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Wage formation and employment in a cointegrated VAR model

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Author Info

  • THÓRARINN G. PÉTURSSON

    ()

  • TORSTEN SLØK

    ()

Abstract

This paper uses a general equilibrium, monopolistic competition model of wage bargaining between trade unions and firms to derive two steady state relations which are estimated within a cointegrated VAR framework using quarterly Danish data. The first coin-tegrating relation is the marginal productivity condition for labour, derived from profit max-imization of firms who face a downward sloping demand curve for their product. The sec-ond cointegrating relation is a real wage relation, derived from the bargaining between trade unions and firms over wages, in the right-to-manage manner. The theoretical model is not rejected and the model displays parameter constancy throughout the estimation period and is able to forecast out-of-sample.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Econometrics Journal.

Volume (Year): 4 (2001)
Issue (Month): 2 ()
Pages: 2

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Handle: RePEc:ect:emjrnl:v:4:y:2001:i:2:p:2

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Related research

Keywords: Wage bargaining; Monopolistic competition; Employment; Over-identifying cointegrating restrictions; VAR models.;

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Cited by:
  1. Rita Duarte & Carlos Marques, 2013. "The dynamic effects of shocks to wages and prices in the United States and the Euro Area," Empirical Economics, Springer, vol. 44(2), pages 613-638, April.
  2. Aka, Bédia F. & P. Pieretti, 2008. "Wage Dynamics In A Structural Time Series Model For Luxembourg," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 5(2).
  3. Suedekum, Jens & Blien, Uwe, 2004. "Wages and Employment Growth: Disaggregated Evidence for West Germany," IZA Discussion Papers 1128, Institute for the Study of Labor (IZA).
  4. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2007. "A Multivariate Long-Memory Model with Structural Breaks," CESifo Working Paper Series 1950, CESifo Group Munich.
  5. Girardi, Riccardo & Paruolo, Paolo, 2013. "Wages and prices in Europe before and after the onset of the Monetary Union," Economic Modelling, Elsevier, vol. 35(C), pages 643-653.

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