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A Cointegration Model for Search Equilibrium Wage Formation

Author

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  • Lourens Broersma
  • Frank A.G. den Butter
  • Udo Kock

Abstract

In flow models of the labor market, wages are determined by negotiations between workers and employers on the surplus value of a realized match. From this perspective, this paper presents an econometric analysis of the influence of labor market flows on wage formation as an alternative to the traditional specification of wage equations in which unemployment represents Phillips-curve or wage-curve effects. The paper estimates a dynamic wage equation for the Netherlands using a cointegration approach. It finds that labor flows, and notably flows from outside the labor market, are important determinants of both short-run and long-run wage setting.

Suggested Citation

  • Lourens Broersma & Frank A.G. den Butter & Udo Kock, 2006. "A Cointegration Model for Search Equilibrium Wage Formation," Journal of Applied Economics, Taylor & Francis Journals, vol. 9(2), pages 235-254, November.
    • Handle: RePEc:taf:recsxx:v:9:y:2006:i:2:p:235-254
    DOI: 10.1080/15140326.2006.12040646
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    Cited by:

    1. Katarzyna Budnik, 2012. "Do those who stay work less? On the impact of emigration on the measured TFP in Poland," NBP Working Papers 113, Narodowy Bank Polski.
    2. Katarzyna Budnik, 2008. "Search Equilibrium with Migration: the Case of Poland," NBP Working Papers 45, Narodowy Bank Polski.

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