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Wage Formation in a Cointegrated VAR Model: A Demand and Supply Approach

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  • Thórarinn G. Pétursson
  • Torsten Sløk

Abstract

Usually cointegrated VAR models of wage formation are analysed in a wage-price setup. However, theoretical wage bargaining models provide the background for a wage-employment setup. The two relations of interest are the labour demand equation from the profit maximizing firms and the (bargained) wage equation from maximizing the Nash product of the wage bargaining process. From the underlying economic model we derive explicit parameter restrictions which are analysed using a multivariate cointegration approach, using quarterly data from Denmark. These restrictions are not rejected and the theoretical model with maximizing agents can be said to give a good description of wage formation in Denmark.

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  • Thórarinn G. Pétursson & Torsten Sløk, "undated". "Wage Formation in a Cointegrated VAR Model: A Demand and Supply Approach," EPRU Working Paper Series 97-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:epruwp:97-03
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    3. Bruce, Neil, 1992. "A Note on the Taxation of International Capital Income Flows," The Economic Record, The Economic Society of Australia, vol. 68(202), pages 217-221, September.
    4. Partha Dasgupta & Joseph Stiglitz, 1972. "On Optimal Taxation and Public Production," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 87-103.
    5. Huizinga, Harry & Nielsen, Soren Bo, 2002. "The coordination of capital income and profit taxation with cross-ownership of firms," Regional Science and Urban Economics, Elsevier, vol. 32(1), pages 1-26, January.
    6. Torsten Persson & Guido Tabellini, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 689-701.
    7. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
    8. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
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