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A Cointegration Model for Search Equilibrium Wage Formation

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  • L. Broersma

    ()
    (Department of Economics and Department of Spatial Science, University of Groningen)

  • Frank A.G. den Butter

    ()
    (Department of Economics, Vrije Universiteit Amsterdam)

  • Udo Kock

    ()
    (International Monetary Fund, Washington)

Abstract

In flow models of the labor market, wages are determined by negotiations between workers and employers on the surplus value of a realized match. From this perspective our study presents an econometric analysis of the influence of labor market flows on wage formation as alternative to the traditional specification of wage equations where unemployment represents the Phillips-curve or wage curve-effects. We estimate a dynamic wage equation for the Netherlands using a cointegration approach. We find that labor flows, and notably flows from outside the labor market, are important determinants for both short run and long run wage setting

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-088/3.

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Date of creation: 03 Nov 2003
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Handle: RePEc:dgr:uvatin:20030088

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Keywords: Wage curve; Labour market flows; Cointegration model;

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  1. Paul Frijters & Bas van der Klaauw, 2003. "Job Search with Nonparticipation," School of Economics and Finance Discussion Papers and Working Papers Series 168d, School of Economics and Finance, Queensland University of Technology.
  2. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
  3. Lars Ljungqvist & Thomas J. Sargent, 1995. "The European unemployment dilemma," Working Paper Series, Macroeconomic Issues 95-17, Federal Reserve Bank of Chicago.
  4. Diamond, Peter A, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 49(2), pages 217-27, April.
  5. Lourens Broersma & Frank A. G . Den Butter, 2001. "Labour Flows as Determinants of the Wage-Price Spiral: An Empirical Analysis for The Netherlands," LABOUR, CEIS, vol. 15(2), pages 279-294, 06.
  6. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
  7. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  8. Dale T. Mortensen, 1979. "The Matching Process as a Non-Cooperative/Bargaining Game," Discussion Papers 384, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  10. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  11. Knoester, Anthonie & van der Windt, Nico, 1987. "Real Wages and Taxation in Ten OECD Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 151-69, February.
  12. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  13. Olivier Jean Blanchard & Peter Diamond, 1992. "The Flow Approach to Labor Markets," NBER Working Papers 4000, National Bureau of Economic Research, Inc.
  14. Broersma, Lourens & den Butter, Frank A. G. & Kock, Udo, 2000. "A national accounting system for worker flows," Economics Letters, Elsevier, vol. 67(3), pages 331-336, June.
  15. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
  16. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  17. Graafland, J.J., 1991. "From Phillips curve to wage curve," MPRA Paper 21077, University Library of Munich, Germany.
  18. Broersma, Lourens & Butter, Frank A.G. den, 1999. "An explorative empirical analysis of the influence of labour flows on wage formation using the Johansen approach," Serie Research Memoranda 0059, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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Cited by:
  1. Katarzyna Budnik, 2012. "Do those who stay work less? On the impact of emigration on the measured TFP in Poland," National Bank of Poland Working Papers 113, National Bank of Poland, Economic Institute.
  2. Kees Folmer, 2009. "Why do macro wage elasticities diverge? A meta analysis," CPB Discussion Paper 122, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Katarzyna Budnik, 2008. "Search Equilibrium with Migration: the Case of Poland," National Bank of Poland Working Papers 45, National Bank of Poland, Economic Institute.

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