Why did we think wages are rigid for all those years?
See-Yu Chan, Stephan Hobler, Thijs van Rens
This is a good example of Do the simplest thing that works — the paper essentially removes workers from the earnings distribution that report full dollar or half dollar earnings in their hourly or weekly wages, and then re-estimates the distribution of wage changes. While this is far from a bulletproof approach to accounting for measurement error, it’s extremely simple and just kind of makes sense.