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The Relation Between Skill Levels and the Cyclical Variability of Employment, Hours, and Wages

38 Pages Posted: 15 Feb 2006  

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; IZA Institute of Labor Economics

Date Written: May 1993

Abstract

This paper uses micro panel data to examine differences in the cyclical variability of employment, hours, and real wages for skilled and unskilled workers. Contrary to conventional wisdom, we find that, at the aggregate level, skilled and unskilled workers are subject to essentially the same degree of cyclical variation in wages. However, important differences emerge in the patterns of employment and hours variation for skilled versus unskilled workers, especially when a college degree is used as a proxy for skills. We find that the quality of labor input per manhour tends to rise in recessions, thereby inducing a countercyclical bias in aggregate measures of the real wage. We also find substantial differences across industries in the cyclical variation of employment, hours, and wage differentials, which we interpret as indicative of important inter-industry differences in labor contracting.

JEL Classification: J31, E32, J41

Suggested Citation

Prasad, Eswar S., The Relation Between Skill Levels and the Cyclical Variability of Employment, Hours, and Wages (May 1993). IMF Working Paper, Vol. , pp. 1-38, 1993. Available at SSRN: https://ssrn.com/abstract=883502

Eswar Prasad

Cornell University - Dyson School of Applied Economics and Management ( email )

440 Warren Hall
Ithaca, NY 14853
United States

HOME PAGE: http://prasad.aem.cornell.edu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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