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Worker Flows and Wage Dynamics: Estimating Wage Growth without Composition Effects

Author

Listed:
  • Raquel Carrasco
  • J. Ignacio García-Pérez
  • Juan F. Jimeno

Abstract

Wage dynamics is closely intertwined with job flows. However, composition effects associated to the different sizes and characteristics of workers entering/exiting into/from employment that may blur the “true” underlying wage growth, are not typically accounted for. In this paper, we take these composition effects into consideration and compute wage growth in Spain during the 2006-2018 period after netting out the consequences of employment dynamics. Our results show that the “true” underlying wage growth in the Spanish economy during recessions (expansions) was, on average, significantly lower (higher) that the observed with raw data. This may help to explain some macro puzzles, such as the “vanishing” Phillips curve.

Suggested Citation

  • Raquel Carrasco & J. Ignacio García-Pérez & Juan F. Jimeno, 2021. "Worker Flows and Wage Dynamics: Estimating Wage Growth without Composition Effects," Studies on the Spanish Economy eee2021-03, FEDEA.
    • Handle: RePEc:fda:fdaeee:eee2021-03
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    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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