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The long-run determinants of UK wages, 1860-2004

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  • Castle, Jennifer L.
  • Hendry, David F.

Abstract

As it is almost 50 years since the Phillips curve, we analyze an historical series on UK wages and their determinants [see Phillips, A.W.H., 1958. The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861-1957. Economica, 25, 283-299]. Huge changes have occurred over this long-run, so congruence is hard to establish: real wages have risen more than 6 fold, and nominal 500 times; laws, technology, wealth distribution, and social structure are unrecognizably different from 1860. We investigate: wage rates and weekly earnings; real versus nominal wages; breaks over 1860-2004; non-linearities, including Phillips' non-linear response to unemployment; 'trade union power' and unemployment benefits; and measures of excess demand, where workers react more to inflation when it rises.

Suggested Citation

  • Castle, Jennifer L. & Hendry, David F., 2009. "The long-run determinants of UK wages, 1860-2004," Journal of Macroeconomics, Elsevier, vol. 31(1), pages 5-28, March.
    • Handle: RePEc:eee:jmacro:v:31:y:2009:i:1:p:5-28
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    5. Barr, Nicholas & Johnston, Alison, 2010. "Interest subsidies on student loans: a better class of drain," LSE Research Online Documents on Economics 28287, London School of Economics and Political Science, LSE Library.
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    8. Josh R. Stillwagon, 2015. "TIPS and the VIX: Non-linear Spillovers from Financial Panic to Breakeven Inflation," Working Papers 1502, Trinity College, Department of Economics.
    9. Baffigi, Alberto & Bontempi, Maria Elena & Felice, Emanuele & Golinelli, Roberto, 2015. "The changing relationship between inflation and the economic cycle in Italy: 1861–2012," Explorations in Economic History, Elsevier, vol. 56(C), pages 53-70.
    10. Loening, Josef L. & Durevall, Dick & Ayalew Birru, Yohannes, 2009. "Inflation Dynamics and Food Prices in an Agricultural Economy: The Case of Ethiopia," Working Papers in Economics 347, University of Gothenburg, Department of Economics.
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    15. Durevall, Dick & Loening, Josef L. & Ayalew Birru, Yohannes, 2013. "Inflation dynamics and food prices in Ethiopia," Journal of Development Economics, Elsevier, vol. 104(C), pages 89-106.
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    More about this item

    Keywords

    Nominal wages Real wages UK historical data Structural breaks Non-linear modelling;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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