Real wages and aggregate demand shocks: contradictory evidence from VARs
نویسنده
چکیده
This paper revisits two recent studies that estimate the dynamic response of real wages to aggregate demand shocks. Using identical empirical techniques—structural VARs with long-run identifying restrictions—and similar post-war data, [Gamber and Joutz 83 (1993) 1387] and [Spencer 36 (1998) 120] report contradictory findings. After careful examination, I conclude that the reason for this puzzling result is a lack of robustness of the estimated wage response functions to model specification, data transformation to induce stationarity, the choice of proxy for the aggregate real wage, and the choice of variables to include in the VAR. The implication is that the message from VARs with long-run restrictions regarding real wage dynamics is not clear, and that further work must be done to understand the role of relative stickiness of wages and prices in the transmission of aggregate demand shocks. © 2002 Elsevier Science Inc. All rights reserved. JEL classification: E0; E1; E3
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