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  4. September 2004
  5. Why Does the Cyclical Behavior of Real Wages Change Over Time?

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Why Does the Cyclical Behavior of Real Wages Change Over Time?

  • Kevin X.D. Huang
  • Zheng Liu
  • Louis Phaneuf
American Economic Review
vol. 94, no. 4, September 2004
(pp. 836–856)
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Abstract

The cyclical behavior of real wages has evolved from mildly countercyclical during the interwar period to modestly procyclical in the postwar era. This paper presents a general-equilibrium business-cycle model that helps explain the evolution. In the model, changes in the real wage cyclicality arise from interactions between nominal wage and price rigidities and an evolving input-output structure.

Citation

Huang, Kevin, X.D., Zheng Liu, and Louis Phaneuf. 2004. "Why Does the Cyclical Behavior of Real Wages Change Over Time?" American Economic Review, 94 (4): 836–856. DOI: 10.1257/0002828042002552

JEL Classification

  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
  • E32 Business Fluctuations; Cycles
  • E52 Monetary Policy