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Journal of Labor Economics Vol. 34 No. S1 2016

Wage Adjustment in the Great Recession and Other Downturns: Evidence from the United States and Great Britain

Michael Elsby1; Donggyun Shin2; Gary Solon3,4

1 University of Edinburgh · 2 Kyung Hee University · 3 University of Arizona · 4 National Bureau of Economic Research

open access

Abstract

Using 1979–2012 CPS data for the United States and 1975–2012 NES data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real wages varies across recessions, and does so differently between the two countries, in ways that defy simple explanations. We devote particular attention to the hypothesis that downward nominal wage rigidity plays an important role in cyclical employment and unemployment fluctuations. We conclude that downward wage rigidity may be less binding and have lesser allocative consequences than is often supposed.

DOI
10.1086/682407
Volume
34
Issue
S1
Pages
S249-S291
Language
en
Sources
openalex crossref

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