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The role of profitability and industrial wages in firm level wage determination


  • Kevin Denny

    (Institute for Fiscal Studies and University College Dublin)

  • Machin, S


The level of real wages is one of the key variables-perhaps the key variable-in the economy. Understanding the processes by which wage levels are determined has proved a major task for economists, both theoretical and applied. Much of the effort has taken place within the context of the 'NAIRU' (or non-accelerating inflation rate of unemployment)paradigm. According to this view, the long-run or 'natural' rate of unemployment is determined by the supply side. This would include incentives to work provided by the social security system as well as demographic factors-in Friedman's celebrated phrase, it is the rate that is 'ground out by the Walrasian system of equations' (Friedman, 1968).

Suggested Citation

  • Kevin Denny & Machin, S, 1991. "The role of profitability and industrial wages in firm level wage determination," Fiscal Studies, Institute for Fiscal Studies, vol. 12(2), pages 34-45, May.
  • Handle: RePEc:ifs:fistud:v:12:y:1991:i:2:p:34-45

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    References listed on IDEAS

    1. Mervyn A. King, 1983. "The Distribution of Gains and Losses from Changes in the Tax Treatment of Housing," NBER Chapters,in: Behavioral Simulation Methods in Tax Policy Analysis, pages 109-138 National Bureau of Economic Research, Inc.
    2. Callan, Tim, 1991. "Property Tax: Principles and Policy Options," Research Series, Economic and Social Research Institute (ESRI), number PRS12.
    3. John Hills & Holly Sutherland, 1991. "The proposed Council Tax," Fiscal Studies, Institute for Fiscal Studies, vol. 12(4), pages 1-21, November.
    4. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, vol. 8(2), pages 191-210, October.
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    Cited by:

    1. Ilan Tojerow & François Rycx, 2004. "Rent-sharing and the gender wage gap in Belgium," ULB Institutional Repository 2013/245700, ULB -- Universite Libre de Bruxelles.
    2. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
    3. Marcello Estevao & Stacey Tevlin, 2003. "Do Firms Share their Success with Workers? The Response of Wages to Product Market Conditions," Economica, London School of Economics and Political Science, vol. 70(280), pages 597-617, November.
    4. Jennifer C. Smith, 1996. "Effet du pouvoir de négociation et du marché local du travail sur la détermination des salaires," Économie et Prévision, Programme National Persée, vol. 126(5), pages 1-17.
    5. Smith, J.C., 1996. "Bargaining Power and Local Labour Market Influences on Wage Determination," The Warwick Economics Research Paper Series (TWERPS) 455, University of Warwick, Department of Economics.
    6. Frank Barry & Holger Gorg & Eric Strobl, 2005. "Foreign direct investment and wages in domestic firms in Ireland: Productivity spillovers versus labour-market crowding out," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(1), pages 67-84.

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