Labor Quality and the Cyclicality of Real Wages.

Because labor quality changes over the business cycle,the cyclicality of aggregate wages cannot reflect the true cyclical behavior of the price of labor inputs. To control for changes in labor quality, many researchers have examined the cyclical behavior of the price of labor inputs using microdata sets with mixed results. In this paper, I develop a hedonic pricing method to examine the cyclicality of real wages and implement it using the U.S. Current Population Survey (CPS) data.