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Wage Dynamics In A Structural Time Series Model For Luxembourg

  • Aka, Bédia F.


  • P. Pieretti

This paper examines the relationships between monetary wage and its theoretical explanatory variables using a Structural Time Series (STS) model in order to take into account the unobserved components (trend, cycle, seasonal and irregular) of wage. Theoretically, the monetary wage is negatively related to labor productivity and unemployment rate but positively to the consumer price index and foreign prices. Our empirical results for a small open economy as Luxembourg indicate that the wage is positively related to the consumer price index and foreign prices as predicted by the theory, but the labor productivity and unemployment rate are not significant in the explanation of wages dynamics in the Luxembourg economy.

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Article provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .

Volume (Year): 5 (2008)
Issue (Month): 2 ()

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Handle: RePEc:eaa:ijaeqs:v:5:y2008:i:2_2
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  1. Alan Manning, 1992. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," CEP Discussion Papers dp0062, Centre for Economic Performance, LSE.
  2. Thórarinn G. Pétursson & Torsten Sløk, 2001. "Wage formation and employment in a cointegrated VAR model," Econometrics Journal, Royal Economic Society, vol. 4(2), pages 2.
  3. Nymoen, Ragnar & Rodseth, Asbjorn, 2003. "Explaining unemployment: some lessons from Nordic wage formation," Labour Economics, Elsevier, vol. 10(1), pages 1-29, February.
  4. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  5. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August.
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