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The Wage Curve Reloaded

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Author Info
David G. Blanchflower
Andrew J. Oswald

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Abstract

This paper provides evidence for the existence of a wage curve -- a micro-econometric association between the level of pay and the local unemployment rate -- in modern U.S. data. Consistent with recent evidence from more than 40 other countries, the wage curve in the United States has a long-run elasticity of approximately -0.1. In line with the paper's theoretical framework: (i) wages are higher in states with more generous unemployment benefits, (ii) the perceived probability of job-finding is lower in states with higher unemployment, and (iii) employees are less happy in states that have higher unemployment. We conclude that it is reasonable to view the wage curve as an empirical law of economics.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11338.

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Date of creation: May 2005
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Handle: RePEc:nbr:nberwo:11338

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Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment

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Full references

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. Badi H. Baltagi & Uwe Blien & Katja Wolf, 2008. "New Evidence on the Dynamic Wage Curve for Western Germany: 1980-2004," Center for Policy Research Working Papers 103, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
    Other versions:
  2. Louis Christofides & Amy Chen Peng, 2006. "Major Provisions of Labour Contracts and their Theoretical Coherence," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  3. Blien, Uwe & Sanner, Helge, 2006. "Structural change and regional employment dynamics," IAB Discussion Paper 200606, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
    Other versions:
  4. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie Ward, 2006. "The interaction of labor markets and inflation: analysis of micro data from the International Wage Flexibility Project," Proceedings, Federal Reserve Bank of San Francisco. [Downloadable!]
  5. Geraint Johnes, 2005. "The wage curve revisited: estimates from a UK panel," Working Papers 003050, Lancaster University Management School, Economics Department. [Downloadable!]
    Other versions:
  6. repec:ese:iserwp: is not listed on IDEAS
  7. Robert Küster & ingo Ellersdorfer & Ulrich Fahl, 2007. "A CGE-Analysis of Energy Policies Considering Labor Market Imperfections and Technology Specifications," Working Papers 2007.7, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Stefanie Schurer, 2008. "Labour Market Outcomes of Second Generation Immigrants: How Heterogeneous Are They Really?," Melbourne Institute Working Paper Series wp2008n14, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  9. David G. Blanchflower & Andrew J. Oswald, 2006. "The Wage Curve: An Entry Written for the New Palgrave, 2nd Edition," IZA Discussion Papers 2138, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Marisa Bucheli & Cecilia González, 2007. "An estimation of the wage curve for Uruguay," Documentos de Trabajo (working papers) 1107, Department of Economics - dECON. [Downloadable!]
  11. Hannu Piekkola, 2006. "Tax cuts and employment: Evidence from Finnish linked employer-employee data," Discussion Papers 1041, The Research Institute of the Finnish Economy. [Downloadable!]
  12. Gabriel J. Felbermayr & Wido Geis & Wilhelm Kohler, 2008. "Restrictive Immigration Policy in Germany: Pains and Gains Foregone?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  13. Ruud de Mooij, 2007. "Reinventing the Dutch tax-benefit system," CPB Discussion Papers 88, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  14. Ludsteck, Johannes, 2008. "Wage cyclicality and the wage curve under the microscope," IAB Discussion Paper 200811, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  15. Böckerman, Petri & Laaksonen, Seppo & Vainiomäki, Jari, 2006. "Micro-level evidence on wage rigidities in Finland," MPRA Paper 1811, University Library of Munich, Germany. [Downloadable!]
  16. Aleksey Oshchepkov, 2007. "Are Interregional Wage Differentials in Russia Compensative?," Discussion Papers of DIW Berlin 750, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  17. Ludsteck, Johannes & Haupt, Harry, 2007. "An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition," Discussion Papers in Economics 1977, University of Munich, Department of Economics. [Downloadable!]
  18. Ludsteck, Johannes & Haupt, Harald, 2007. "An Empirical Test of the Reder Hypothesis," Discussion Papers in Economics 1397, University of Munich, Department of Economics. [Downloadable!]
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