The Dynamics and Interrelations of Series of Wage and Employment Evidence from Micro Data

Abstract

The paper analyzes the behavior and interrelations of series of wage and employment at two levels of aggregation. The lower level is composed of individual firms. The higher level is composed of aggregates of these firms into homogeneous groups. The relation of the wage series to each other is characterized at the two levels of aggregation. The relation of employment and wage is characterized at the lower (firm) level. At each aggregation level the analysis is performed on monthly, quarterly and annual data frequencies. The data supports the existence of wage leadership within homogeneous groups of firms. The wage series display a time uniform hierarchy at the higher level of aggregation which disappears at the firm level. Yet the wage ranking is quite persistent even at the firm level. The majority of the firms in the sample display a negative relation between their series of relative wage and relative employment. The rates of change of these series display a similar negative relation which is, however, much weaker.