The Life-Cycle and the Business-Cycle of Wage Risk: A Cross-Country Comparison

Christian Bayer and Falko Juessen

No 4402, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper provides a cross-country comparison of life-cycle and business-cycle fluctuations in the dispersion of household-level wage innovations. We draw our inference from household panel data sets for the US, the UK, and Germany. First, we find that household characteristics explain about 25% of the dispersion in wages within an age group in all three countries. Second, the cross-sectional variance of wages is almost linearly increasing in household age in all three countries, but with increments being smaller in the European data. Third, we find that wage risk is procyclical in Germany while it is countercyclical in the US and acyclical in the UK, pointing towards labor market institutions being pivotal in determining the cyclical properties of labor market risk.

Keywords: business cycle; uncertainty fluctuations; heterogeneity; life-cycle risk; wages (search for similar items in EconPapers)
JEL-codes: D31 D91 E20 J31 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-09
New Economics Papers: this item is included in nep-bec, nep-eec and nep-mac
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Citations: View citations in EconPapers (9)

Published - published in: Economics Letters, 2012, 117 (3), 831-833

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Journal Article: The life-cycle and the business-cycle of wage risk — Cross-country comparisons (2012)
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