The Life-cycle And The Business-cycle Of Wage Risk: A Cross-country Comparison
Source: Institute for the Study of Labor
This paper provides a cross-country comparison of life-cycle and business-cycle fluctuations in the dispersion of household-level wage innovations. The authors draw their inference from household panel data sets for the US, the UK, and Germany. First, they find that household characteristics explain about 25% of the dispersion in wages within an age group in all three countries. Second, the cross-sectional variance of wages is almost linearly increasing in household age in all three countries, but with increments being smaller in the European data. Third, they find that wage risk is procyclical in Germany while it is countercyclical in the US and acyclical in the UK, pointing towards labor market institutions being pivotal in determining the cyclical properties of labor market risk.