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Structural change in U.S. wage determination

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  • Robert W. Rich
  • Donald Rissmiller

Abstract

This paper provides an empirical investigation into the determinants and stability of the aggregate wage inflation process in the United States over the 1967-2000 period. Using compensation per hour as the measure of wages, we specify a Phillips curve model that links wage growth to its past values as well as to the unemployment rate, price inflation, labor productivity growth, and an additional set of labor market variables. The results do not reject the hypothesis that real wages and labor productivity move proportionally in the long run. More important, endogenous structural break tests provide little evidence of model instability. We conclude that aggregate wage determination has remained stable over the last thirty years and that any recent shift in the inflation-unemployment relationship reflects developments outside the labor market.

Suggested Citation

  • Robert W. Rich & Donald Rissmiller, 2001. "Structural change in U.S. wage determination," Staff Reports 117, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:117
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    References listed on IDEAS

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    Keywords

    Inflation (Finance); Wages; Labor productivity;
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