Munich Personal RePEc Archive

Pre-Recession Wage Inflation and the Strength of the Subsequent Recovery

Campbell, Carl (2016): Pre-Recession Wage Inflation and the Strength of the Subsequent Recovery.

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Abstract

This study shows that the rate of wage inflation in the year before a recession is positively related to the rate of employment growth in the subsequent recovery. A possible explanation for this relationship is downward nominal wage rigidity. On the other hand, the prior rate of wage inflation is not significantly related to the employment decline during the ensuing recession, suggesting that prior wage growth has a greater impact on the strength of the recovery from a recession than on the severity of the recession.

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