Georgiadis, Andreas and Manning, Alan (2014) The volatility of earnings: evidence from high-frequency firm-level data. CEP Discussion Papers, CEPDP1290. Centre for Economic Performance, London School of Economics and Political Science, London, UK.
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Abstract
The first contribution of this paper is to use UK monthly firm-level data to show that there is a large amount of transitory volatility in firm-level average earnings from month to month. We conclude that this cannot all be explained away as the consequence of measurement error, composition effects or variation in remunerated hours i.e. we suggest this volatility is real. The second contribution of the paper is to argue that this volatility cannot be interpreted as high flexibility in the shadow cost of labour to employers because of sizeable frictions in the labour market. Indeed we point out that it is the existence of frictions that allow the volatility to exist. Consequently we argue that this volatility would be expected to have only small allocational consequences and that measures of base wages are more useful in drawing conclusions about wage flexibility.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://cep.lse.ac.uk/_new/publications/series.asp?... |
| Additional Information: | © 2014 The Authors |
| Library of Congress subject classification: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor |
| Journal of Economic Literature Classification System: | E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation) J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General |
| Sets: | Departments > Economics Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP) |
| Identification Number: | CEPDP1290 |
| Funders: | Economic and Social Research Council |
| Date Deposited: | 04 Dec 2014 15:32 |
| URL: | http://eprints.lse.ac.uk/60443/ |
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