Data Management

Measuring What Employers Really Do About Entry Wages Over The Business Cycle

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Executive Summary

In models recently published by several influential macroeconomic theorists, rigidity in the real wages that firms pay newly hired workers plays a crucial role in generating realistically large cyclical fluctuations in unemployment. The authors review the small empirical literature and show that the methods used thus far are poorly suited for identifying employers' wage practices. They propose a simpler and more relevant approach - use matched employer/employee longitudinal data to identify entry jobs and then directly track the cyclical variation in the real wages paid to workers newly hired into those jobs.

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