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The Role of Sectoral Interactions in Wage Determination in the UK Economy

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Author Info

  • Lee, K.C.
  • Pesaran, M.H.

Abstract

A multisectoral union-firm model of wage-setting is developed to analyze intersectoral interactions that take place through expectations of outside wage opportunities in the economy as a whole. The technical issues involved in the solution and estimation of models of this type are discussed, noting the significance of the assumed structure of information across sectors. These issues are investigated empirically using data for sixteen industrial sectors o f the UK economy. It is found that (1) expected outside wages exert an important influence on real wages in all sectors; (2) pressure on wa ges which are internal to the sector are found primarily outside the "service-producing" sectors; (3) unemployment rates and unemployment benefits show up significantly only in a few sectors; (4) there are complicated dynamic adjustments influencing wage formation across th e sectors; and (5) the aggregate wage equations considered in the pape r are subject to serious aggregation problems. Copyright 1993 by Royal Economic Society.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 9214.

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Length: 45 pages
Date of creation: 1992
Date of revision:
Handle: RePEc:cam:camdae:9214

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: wages ; trade unions;

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Cited by:
  1. M. Hashem Pesaran, 2003. "Estimation and Inference in Large Heterogenous Panels with Cross Section Dependence," CESifo Working Paper Series 869, CESifo Group Munich.
  2. George Kapetanios & M. Hashem Pesaran, 2005. "Alternative Approaches to Estimation and Inference in Large Multifactor Panels: Small Sample Results with an Application to Modelling of Asset Returns," CESifo Working Paper Series 1416, CESifo Group Munich.
  3. John S. Earle & Klara Z. Sabirianova, 2000. "Equilibrium Wage Arrears: Institutional Lock-In of Contractual Failure in Russia," William Davidson Institute Working Papers Series 321, William Davidson Institute at the University of Michigan.
  4. Hsiao, Cheng & Pesaran, M. Hashem, 2004. "Random Coefficient Panel Data Models," IZA Discussion Papers 1236, Institute for the Study of Labor (IZA).
  5. Heinz Welsch, 1996. "Recycling of carbon/energy taxes and the labor market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 8(2), pages 141-155, September.
  6. G. Kapetanios & M. Hashem Pesaran & T. Yamagata, 2010. "Panels with nonstationary multifactor error structures," Post-Print peer-00768190, HAL.
  7. Annette, S. Zeilstra & Linda, A Toolsema, 2005. "Centralised wage bargaining and regional unemployment," ERSA conference papers ersa05p720, European Regional Science Association.
  8. M. Hashem Pesaran, 2004. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," CESifo Working Paper Series 1331, CESifo Group Munich.
  9. John S. Earle & Klara Sabirianova Peter, 2004. "Contract Violations, Neighborhood Effects, And Wage Arrears In Russia," William Davidson Institute Working Papers Series 2004-708, William Davidson Institute at the University of Michigan.
  10. John S. Earle & Klara Sabirianova Peter, 2006. "Complementarity and Custom in Contract Violation," Upjohn Working Papers and Journal Articles 06-129, W.E. Upjohn Institute for Employment Research.
  11. Earle, John S. & Peter, Klara Sabirianova, 2000. "Equilibrium Wage Arrears: A Theoretical and Empirical Analysis of Institutional Lock-In," IZA Discussion Papers 196, Institute for the Study of Labor (IZA).

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