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The wage curve: A panel data view of labour market segments

Author

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  • Pavel Gertler

    () (National Bank of Slovakia, Research Departmen)

Abstract

The paper studies the relationship between the local unemployment rate and wage level – commonly referred to as the wage curve. Using a panel data setup for annual enterprise-level microdata, we confirm previous findings that wages in Slovakia are, on the whole, relatively flexible – with a rise in the local unemployment rate of 1 percentage point being associated with a drop in wages of 0.85%. We find, however, that these elasticities differ considerably across sectors, regions and, in particular, skills. Our results indicate that overall wage flexibility in the Slovak labour market is driven more by the wage flexibility of higher-skilled employees, and their broader opportunities for employment, than by the institutional arrangements of the labour market.

Suggested Citation

  • Pavel Gertler, 2010. "The wage curve: A panel data view of labour market segments," Working and Discussion Papers WP 3/2010, Research Department, National Bank of Slovakia.
  • Handle: RePEc:svk:wpaper:1012
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    References listed on IDEAS

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    1. Erica L. Groshen & Mark E. Schweitzer, 1996. "Macro- and microeconomic consequences of wage rigidity," Working Paper 9607, Federal Reserve Bank of Cleveland.
    2. David Card & W. Craig Riddell, 1993. "A Comparative Analysis of Unemployment in Canada and the United States," NBER Chapters,in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 149-190 National Bureau of Economic Research, Inc.
    3. Pavel Gertler & Matúš Senaj, 2010. "Downward Wage Rigidities in Slovakia," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 4(1), pages 079-101, March.
    4. Ian Babetskii, 2006. "Aggregate Wage Flexibility in Selected New EU Member States," Working Papers 2006/1, Czech National Bank, Research Department.
    5. Blanchflower, David G., 2001. "Unemployment, Well-Being, and Wage Curves in Eastern and Central Europe," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 364-402, December.
    6. Kamil Galušèák & Daniel Münich, 2005. "Regional Wage Adjustments and Unemployment: Estimating the Time-Varying Wage Curve (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 55(1-2), pages 68-82, January.
    7. 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.
    8. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    Citations

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    Cited by:

    1. Marianna Cervena, 2012. "Base Wage Rigidities: Evidence From a Survey of Slovak Firms," Working and Discussion Papers WP 3/2012, Research Department, National Bank of Slovakia.
    2. Daniel Němec, 2013. "Investigating Differences Between the Czech and Slovak Labour Market Using a Small DSGE Model with Search and Matching Frictions," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 7(1), pages 021-041, March.
    3. repec:spr:jahrfr:v:38:y:2018:i:1:d:10.1007_s10037-017-0113-z is not listed on IDEAS
    4. Marianna Cervena, 2012. "Labor Cost Adjustment: Evidence From a Survey of Slovak Firms," Working and Discussion Papers WP 4/2012, Research Department, National Bank of Slovakia.
    5. 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

    Keywords

    wage curve; panel data; unemployment elasticity of wages; wage flexibility; Slovakia; Phillips curve; microdata;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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