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Estimating a Wage Curve for Britain 1973-1990

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  • David G. Blanchflower
  • Andrew J. Oswald

Abstract

Following Phillip's original work on the UK, applied research on unemployment and wages has been dominated by the analysis of highly aggregated time-series data sets. However, it has proved difficult with such methods to uncover statistically reliable models. This paper adopts a different approach. It uses microeconomic data on 175,000 British workers from 1973-1990 to provide evidence for the existence of a negatively sloped relationship linking the level of pay to the local rate of unemployment. This 'wage curve' is found to have an elasticity of approximately -0.1. Contrary to the Phillips Curve, no autoregression is found in wages. The paper casts doubt on standard ideas in macroeconomics, regional economics and labour economics.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4770.

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Date of creation: Jun 1994
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Publication status: published as Economic Journal, September 1994, Vol. 104, No. 426, pp. 1025-1043.
Handle: RePEc:nbr:nberwo:4770

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  22. Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, Elsevier, vol. 35(5), pages 1009-1034, July.
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  1. Baas, Timo & Brücker, Herbert, 2012. "The macroeconomic consequences of migration diversion: Evidence for Germany and the UK," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 23(2), pages 180-194.
  2. Tim Jackson & Ben Drake & Peter Victor & Kurt Kratena & Mark Sommer, 2014. "Literature review and model development," WWWforEurope Working Papers series, WWWforEurope 65, WWWforEurope.
  3. Markus Pannenberg & Johannes Schwarze, 1996. "Unemployment, Labor Market Training Programs and Regional Wages: An Extended Wage Curve Approach," Discussion Papers of DIW Berlin 139, DIW Berlin, German Institute for Economic Research.
  4. Efstratia Arampatzi & Martijn J. Burger & Ruut Veenhoven, . "Financial Distress and Happiness of Employees in Times of Economic Crisis," Tinbergen Institute Discussion Papers 14-082/VII, Tinbergen Institute.
  5. Antonis Adam & Thomas Moutos, 2014. "Industry-Level Labour Demand Elasticities Across the Eurozone: Will There Be Any Gain After the Pain of Internal Devaluation?," CESifo Working Paper Series 4858, CESifo Group Munich.
  6. Stefan Boeters & Luc Savard, 2012. "The Labour Market in CGE Models," CPB Discussion Paper 201, CPB Netherlands Bureau for Economic Policy Analysis.
  7. Kurt Kratena & Mark Sommer, 2014. "Labour Market Policy and Environmental Fiscal Devaluation: A Cure for Spain in the Aftermath of the Great Recession?," WIFO Working Papers, WIFO 476, WIFO.
  8. Bell, Brian & Bindler, Anna & Machin, Stephen, 2014. "Crime Scars: Recessions and the Making of Career Criminals," IZA Discussion Papers 8332, Institute for the Study of Labor (IZA).
  9. Mariam Camarero & Gaetano D’Adamo & Cecilio Tamarit, 2014. "The role of Institutions in explaining wage determination in the Euro Area: a panel cointegration approach," Working Papers, Economics Department, Universitat Jaume I, Castellón (Spain) 2014/15, Economics Department, Universitat Jaume I, Castellón (Spain).
  10. Jean-Pierre Laffargue & Stéphanie Guichard, 2001. "Comparaison de la formation des salaires dans un panel de pays industrialisés," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 147(1), pages 37-49.
  11. Choong, Chee-Keong & Baharumshah, Ahmad Zubaidi & Yusop, Zulkornain & Habibullah, Muzafar Shah, 2010. "Private capital flows, stock market and economic growth in developed and developing countries: A comparative analysis," Japan and the World Economy, Elsevier, Elsevier, vol. 22(2), pages 107-117, March.
  12. Mohsen Bahmani-oskooee & Massoumeh Hajilee, 2011. "How Fast Wages Adjust to Prices: A Multi Country Analysis," Economics Bulletin, AccessEcon, vol. 31(3), pages 2404-2413.
  13. David N. F. Bell & David G. Blanchflower, 2014. "Labor Market Slack in the United Kingdom," Working Paper Series, Peterson Institute for International Economics WP14-2, Peterson Institute for International Economics.
  14. Bhalotra, Sonia, 2003. "The impact of economic liberalization on employment and wages in India," ILO Working Papers, International Labour Organization 365054, International Labour Organization.
  15. Andreas Georgiadis & Alan Manning, 2014. "The Volatility of Earnings: Evidence from High-Frequency Firm-Level Data," CEP Discussion Papers, Centre for Economic Performance, LSE dp1290, Centre for Economic Performance, LSE.
  16. Sébastien Doisy & Sandrine Duchêne & Christian Gianella, 2004. "Un modèle d’appariement avec hétérogénéité du facteur travail : un nouvel outil d’évaluation des politiques économiques," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 162(1), pages 1-22.

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