the problem. The contributions reviewed in the paper are arranged roughly in a chronological order: the interwar period, the postwar pre-econometric studies, the econometric work using aggregate data,, the evidence produced on the basis of longitudinal data, the analyses of the shock-responsiveness of real wages, and, finally, the most recent papers attempting a reconciliation of the somewhat conflicting evidence derived from aggregate and panel data

Topics: HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 1993
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Provided by: LSE Research Online
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