← Search

Business Cycle Models, Aggregation, and Real Wage Cyclicality

Audra J. Bowlus¹; Haoming Liu²; Chris Robinson¹

¹ Western University · ² National University of Singapore

A substantial literature has developed to estimate the “true” cyclicality of real wages, that is, composition bias free. Two major issues are addressed in this article: aggregation of heterogeneous workers and potential bias in the measurement of the labor input. A general analysis of the biases is presented, and alternative approaches in the literature are nested in a single framework. Estimates based on an efficiency units concept that avoids the usual aggregation problems are presented. Composition bias underestimates the usual parameters of interest unless both the price and the quantity of the labor input are adjusted appropriately.

DOI

10.1086/338219

Volume

20 (2)

Pages

308-335

Language

en

Export

BibTeX

Sources

openalex crossref