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a measure of trend wage inflation

We extend time-series models that have so far been used to study price inflation (Stock and Watson 2016) and apply them to a micro-level data set containing worker-level information on hourly wages. We construct a measure of aggregate nominal wage growth that (i) filters out noise and very transitory movements, (ii) quantifies the importance of idiosyncratic factors for aggregate wage dynamics, and (iii) strongly co-moves with labor market tightness, unlike existing indicators of wage inflation. We show that our measure is a reliable real-time indicator of wage pressures and a good predictor of future wage growth.

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Audoly, Richard; Almuzara, Martin; Melcangi, Davide (2025): A Measure of Trend Wage Inflation. Version: 1.0. Journal of Applied Econometrics. Dataset. http://dx.doi.org/10.15456/jae.2025063.1717036120

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