Interpreting aggregate wage growth: The role of labor market participation

Richard Blundell, Howard Reed, Thomas M. Stoker

Research output: Contribution to journalArticlepeer-review

37 Citations (Scopus)


A new and easily implementable framework for the empirical analysis of the relationship between aggregate and individual wages is developed. Aggregate real wages are shown to contain three important bias terms: one associated with the dispersion of individual wages, a second deriving from compositional changes in the (selected) sample of workers, and a third reflecting the distribution of working hours. Their importance for interpreting the path of aggregate wages and of the returns to education for recent experience in Britain is highlighted. A close correspondence between the estimated biases and the patterns of differences shown by aggregate wages is established.
Original languageEnglish
Pages (from-to)1114-1131
Number of pages18
JournalAmerican Economic Review
Issue number4
Publication statusPublished - Sept 2003

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