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Explaining Variations in Wage Curves: Theory and Evidence

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Author Info

  • Barth, Erling

    ()
    (Institute for Social Research)

  • Bratsberg, Bernt

    ()
    (Ragnar Frisch Centre for Economic Research)

  • Naylor, Robin A.

    ()
    (University of Warwick, Department of Economics)

  • Raaum, Oddbjørn

    ()
    (Ragnar Frisch Centre for Economic Research)

Abstract

This paper presents both theoretical analysis and econometric evidence for the United States, Great Britain and Norway on the extent to which hourly wages of different groups of workers are sensitive to local labour market conditions. We focus on differences by union status. Our theoretical framework captures both a turnover-based efficiency wage mechanism and one originating in union-firm bargaining. Under fairly general conditions, we show that wages are less sensitive to local unemployment the higher is the bargaining power of the union. In accordance with this theoretical prediction, we find that the absolute value of the elasticity of wages with respect to unemployment is higher in the nonunion sector than in the union sector for all three countries. We interpret the evidence as giving support to an efficiency wage interpretation of the wage curve.

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File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2002/Memo-03-2002.pdf
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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 03/2002.

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Length: 59 pages
Date of creation: 05 Jan 2002
Date of revision:
Handle: RePEc:hhs:osloec:2002_003

Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Email:
Web page: http://www.oekonomi.uio.no/indexe.html
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Related research

Keywords: Wage curves; efficiency wages; bargaining;

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References

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  1. Barth, E. & Raaum, O. & Naylor, R., 1998. "Union Wage Effects: Does Membership Matter?," The Warwick Economics Research Paper Series (TWERPS) 500, University of Warwick, Department of Economics.
  2. Karsten Albaek & Rita Asplund & Erling Barth & Stig Blomskog & Bjorn Runar Gudmundsson & Vifill Karlsson & Erik Strojer Madsen, 2000. "Dimensions of the Wage-Unemployment Relationship in the Nordic Countries: Wage Flexibility Without Wage Curves," Econometric Society World Congress 2000 Contributed Papers 1893, Econometric Society.
  3. Bratsberg, Bernt & Turunen, Jarkko, 1996. "Wage curve evidence from panel data," Economics Letters, Elsevier, vol. 51(3), pages 345-353, June.
  4. Green, Francis & Machin, Stephen & Manning, Alan, 1996. "The Employer Size-Wage Effect: Can Dynamic Monopsony Provide an Explanation?," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 433-55, July.
  5. David Blanchflower & A Oswald, 1993. "International Wage Curve," CEP Discussion Papers dp0116, Centre for Economic Performance, LSE.
    • David G. Blanchflower & Andrew Oswald, 1995. "International Wage Curves," NBER Chapters, in: Differences and Changes in Wage Structures, pages 145-174 National Bureau of Economic Research, Inc.
  6. Holden, S. & Raaum, O., 1989. "Wage Moderation And Unions Structure," Memorandum 06/1989, Oslo University, Department of Economics.
  7. Bell, Brian & Nickell, Stephen & Quintini, Glenda, 2002. "Wage equations, wage curves and all that," Labour Economics, Elsevier, vol. 9(3), pages 341-360, July.
  8. Andrews, Martyn J. & Stewart, Mark B. & Swaffield, Joanna K. & Upward, Richard, 1998. "The estimation of union wage differentials and the impact of methodological choices," Labour Economics, Elsevier, vol. 5(4), pages 449-474, December.
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  22. Baltagi, Badi H. & Blien, Uwe, 1998. "The German wage curve: evidence from the IAB employment sample," Economics Letters, Elsevier, vol. 61(2), pages 135-142, November.
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  24. Hoel, Michael, 1989. "Efficiency wages and local versus central wage bargaining," Economics Letters, Elsevier, vol. 30(2), pages 175-179, August.
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Citations

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Cited by:
  1. García-Mainar , Inmaculada & Montuenga-Gómez , Víctor M., 2012. "Wage dynamics in Spain: evidence from individual data (1994-2001)," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 24, pages 41-58.
  2. Roberto Bande Ramudo & Melchor Fernández Fernández & Víctor Montuenga Gómez, 2011. "Wage flexibility and local labour markets: homogeneity of the wage curve in Spain," Documentos de trabajo - Analise Economica 0044, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
  3. Torberg Falch & Bjarne Strøm, 2003. "Wage Bargaining and Political Strength in the Public Sector," Working Paper Series 3203, Department of Economics, Norwegian University of Science and Technology.
  4. Bernt Bratsberg & Erling Barth & Oddbjørn Raaum, 2006. "Local Unemployment and the Relative Wages of Immigrants: Evidence from the Current Population Surveys," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 243-263, May.
  5. David Castro Lugo, 2006. "Curva salarial: una aplicación para el caso de México, 1993-2002," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 233-273.
  6. Sanz de Galdeano, Anna & Turunen, Jarkko, 2005. "Real wages and local unemployment in the euro area," Working Paper Series 0471, European Central Bank.
  7. Marisa Carla Bucheli Anaya & Cecilia González Rodríguez-Villamil, 2012. "An estimation of the wage curve for Uruguay," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID.
  8. Victor Montuenga & Inmaculada Garcia, 2011. "The wage dynamics in Spain: evidence from individual data," ERSA conference papers ersa11p585, European Regional Science Association.
  9. Blanchflower, David G. & Oswald, Andrew J., 2005. "The Wage Curve Reloaded," IZA Discussion Papers 1665, Institute for the Study of Labor (IZA).
  10. Inmaculada Garcia-Mainar & Victor Montuenga-Gomez, 2003. "The Spanish Wage Curve: 1994-1996," Regional Studies, Taylor & Francis Journals, vol. 37(9), pages 929-945.
  11. Athanasios Vamvakidis, 2009. "Regional Wage Differentiation and Wage Bargaining Systems in the European Union," Financial Theory and Practice, Institute of Public Finance, vol. 33(1), pages 73-87.
  12. Barth, Erling & Bratsberg, Bernt & Raaum, Oddbjørn, 2003. "Local Unemployment and the Earnings Assimilation of Immigrants in Norway," Memorandum 19/2002, Oslo University, Department of Economics.

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