Wage Cyclicality and Labor Market Sorting

Ana Gomes Figueiredo Varatojo dos Santos

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Abstract

This paper uses a measure of skill mismatch to separate wage flexibility from confounding variation in wages driven by differences in job quality over the business cycle. I first show that the high cyclicality of job switchers wages goes beyond cyclical movements in skill mismatch. Then, I uncover large differences in wage cyclicality across the skill mismatch distribution. Among incumbent workers, wages are acyclical in good matches but procyclical in poor matches, in particular for overqualified workers.
Original languageEnglish
Number of pages25
JournalAmerican Economic Review: Insights
Volume4
Issue number4
DOIs
Publication statusPublished - Dec 2022

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