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Working Paper
Heterogeneity and the Effects of Aggregation on Wage Growth
This paper focuses on the implications of alternative methods of aggregating individual wage data for the behavior of economy-wide wage growth. The analysis is motivated by evidence of significant heterogeneity in individual wage growth and its cyclicality. Because of this heterogeneity, the choice of aggregation will affect the properties of economy-wide wage growth measures. To assess the importance of this consideration, we provide a decomposition of wage growth into aggregation effects and composition effects and use the decomposition to compare growth in an average wage—specifically ...
Working Paper
Heterogeneity and the Effects of Aggregation on Wage Growth
This paper focuses on the implications of alternative methods of aggregating individual wage data for the behavior of economy-wide wage growth. The analysis is motivated by evidence of significant heterogeneity in individual wage growth and its cyclicality. Because of this heterogeneity, the choice of aggregation will affect the properties of economy-wide wage growth measures. To assess the importance of this consideration, we provide a decomposition of wage growth into aggregation effects and composition effects and use the decomposition to compare growth in an average wage—specifically ...
Working Paper
How Important are Composition Effects for Aggregate Wage Growth?
Previous studies have ascribed the modest procyclicality of average hourly earnings growth to composition bias. These studies argue that by placing more weight on low-skill workers during expansions than during recessions, average hourly earnings growth generates a downward bias in estimated cyclicality. This paper uses data from the Survey of Income and Program Participation to document that this downward bias is, instead, the consequence of an aggregation effect that involves a relative-earnings weighting of individual wage growths. We also find that the aggregation effect largely accounts ...