IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/4770.html
   My bibliography  Save this paper

Estimating a Wage Curve for Britain 1973-1990

Author

Listed:
  • David G. Blanchflower
  • Andrew J. Oswald

Abstract

Following Phillip's original work on the UK, applied research on unemployment and wages has been dominated by the analysis of highly aggregated time-series data sets. However, it has proved difficult with such methods to uncover statistically reliable models. This paper adopts a different approach. It uses microeconomic data on 175,000 British workers from 1973-1990 to provide evidence for the existence of a negatively sloped relationship linking the level of pay to the local rate of unemployment. This 'wage curve' is found to have an elasticity of approximately -0.1. Contrary to the Phillips Curve, no autoregression is found in wages. The paper casts doubt on standard ideas in macroeconomics, regional economics and labour economics.

Suggested Citation

  • David G. Blanchflower & Andrew J. Oswald, 1994. "Estimating a Wage Curve for Britain 1973-1990," NBER Working Papers 4770, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4770
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w4770.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 255-283.
    2. Bowles, Samuel, 1985. "The Production Process in a Competitive Economy: Walrasian, Neo-Hobbesian, and Marxian Models," American Economic Review, American Economic Association, vol. 75(1), pages 16-36, March.
    3. David G. Blanchflower & Andrew Oswald, 1995. "International Wage Curves," NBER Chapters, in: Differences and Changes in Wage Structures, pages 145-174, National Bureau of Economic Research, Inc.
    4. Blanchflower, D. & Oswald, A. & Garrett, M., 1988. "Insider Power In Wage Determination," Papers 319, London School of Economics - Centre for Labour Economics.
    5. Blanchflower, David G, 1991. "Fear, Unemployment and Pay Flexibility," Economic Journal, Royal Economic Society, vol. 101(406), pages 483-496, May.
    6. Lynch, Lisa M. (ed.), 1994. "Training and the Private Sector," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226498102, December.
    7. Edmund S. Phelps, 1992. "Consumer Demand and Equilibrium Unemployment in a Working Model of the Customer-Market Incentive-Wage Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 1003-1032.
    8. Louis N. Christofides & Andrew J. Oswald, 1992. "Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 985-1002.
    9. 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.
    10. Blanchflower, David G & Oswald, Andrew J & Garrett, Mario D, 1990. "Insider Power in Wage Determination," Economica, London School of Economics and Political Science, vol. 57(226), pages 143-170, May.
    11. 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 353-367.
    12. Richard Jackman & Richard Layard & S Savouri, 1990. "Mismatch: A Framework for Thought," CEP Discussion Papers dp0001, Centre for Economic Performance, LSE.
    13. Nickell, Stephen J, 1987. "Why Is Wage Inflation in Britain So High?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 103-128, February.
    14. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, March.
    15. Lindbeck, Assar, 1992. "Macroeconomic theory and the labor market," European Economic Review, Elsevier, vol. 36(2-3), pages 209-235, April.
    16. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    17. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    18. Woodford, Michael, 1992. "Seven schools of macroeconomic thought by E.S. Phelps : A book review," Journal of Economic Dynamics and Control, Elsevier, vol. 16(2), pages 391-398, April.
    19. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    20. 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.
    21. Lisa M. Lynch, 1994. "Training and the Private Sector: International Comparisons," NBER Books, National Bureau of Economic Research, Inc, number lync94-1, May.
    22. Blackaby, D H & Manning, D N, 1990. "The North-South Divide: Questions of Existence and Stability?," Economic Journal, Royal Economic Society, vol. 100(401), pages 510-527, June.
    23. Moulton, Brent R, 1987. "Diagnostics for Group Effects in Regression Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 275-282, April.
    24. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
    25. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 111-143, June.
    26. Manning, Alan, 1993. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," Economic Journal, Royal Economic Society, vol. 103(416), pages 98-118, January.
    27. Greenhalgh, Christine A, 1980. "Male-Female Wage Differentials in Great Britain: Is Marriage an Equal Opportunity?," Economic Journal, Royal Economic Society, vol. 90(363), pages 751-775, December.
    28. Blackaby, D H & Manning, D N, 1987. "Regional Earnings Revisited," The Manchester School of Economic & Social Studies, University of Manchester, vol. 55(2), pages 158-183, June.
    29. 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.
    30. 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 334-338, May.
    31. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David G. Blanchflower & Andrew Oswald, 1995. "International Wage Curves," NBER Chapters, in: Differences and Changes in Wage Structures, pages 145-174, National Bureau of Economic Research, Inc.
    2. Víctor M. Montuenga‐Gómez & José M. Ramos‐Parreño, 2005. "Reconciling the Wage Curve and the Phillips Curve," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 735-765, December.
    3. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
    4. Bill Collier, 2000. "The UK Wage Curve: New Evidence from the British Household Panel Survey," Studies in Economics 0010, School of Economics, University of Kent.
    5. Jean‐Pierre Danthine & André Kurmann, 2007. "The Macroeconomic Consequences of Reciprocity in Labor Relations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 857-881, December.
    6. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
    7. Frank Scharr, 2005. "Tarifbindung, Rententeilung und Konzessionsverträge als Einflussgrößen der Lohnhöhe in Unternehmen : eine Untersuchung mit Mikrodaten für thüringische Firmen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 39.
    8. Bratsberg, Bernt & Turunen, Jarkko, 1996. "Wage curve evidence from panel data," Economics Letters, Elsevier, vol. 51(3), pages 345-353, June.
    9. Mahmood Arai, 2003. "Wages, Profits, and Capital Intensity: Evidence from Matched Worker-Firm Data," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 593-618, July.
    10. José Abraham López Machuca & Jorge Eduardo Mendoza Cota, 2017. "Salarios, desempleo y productividad laboral en la industria manufacturera mexicana. (Wage, Unemployment and Labor Productivity in the Mexican Manufacturing Industry)," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 185-228, October.
    11. Maarten Goos & Jozef Konings, 2001. "Does Rent-Sharing Exist in Belgium ?. An Empirical Analysis Using Firm Level Data," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 65-79.
    12. Inmaculada Garcia-Mainar & Victor Montuenga-Gomez, 2003. "The Spanish Wage Curve: 1994-1996," Regional Studies, Taylor & Francis Journals, vol. 37(9), pages 929-945.
    13. Charles Brown & James L. Medoff, 2003. "Firm Age and Wages," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 677-698, July.
    14. Kåre Johansen, 2002. "Regional Wage Curves Empirical Evidence from Norway," Working Paper Series 0302, Department of Economics, Norwegian University of Science and Technology.
    15. Moller, Joachim, 2001. "Regional Adjustment Dynamics," Discussion Paper Series 26180, Hamburg Institute of International Economics.
    16. Kåre Johansen, "undated". "Nonlinear Wage Responses to Internal and External Factors," Working Paper Series 0902, Department of Economics, Norwegian University of Science and Technology, revised 25 Aug 2002.
    17. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1996. "Wages, Profits, and Rent-Sharing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 227-251.
    18. 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.
    19. Franz, Wolfgang, 1993. "Unvollkommene Arbeitsmärkte in makroökonomischen Modellen: Eine Übersicht," Discussion Papers 1, University of Konstanz, Center for International Labor Economics (CILE).
    20. Reinhold Kosfeld & Christian Dreger, 2018. "Local and spatial cointegration in the wage curve – a spatial panel analysis for german regions," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 38(1), pages 53-75, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4770. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.