Difficulties in determining the cyclical pattern in real wage rates from aggregate data are primarily caused by biases due to
A) substitution behavior.
B) substantial differences across different business cycles.
C) variations in the composition of the labor force over the business cycle.
D) changing policy responses to business cycles.

Question

Quizplus · Accepted Answer

Variations in the composition of the labor force over the business cycle can make it difficult to determine the cyclical pattern of real wage rates based on aggregate data, as different groups of workers may have different wage trends over the cycle. This can create biases and distortions in the observed data, making it harder to identify clear patterns or trends. Other factors may also contribute to difficulties in interpreting cyclical patterns in real wages, but variations in the composition of the labor force are considered a primary cause of bias in this context.

Difficulties in Determining the Cyclical Pattern in Real Wage Rates