A cross-country comparison of the cyclicality of real wages

This paper contains the first cross-country comparison of the cyclical behaviour of real wages using microdata. After controlling for changes in labour quality, I find that real wages are strongly procyclical in Canada, the United Kingdom, and the United States. In contrast, the cyclicality of government-published real aggregate hourly wages varies substantially across these three countries. The disparity suggests that a direct comparison of the cyclical behaviour of real aggregate wages is misleading. Finally, I show that variations in labour quality also bias the cross-country correlation of several key labour market-variables.