Are Real Wages and Unemployment Related?
In this paper we propose an alternative method for investigating the sources behind the behavior of real wages and unemployment. The statistical model we study is a certain structural error correction model, a so called common trends model, which has become popular in the empirical growth/business cycle literature. The system consists of real output, employment, unemployment and the product real wage and two exogenous stochastic variables, a tax wedge and a currency basket index. Based on quarterly Swedish data (1965-90) we find evidence supporting a short run but not a medium or long run relation.
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|Date of creation:||Jan 1994|
|Date of revision:|
|Publication status:||Published in Economica, 1998, pages 69-96.|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
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