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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)

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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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Publisher 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

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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
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Related research
Keywords: Wage curves efficiency wages bargaining

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Marisa Bucheli & Cecilia González, 2007. "An estimation of the wage curve for Uruguay," Documentos de Trabajo (working papers) 1107, Department of Economics - dECON. [Downloadable!]
  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. [Downloadable!]
    Other versions:
  4. Barth, Erling & Bratsberg, Bernt & Raaum, Oddbjørn, 2003. "Local Unemployment and the Relative Wages of Immigrants: Evidence from the Current Population Surveys," Memorandum 20/2002, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  5. Inmaculada García-Mainar & Víctor Montuenga-Gómez, 2003. "The Spanish Wage Curve: 1994-1996," Regional Studies, Taylor and Francis Journals, vol. 37(9), pages 929-945, December. [Downloadable!] (restricted)
  6. 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. [Downloadable!]
  7. Anna Sanz de Galdeano & Jarkko Turunen, 2005. "Real wages and local unemployment in the euro area," Working Paper Series 471, European Central Bank. [Downloadable!]
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