New Evidence on Real Wage Cyclicality Within Employer-employee Matches

13 Pages Posted: 5 Nov 2007

See all articles by Donggyun Shin

Donggyun Shin

Hanyang University - Department of Economics

Gary Solon

University of Arizona; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: 2007-08-01


In the most thorough study to date on wage cyclicality among job stayers, Devereux's (2001) analysis of men in the Panel Study of Income Dynamics (PSID) produced two puzzling findings: (1) the real wages of salaried workers are noncyclical, and (2) wage cyclicality among hourly workers differs between two alternative wage measures. We examine these puzzles with additional evidence from other sources. Devereux's finding of noncyclical real wages among salaried job stayers is not replicated in the National Longitudinal Survey of Youth (NLSY) data. The NLSY data, however, do corroborate his finding of a discrepancy for hourly workers between the cyclicality of the two alternative wage measures. Evidence from the PSID Validation Study contradicts Devereux's conjecture that the discrepancy might be due to a procyclical bias from measurement error in average hourly earnings. Evidence from the Bureau of Labor Statistics establishment survey supports his hypothesis that overtime work accounts for part (but not all) of the discrepancy. We conclude that job stayers' real average hourly earnings are substantially procyclical and that an important portion of that procyclicality probably is due to compensation beyond base wages.

Suggested Citation

Shin, Donggyun and Solon, Gary, New Evidence on Real Wage Cyclicality Within Employer-employee Matches (2007-08-01). Scottish Journal of Political Economy, Vol. 54, Issue 5, pp. 648-660, November 2007. Available at SSRN: or

Donggyun Shin (Contact Author)

Hanyang University - Department of Economics ( email )

17 Haegdang-dong
Seoul, 133-791

Gary Solon

University of Arizona ( email )

Department of Economics
Eller College of Management
Tucson, AZ 85719
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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