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Bureau of Labor Statistics > Office of Survey Methods and Research > Publications > Browse Research Papers

Cyclical Aggregation Bias

Michael K. Lettau

Abstract

The paper estimates the aggregation bias in compensation per hour for the United States, where aggregation bias is defined as the difference over the business cycle between compensation in the typical job and average compensation in the labor market. It compares the Employment Cost Index with the Employer Cost for Employee Compensation, both of which are calculated using the same data from a panel survey of jobs. The results suggest that the aggregation bias is countercyclical, so compensation in the typical job is more procyclical than average compensation in the labor market.