Causes of Business Cycles and the Cyclicality of Real Wages

摘要

A models ability to explain procyclical movements in real wages has become an211u001eimportant benchmark by which macroeconomists judge business cycle theories. 211u001eBecause Keynesian models with sticky nominal wages predict countercyclical real 211u001ewages, they have been criticized and dismissed in favor of Real Business Cycle 211u001emodels or New Keynesian models based on price stickiness or countercyclical 211u001emarkups. The bulk of the evidence for procyclical real wages, however, comes from 211u001estudies using panel data that estimate the unconditional, contemporaneous 211u001ecorrelation between real wages and the unemployment rate. These studies constrain 211u001ereal wage cyclicality to be the same irrespective of the source of the business 211u001ecycle fluctuations. This paper relaxes this constraint and estimates a structural 211u001eVAR identified by long-run restrictions on the responses of hours and output to 211u001elabor supply, technology, oil price, and aggregate demand shocks. It finds that 211u001ereal wages are procyclical in response to technology shocks and oil price shocks, 211u001ebut are countercyclical in response to labor supply shocks and aggregate demand 211u001eshocks. The procyclicality of real wages during the periods covered by the panel 211u001edata sets may be explained by the importance of the productivity slowdown and the 211u001e1970s oil price shocks. The results highlight the limitations of using the 211u001eunconditional, contemporaneous correlation between real wages and business cycle 211u001eindicators to sort out competing theories of the business cycle, and cast strong 211u001edoubt on the appropriateness of the rejection of sticky wage models.