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Do Job-to-Job Transitions Drive Wage Fluctuations Over the Business Cycle?

Fatih Karahan¹; Ryan Michaels²; Benjamin Pugsley¹; Ayşegül Şahin³; Rachel Schuh¹

¹ Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045 (e-mail: ) · ² Federal Reserve Bank of Philadelphia, 10 N Independence Mall W, Philadelphia, PA 19106 (e-mail: ) · ³ Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045.

We investigate the importance of job-to-job (JJ) transitions for cyclical wage dynamics. By exploiting cross-state variation, we find that wage growth is tightly linked to variation in the JJ transition probability, and conditional on this, the job finding probability of the unemployed has no explanatory power. We investigate the robustness of our results to several caveats and find the result to hold. Finally, we discuss the implications of our findings for competing theories of wage dynamics.

DOI

10.1257/aer.p20171076

Volume

107 (5)

Pages

353-357

Language

en

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