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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
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Handle: RePEc:cep:cepdps:dp0116
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. 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.
  2. 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.
  3. Nickell, Stephen & Wadhwani, Sushil B, 1989. "Insider Forces and Wage Determination," CEPR Discussion Papers 310, C.E.P.R. Discussion Papers.
  4. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June.
  5. David G. Blanchflower & Lisa M. Lynch, 1992. "Training at Work: A Comparison of U.S. and British Youths," NBER Working Papers 4037, National Bureau of Economic Research, Inc.
  6. 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.
  7. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
  8. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  9. L Christofides & A Oswald, 1991. "Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements," CEP Discussion Papers dp0042, Centre for Economic Performance, LSE.
  10. 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.
  11. Marston, Stephen T, 1985. "Two Views of the Geographic Distribution of Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 57-79, February.
  12. 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.
  13. David G. Blanchflower, 1990. "Fear, Unemployment and Pay Flexibility," NBER Working Papers 3365, National Bureau of Economic Research, Inc.
  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. 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.
  16. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
  17. Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, vol. 35(5), pages 1009-1034, July.
  18. 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.
  19. Richard Jackman & Richard Layard & S Savouri, 1990. "Mismatch: A Framework for Thought," CEP Discussion Papers dp0001, Centre for Economic Performance, LSE.
  20. 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.
  21. 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.
  22. 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.
  23. 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.
  24. 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.
  25. Adams, James D, 1985. "Permanent Differences in Unemployment and Permanent Wage Differentials," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 29-56, February.
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