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New evidence on the dynamic wage curve for Western Germany: 1980-2004

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  • Baltagi, Badi H.
  • Blien, Uwe
  • Wolf, Katja

Abstract

Blanchflower and Oswald [Blanchflower, David G. and Oswald, Andrew J., 1994a, The Wage Curve, (Cambridge, MA, MIT Press), Blanchflower, David G. and Oswald, Andrew J., 1994b, Estimating a Wage Curve for Britain 1973-90, The Economic Journal 104, 1025-1043. Eine praktische Einführung, Nürnberg] reported that they have found an 'empirical law of economics' -- the Wage Curve. Our paper reconsiders the western German Wage Curve using disaggregated regional data and is based on almost one million employees drawn from the Federal Employment Services of Germany over the period 1980-2004. We find that the wage equation is highly autoregressive but far from unit root. The unemployment elasticity is significant but relatively small: only between -Â 0.02 and -Â 0.04. We also check the sensitivity of this elasticity for different population groups (young versus old, men versus women, less educated versus highly educated, German native versus foreigner), confirming that it is stronger the weaker the bargaining power of the particular group.

Suggested Citation

  • Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2009. "New evidence on the dynamic wage curve for Western Germany: 1980-2004," Labour Economics, Elsevier, vol. 16(1), pages 47-51, January.
  • Handle: RePEc:eee:labeco:v:16:y:2009:i:1:p:47-51
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    Cited by:

    1. Roberto Bande Ramudo & Melchor Fernández Fernández & Víctor Montuenga Gómez, 2011. "Wage flexibility and local labour markets: homogeneity of the wage curve in Spain," Documentos de trabajo - Analise Economica 0044, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    2. Bernard Fingleton & Simonetta Longhi, 2013. "The Effects Of Agglomeration On Wages: Evidence From The Micro-Level," Journal of Regional Science, Wiley Blackwell, vol. 53(3), pages 443-463, August.
    3. Blien, Uwe & Messmann, Susanne & Trappmann, Mark, 2012. "Do reservation wages react to regional unemployment?," IAB Discussion Paper 201222, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. repec:spr:jahrfr:v:38:y:2018:i:1:d:10.1007_s10037-017-0113-z is not listed on IDEAS
    5. Brown, Sarah & Taylor, Karl, 2015. "The reservation wage curve: Evidence from the UK," Economics Letters, Elsevier, vol. 126(C), pages 22-24.
    6. Kosfeld, Reinhold & Dreger, Christian, 2017. "Towards an East German Wage Curve: NUTS Boundaries, Labour Market Regions and Unemployment Spillovers," IZA Discussion Papers 10892, Institute for the Study of Labor (IZA).
    7. Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2012. "A dynamic spatial panel data approach to the German wage curve," Economic Modelling, Elsevier, vol. 29(1), pages 12-21.
    8. Koenig, Felix & Manning, Alan & Petrongolo, Barbara, 2014. "Reservation wages and the wage flexibility puzzle," LSE Research Online Documents on Economics 60613, London School of Economics and Political Science, LSE Library.
    9. García-Mainar , Inmaculada & Montuenga-Gómez , Víctor M., 2012. "Wage dynamics in Spain: evidence from individual data (1994-2001)," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 24, pages 41-58.
    10. Uwe Blien & Wolfgang Dauth & Thorsten Schank & Claus Schnabel, 2013. "The Institutional Context of an ‘Empirical Law’: The Wage Curve under Different Regimes of Collective Bargaining," British Journal of Industrial Relations, London School of Economics, vol. 51(1), pages 59-79, March.
    11. repec:cep:cepdps:dp1319 is not listed on IDEAS
    12. Hamann, Silke & Niebuhr, Annekatrin & Peters, Jan Cornelius, 2016. "Benefits of dense labour markets: Evidence from transitions to employment in Germany," Economics Working Papers 2016-07, Christian-Albrechts-University of Kiel, Department of Economics.
    13. Andini, Corrado, 2014. "Persistence Bias and Schooling Returns," IZA Discussion Papers 8143, Institute for the Study of Labor (IZA).
    14. Reinhold Kosfeld & Christian Dreger, 2018. "Local and spatial cointegration in the wage curve – a spatial panel analysis for german regions," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 38(1), pages 53-75, February.
    15. Paweł Strzelecki & Joanna Tyrowicz, 2015. "Inferring the Adequacy of Wage Expectations Among the Non-Working," Gospodarka Narodowa, Warsaw School of Economics, issue 6, pages 51-69.
    16. Fingleton, Bernard & Palombi, Silvia, 2013. "Spatial panel data estimation, counterfactual predictions, and local economic resilience among British towns in the Victorian era," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 649-660.
    17. Kazuyuki Inagaki, 2015. "Wage curve in dual labor markets: cross-sectional evidence from Japan," Economics and Business Letters, Oviedo University Press, vol. 4(2), pages 51-56.
    18. Bernard FINGLETON & Silvia PALOMBI, 2013. "The Wage Curve Reconsidered: Is It Truly An 'Empirical Law Of Economics'?," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 38, pages 49-92.
    19. Victor Montuenga & Inmaculada Garcia, 2011. "The wage dynamics in Spain: evidence from individual data," ERSA conference papers ersa11p585, European Regional Science Association.
    20. Irineu E de Carvalho Filho & Marcello M. Estevão, 2012. "Institutions, Informality, and Wage Flexibility; Evidence From Brazil," IMF Working Papers 12/84, International Monetary Fund.

    More about this item

    Keywords

    Wage Curve Regional labour markets Phillips curve Panel data;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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