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International Wage Curve

  • David Blanchflower
  • A Oswald

The paper provides international evidence for the existence of a negatively sloped locus linking the level of pay to the rate of regional (or industry) unemployment. This 'wage curve' is found using microeconomic data for Britain, the US, Canada, Korea, Austria, Italy, Holland, Switzerland, Norway and Germany. The average unemployment elasticity of pay is approximately -0.1. The paper sets out a multi-region efficiency wage model as one possible interpretation of the data.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0116.

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Date of creation: Feb 1993
Date of revision:
Handle: RePEc:cep:cepdps:dp0116
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  1. Blanchflower, David G, 1991. "Fear, Unemployment and Pay Flexibility," Economic Journal, Royal Economic Society, vol. 101(406), pages 483-96, May.
  2. David G. Blanchflower & Lisa M. Lynch, 1994. "Training at Work: A Comparison of U.S. and British Youths," NBER Chapters, in: Training and the Private Sector: International Comparisons, pages 233-260 National Bureau of Economic Research, Inc.
  3. Kloek, T, 1981. "OLS Estimation in a Model Where a Microvariable Is Explained by Aggregates and Contemporaneous Disturbances Are Equicorrelated," Econometrica, Econometric Society, vol. 49(1), pages 205-07, January.
  4. repec:oup:qjecon:v:100:y:1985:i:1:p:57-79 is not listed on IDEAS
  5. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
  6. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-88, August.
  7. Holmlund, B. & Zetterberg, J., 1989. "Insider Effects In Wage Determination: Evidence From Five Countries," Papers 1989a, Uppsala - Working Paper Series.
  8. Reza, Ali M, 1978. "Geographical Differences in Earnings and Unemployment Rates," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 201-08, May.
  9. Nickell, Stephen J & Wadhwani, Sushil, 1990. "Insider Forces and Wage Determination," Economic Journal, Royal Economic Society, vol. 100(401), pages 496-509, June.
  10. Richard Jackman & Richard Layard & S Savouri, 1990. "Mismatch: A Framework for Thought," CEP Discussion Papers dp0001, Centre for Economic Performance, LSE.
  11. Katz, L.F. & Krueger, A.B, 1991. "The Effect Of The New Minimum Wage Law In A Low-Wage Labor Market," Harvard Institute of Economic Research Working Papers 1544, Harvard - Institute of Economic Research.
  12. repec:oup:qjecon:v:107:y:1992:i:3:p:985-1002 is not listed on IDEAS
  13. repec:oup:qjecon:v:100:y:1985:i:1:p:29-56 is not listed on IDEAS
  14. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  15. repec:oup:qjecon:v:105:y:1990:i:2:p:255-83 is not listed on IDEAS
  16. Blackaby, D H & Manning, D N, 1987. "Regional Earnings Revisited," The Manchester School of Economic & Social Studies, University of Manchester, vol. 55(2), pages 158-83, June.
  17. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  18. Phelps, Edmund S, 1990. " Effects of Productivity, Total Domestic-Product Demand and "Incentive Wages" on Unemployment in a Non-monetary Customer-Market Model of the Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 353-67.
  19. Greenwald, Bruce C., 1983. "A general analysis of bias in the estimated standard errors of least squares coefficients," Journal of Econometrics, Elsevier, vol. 22(3), pages 323-338, August.
  20. Richard B. Freeman, 1990. "Employment and Earnings of Disadvantaged Young Men in a Labor Shortage Economy," NBER Working Papers 3444, National Bureau of Economic Research, Inc.
  21. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  22. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
  23. Edin, P.A. & Holmlund, B. & Ostros, T., 1992. "Wage Behavior and Labor Market Programs in Sweden: Evidence from Micro Data," Papers 1993-1, Uppsala - Working Paper Series.
  24. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June.
  25. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
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