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Atlanta Fed Working Papers


Wages and Unemployment across Business Cycles: A High-Frequency Investigation

Lei Fang and Pedro Silos
Working Paper 2012-16
October 2012

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This paper investigates the change in wages associated with a spell of unemployment. The novelty lies in using monthly data from the Survey of Income and Program Participation (SIPP) to analyze the dynamics of those wage changes across different business cycles. The level of education or the sector of re-employment affects the change in wages following an unemployment spell differently across different downturns. The degree of wage rigidity varies across recessions; wage changes pre- and post-unemployment are sometimes procyclical and sometimes countercyclical. These results may be useful for understanding the different aggregate employment dynamics observed across downturns and recoveries.

JEL classification: E24, J31

Key words: wage rigidity, unemployment duration, jobless recoveries


The authors thank Jing Xu for excellent research assistance, Bruce Fallick for a thoughtful discussion on an earlier draft, and Shigeru Fujita for a helpful conversation. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Please address questions regarding content to Lei Fang, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8057, lei.fang@atl.frb.org, or Pedro Silos, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8630, psilos@frbatlanta.org.

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