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Does employees’ compensation vary with corporate profit?

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  • Seip, Knut Lehre
  • McNown, Robert

Abstract

We find that from about 1965 to 1983 US employees’ compensation, EC, relative to corporate profit, CP, increases in the long run, and from 1984 to 2013 the compensation decreases relative to profit to about half its 1983 value. The first period includes “US peacetime inflation”, 1970–1978 and the last period includes “The Great Moderation”, 1985–1997. With the exception of a short period 1998–2003, the dominant pattern is that corporate profit and employees’ compensation increase and decrease in concert, but compensation lags profit with about 10 quarters. From 1965 to present, cycle times for the EC–CP pair generally decreases from about 60 quarters to about 40 quarters.

Suggested Citation

  • Seip, Knut Lehre & McNown, Robert, 2015. "Does employees’ compensation vary with corporate profit?," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 281-290.
    • Handle: RePEc:eee:jpolmo:v:37:y:2015:i:2:p:281-290
    DOI: 10.1016/j.jpolmod.2015.01.012
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    1. Wen-Shwo Fang & Stephen M. Miller, 2008. "The Great Moderation and The Relationship between Output Growth and Its Volatility," Southern Economic Journal, John Wiley & Sons, vol. 74(3), pages 819-838, January.
    2. Seip, Knut Lehre & McNown, Robert, 2007. "The timing and accuracy of leading and lagging business cycle indicators: A new approach," International Journal of Forecasting, Elsevier, vol. 23(2), pages 277-287.
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    Cited by:

    1. Bolaji Saheed HAMZAT & Bashiru Akande BELLO & Adedayo Mathias OPELE, 2018. "Compensation, Employee Performance And Organization Performance In Guarantee Trust Bank (Gt Bank) Plc," Business Excellence and Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 8(4), pages 14-28, December.
    2. Seip, Knut L., 2019. "Does tax reduction have an effect on gross domestic product? An empirical investigation," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1128-1143.

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    More about this item

    Keywords

    Functional distribution of income; Compensation; Profits; Business cycles;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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