American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Job Selection and Wages over the Business Cycle
American Economic Review
vol. 103,
no. 2, April 2013
(pp. 771–803)
Abstract
We consider a model with on-the-job search where current wages depend only on current aggregate labor market conditions and idiosyncratic match-specific productivities. We show theoretically that the model replicates the findings in Bils (1985) and Beaudry and DiNardo (1991) on the history dependence in wages. We develop a method to measure match qualities in the data and show empirically that various variables summarizing past aggregate labor market conditions have explanatory power for current wages only because they are correlated with match qualities. They lose any predictive power once match qualities are accounted for. (JEL E3, E24, J3)Citation
Hagedorn, Marcus, and Iourii Manovskii. 2013. "Job Selection and Wages over the Business Cycle." American Economic Review, 103 (2): 771–803. DOI: 10.1257/aer.103.2.771Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E30 Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
- J30 Wages, Compensation, and Labor Costs: General