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Fear, Unemployment and Pay Flexibility

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  • David G. Blanchflower

Abstract

The paper uses newly available cross-section data to study wage determination in the United Kingdom in the 1980s. The results are contrasted with those from a comparable sample from the US from 1977-1988. 1) Fear of unemployment substantially depresses pay in both countries. 2) There is some evidence of a wage ratchet in the UK whereby rates of pay are more flexible upwards than downwards. 3) The unemployment elasticity of pay averages -0.1 in the UK and apparently zero in the US. 4) Wages are almost twice as flexible in non-union and small workplaces in the UK.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3365.

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Date of creation: May 1990
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Publication status: published as The Economic Journal, Vol. 101, No. 406, pp.483-496, (May 1991).
Handle: RePEc:nbr:nberwo:3365

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  1. Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 197-225.
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  4. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis And The European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
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  8. Wachtel, Howard M & Betsey, Charles, 1972. "Employment at Low Wages," The Review of Economics and Statistics, MIT Press, vol. 54(2), pages 121-29, May.
  9. Solow, Robert M, 1985. " Insiders and Outsiders in Wage Determination," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 411-28.
  10. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
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  15. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
  16. Chowdhury, Gopa & Nickell, Stephen, 1985. "Hourly Earnings in the United States: Another Look at Unionization, Schooling, Sickness, and Unemployment Using PSID Data," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 38-69, January.
  17. Greenhalgh, Christine A, 1980. "Male-Female Wage Differentials in Great Britain: Is Marriage an Equal Opportunity?," Economic Journal, Royal Economic Society, vol. 90(363), pages 751-75, December.
  18. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  19. Holzer, Harry J & Montgomery, Edward B, 1993. "Asymmetries and Rigidities in Wage Adjustments by Firms," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 397-408, August.
  20. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
  21. Minford, Patrick, 1983. "Labour Market Equilibrium in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 207-44, Supplemen.
  22. Black, Jane M & Bulkley, I George, 1989. "Do Trade Unions Reduce Job Opportunities of Non-members?," Economic Journal, Royal Economic Society, vol. 99(394), pages 177-86, March.
  23. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
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