Inflation-Unemployment Tradeoff and Regional Labor Market Data
AbstractWe estimate a linear and a piecewise linear Phillips curve model with regional labor market data for West German and Neue Länder. Employing regional observations allows us to country difference the data. This eliminates, under the assumption of homogeneous Länder, supply shocks and changes in the formation of expectations as possible identification failures. With seemingly unrelated regressions we find a flat Phillips curve in the Neue Länder. For the West German Länder a piecewise linear model with a higher inflation-unemployment tradeoff for the regime of low unemployment rates fits the data very well. The results hold true if we control for endogeneity of the unemployment rate. With a kinked but upward sloping aggregate supply curve there seems to be room for stabilization policies, at least in the range of aggregate demand shifts that our data covers.
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Bibliographic InfoPaper provided by Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL) in its series Darmstadt Discussion Papers in Economics with number 37697.
Date of creation: Sep 2002
Date of revision:
Publication status: Published in Darmstadt Discussion Papers in Economics . 112 (2002-09)
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More information through EDIRC
inflation-unemployment tradeoff; NAIRU; regional labor market data; seemingly unrelated regression;
Other versions of this item:
- Uwe Hassler & Michael Neugart, 2003. "Inflation-unemployment tradeoff and regional labor market data," Empirical Economics, Springer, vol. 28(2), pages 321-334, 04.
- JEL - Labor and Demographic Economics - - - - -
- cla - - - - - -
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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