The paper tests whether or not the effects on sectoral wages of internal and external factors depend upon the sector’s relative wage position. The key hypothesis is that workers in low—wage sectors are more concerned with relative wages than workers in high wage sectors. To test the hypothesis, we make use of panel data and formulate a smooth transition regression model including relative wages as the transition variable. The empirical results provide strong evidence of nonlinear wage responses to industry profitability, outside wages and unemployment. The estimated long—run insider weight and the unemployment effect are much higher in high—wage industries than in low—wage industries. The main results are robust to alternative transformations of the unemployment rate and we also provide some evidence of nonlinear effects using regional panel data.
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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number
0902.
Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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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.:
David G. Blanchflower & Andrew J. Oswald, 1990.
"The Wage Curve,"
NBER Working Papers
3181, National Bureau of Economic Research, Inc.
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Other versions:
Blanchflower, D. & Oswald, A., 1989.
"The Wage Curve,"
Papers
340, London School of Economics - Centre for Labour Economics.
Agell, Jonas & Lundborg, Per, 1995.
"Fair Wages in the Open Economy,"
Economica,
London School of Economics and Political Science, vol. 62(247), pages 335-51, August.
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