This paper estimates the cyclicality of real wages using a VAR approach. Long-run restrictions on the behavior of aggregate hours and output identify labor supply, technology, oil price, and aggregate demand shocks. It is shown that real wages are procyclical in response to technology and oil price shocks but are countercyclical in response to aggregate demand shocks. The evidence is consistent with models where nominal wages are stickier than nominal prices. The results point out the importance of looking at the cyclicality of real wages and output or the unemployment rate.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100713/1/ECON182.pd
