Resource title

Downward Nominal Wage Flexibility : Real or Measurement Error?

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Resource description

This paper presents a new method to correct for measurement error in wage data and applies this method to address an old question. How much downward wage flexibility is there in the U.S? We apply standard methods developed by Bai and Perron (1998b) to identify structural breaks in time series data. Applying these methods to wage histories allows us to identify when each person experienced a change in nominal wages. The length of the period of constant nominal wages is left unrestricted and is allowed to differ across individuals, as is the size and direction of the nominal wage change. We apply these methods to data from the Survey of Income and Program Participation. The evidence we provide indicates that the probability of a cut in nominal wages is substantially overstated in data that is not corrected for measurement error.

Resource author

Peter Gottschalk

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/20595

Resource license

Adapt according to the presented license agreement and reference the original author.