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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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    1. Stillwagon, Josh R., 2016. "Non-linear exchange rate relationships: An automated model selection approach with indicator saturation," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 84-109.
    2. Nicholas Barr & Alison Johnston, 2010. "Interest Subsidies on Student Loans: A Better Class of Drain," CEE Discussion Papers 0114, Centre for the Economics of Education, LSE.
    3. Jennifer Castle & David Hendry, 2013. "Semi-automatic Non-linear Model selection," Economics Series Working Papers 654, University of Oxford, Department of Economics.
    4. 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.
    5. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, vol. 95(7), pages 708-722.
    6. 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.
    7. 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.
    8. 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.
    9. Sohrab Rafiq, 2014. "What Do Energy Prices Tell Us About UK Inflation?," Economica, London School of Economics and Political Science, vol. 81(322), pages 293-310, April.
    10. 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.
    11. Ragnar Nymoen, 2017. "Between Institutions and Global Forces: Norwegian Wage Formation Since Industrialisation," Econometrics, MDPI, Open Access Journal, vol. 5(1), pages 1-54, January.
    12. Robert G. King, 2008. "The Phillips curve and U.S. macroeconomic policy : snapshots, 1958-1996," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 311-359.

    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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