Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/20595 
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion Papers No. 1327
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
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.
Subjects: 
nominal wage rigidity
measurement error
JEL: 
J38
Document Type: 
Working Paper

Files in This Item:
File
Size
595.52 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.