Cyclical Wage Movements in Emerging Markets Compared to Developed Economies: the Role of Interest Rates
Bibliographic record
Abstract
This paper documents that, at the aggregate level, (i) real wages are positively correlated with output and, on average, lag output by about one quarter in emerging markets, while there are no systematic patterns in developed economies, (ii) real wage volatility (relative to output volatility) is about twice as high in emerging markets compared with developed economies, and (iii) real wage volatility, as a ratio of output volatility, decreases with the level of financial development across countries. I then present a model of contractual arrangements between workers and employers in a small open economy that helps explain this contrast. Only employers have access to financial and capital markets in the model, but they need to borrow working capital to pay for labor costs before production is carried out. The idea is that countercyclical interest rates and less developed financial markets in emerging markets make it less optimal for employers to provide workers with relatively stable wages, leading to more volatile and procyclical wages. This is further demonstrated by calibrating the model using data from Mexico and Canada.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.005 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.001 | 0.002 |
| Science and technology studies | 0.000 | 0.001 |
| Scholarly communication | 0.002 | 0.001 |
| Open science | 0.000 | 0.001 |
| Research integrity | 0.000 | 0.001 |
| Insufficient payload (model declined to judge) | 0.002 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".