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A Re-evaluation of the Relation between Wages and Unemployment in the United Kingdom


  • Shadman-Mehta, Fatemeh


This paper examines the long-run or equilibrium relationship between wages, prices and the unemployment rate in the United Kingdom, using annual data covering the period 1860-1999. Using Johansen's maximum likelihood method of testing for cointegration, two long-run relations are found in a small system of four variables. The first relation depicts the co-movement of the level of real wages adjusted for productivity, together with the unemployment rate and the rate of inflation. The second relation shows the co-movement between the rate of inflation and deviations of productivity from its trend growth. Copyright 2001 by The London School of Economics and Political Science

Suggested Citation

  • Shadman-Mehta, Fatemeh, 2001. "A Re-evaluation of the Relation between Wages and Unemployment in the United Kingdom," Economica, London School of Economics and Political Science, vol. 68(272), pages 567-585, November.
  • Handle: RePEc:bla:econom:v:68:y:2001:i:272:p:567-85

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    References listed on IDEAS

    1. Jean-Yves Duclos & Joan Esteban & Debraj Ray, 2004. "Polarization: Concepts, Measurement, Estimation," Econometrica, Econometric Society, vol. 72(6), pages 1737-1772, November.
    2. Esteban, Joan & Ray, Debraj, 1999. "Conflict and Distribution," Journal of Economic Theory, Elsevier, vol. 87(2), pages 379-415, August.
    3. Ebert, Udo, 1987. "Size and distribution of incomes as determinants of social welfare," Journal of Economic Theory, Elsevier, vol. 41(1), pages 23-33, February.
    4. Satya R. Chakravarty & Conchita D'Ambrosio, 2006. "The Measurement Of Social Exclusion," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(3), pages 377-398, September.
    5. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
    6. Wolfson, Michael C, 1994. "When Inequalities Diverge," American Economic Review, American Economic Association, vol. 84(2), pages 353-358, May.
    7. Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, number 9780199253494, June.
    8. Tsakloglou, Panos & Papadopoulos, Fotis, 2001. "Identifying Population Groups at High Risk of Social Exclusion: Evidence from the ECHP," IZA Discussion Papers 392, Institute for the Study of Labor (IZA).
    9. Ambra Poggi, 2007. "Does persistence of social exclusion exist in Spain?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(1), pages 53-72, April.
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    Cited by:

    1. Fumitaka Furuoka & Chong Mun Ho, 2009. "Phillips curves and openness: New evidence from selected Asian economies," Economics Bulletin, AccessEcon, vol. 29(1), pages 253-264.
    2. Max Gillman & Michal Kejak, 2007. " Inflation, Financial Development and Human Capital-Based Endogenous Growth: an Explanation of Ten Empirical Findings," CDMA Conference Paper Series 0703, Centre for Dynamic Macroeconomic Analysis.
    3. Heer, Burkhard & Mau├čner, Alfred, 2015. "The Cash-In-Advance Constraint In Monetary Growth Models With Labor Market Search," Macroeconomic Dynamics, Cambridge University Press, vol. 19(01), pages 144-166, January.
    4. Max Gillman & Michal Kejak, 2011. "Inflation, Investment and Growth: a Money and Banking Approach," Economica, London School of Economics and Political Science, vol. 78(310), pages 260-282, April.

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