IDEAS home Printed from https://ideas.repec.org/p/tin/wpaper/20030088.html

A Cointegration Model for Search Equilibrium Wage Formation

Author

Listed:
  • L. Broersma

    (Department of Economics and Department of Spatial Science, University of Groningen)

  • Frank A.G. den Butter

    (Department of Economics, Vrije Universiteit Amsterdam)

  • Udo Kock

    (International Monetary Fund, Washington)

Abstract

This discussion paper resulted in a publication in the Journal of Applied Economics , 9, 235-54. In flow models of the labor market, wages are determined by negotiations between workers and employers on the surplus value of a realized match. From this perspective our study presents an econometric analysis of the influence of labor market flows on wage formation as alternative to the traditional specification of wage equations where unemployment represents the Phillips-curve or wage curve-effects. We estimate a dynamic wage equation for the Netherlands using a cointegration approach. We find that labor flows, and notably flows from outside the labor market, are important determinants for both short run and long run wage setting

Suggested Citation

  • L. Broersma & Frank A.G. den Butter & Udo Kock, 2003. "A Cointegration Model for Search Equilibrium Wage Formation," Tinbergen Institute Discussion Papers 03-088/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20030088
    as

    Download full text from publisher

    File URL: https://papers.tinbergen.nl/03088.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul Frijters & Bas van der Klaauw, 2006. "Job Search with Nonparticipation," Economic Journal, Royal Economic Society, vol. 116(508), pages 45-83, January.
    2. Dale T. Mortensen, 1982. "The Matching Process as a Noncooperative Bargaining Game," NBER Chapters, in: The Economics of Information and Uncertainty, pages 233-258, National Bureau of Economic Research, Inc.
    3. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    4. Lourens Broersma & Frank A. G. Den Butter, 2001. "Labour Flows as Determinants of the Wage–Price Spiral: An Empirical Analysis for The Netherlands," LABOUR, CEIS, vol. 15(2), pages 279-294, June.
    5. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    6. Blanchard, Olivier Jean & Diamond, Peter, 1992. "The Flow Approach to Labor Markets," American Economic Review, American Economic Association, vol. 82(2), pages 354-359, May.
    7. Graafland, J.J., 1991. "From Phillips curve to wage curve," MPRA Paper 21077, University Library of Munich, Germany.
    8. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 217-227.
    9. Andrew Brigden & Jonathan Thomas, 2003. "A matching model of non-employment and wage pressure," Bank of England Staff Working Paper series 208, Bank of England.
    10. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    11. Robert Engle & Clive Granger, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    12. Knoester, Anthonie & van der Windt, Nico, 1987. "Real Wages and Taxation in Ten OECD Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 151-169, February.
    13. Paul Frijters & Bas van der Klaauw, 2006. "Job Search with Nonparticipation," Economic Journal, Royal Economic Society, vol. 116(508), pages 45-83, January.
    14. Broersma, Lourens & den Butter, Frank A. G. & Kock, Udo, 2000. "A national accounting system for worker flows," Economics Letters, Elsevier, vol. 67(3), pages 331-336, June.
    15. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
    16. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76(4), pages 678-678.
    17. repec:bla:scandj:v:92:y:1990:i:2:p:215-35 is not listed on IDEAS
    18. Lourens Broersma & Frank A. G. Den Butter, 2002. "An explorative empirical analysis of the influence of labour flows on wage formation," Applied Economics, Taylor & Francis Journals, vol. 34(13), pages 1583-1592.
    19. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, vol. 109(456), pages 283-306, June.
    20. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
    21. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-595, September.
    22. Dale T. Mortensen & Christopher A. Pissarides, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 397-415.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Katarzyna Budnik, 2012. "Do those who stay work less? On the impact of emigration on the measured TFP in Poland," NBP Working Papers 113, Narodowy Bank Polski.
    2. Kees Folmer, 2009. "Why do macro wage elasticities diverge? A meta analysis," CPB Discussion Paper 122, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Katarzyna Budnik, 2008. "Search Equilibrium with Migration: the Case of Poland," NBP Working Papers 45, Narodowy Bank Polski.

    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. International Monetary Fund, 2004. "A Cointegration Model for Search Equilibrium Wage Formation," IMF Working Papers 2004/092, International Monetary Fund.
    2. Yashiv, Eran, 2006. "Evaluating the performance of the search and matching model," European Economic Review, Elsevier, vol. 50(4), pages 909-936, May.
    3. Shaimaa Yassin, 2013. "Structural Labor Market Transitions and Wage Dispersion in Egypt and Jordan," Working Papers 753, Economic Research Forum, revised May 2013.
    4. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
    5. repec:eee:labchp:v:3:y:1999:i:pb:p:2567-2627 is not listed on IDEAS
    6. Gautier, Pieter A. & Moraga-González, José L. & Wolthoff, Ronald P., 2007. "Structural Estimation of Search Intensity: Do Non-Employed Workers Search Enough?," IZA Discussion Papers 3045, IZA Network @ LISER.
    7. Broersma, L. & Butter, F.A.G. den, 1993. "The influence of labour market dynamics on wage formation," Serie Research Memoranda 0057, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    8. Ibnouzahir Youssef & Herraz Ismail & Bassite Imad & Elkhattab Younes & Hefnaoui Ahmed, 2025. "Okun’S Law And Phillips Curve Revisited: Nonlinear Evidence From The Moroccan Economy," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 71-86, December.
    9. Pissarides, Christopher & Mortensen, Dale T., 2001. "Taxes, Subsidies and Equilibrium Labour Market Outcomes," CEPR Discussion Papers 2989, Centre for Economic Policy Research.
    10. Lisi, Gaetano, 2013. "The Benchmark Macroeconomic Models of the Labour Market," MPRA Paper 62318, University Library of Munich, Germany.
    11. Tsasa, Jean-Paul K., 2022. "Labor market volatility in a fully specified RBC search model: An analytical investigation," Journal of Mathematical Economics, Elsevier, vol. 103(C).
    12. Andrea Vindigni & Simone Scotti & Cristina Tealdi, 2015. "Uncertainty and the Politics of Employment Protection," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 209-267.
    13. Pissarides, Christopher A., 2015. "Dale Mortensen: An appreciation," Research in Economics, Elsevier, vol. 69(1), pages 1-6.
    14. Michel-Pierre Chélini & Georges Prat, 2019. "Verständnis der langfristigen Dynamik von Arbeitslosigkeit und Löhnen in Frankreich [Understanding the Long Run Dynamics of French Unemployment and Wages]," Post-Print hal-04400810, HAL.
    15. Eckstein, Zvi & van den Berg, Gerard J., 2007. "Empirical labor search: A survey," Journal of Econometrics, Elsevier, vol. 136(2), pages 531-564, February.
    16. Mete Kilic & Jessica A. Wachter, 2015. "Risk, Unemployment, and the Stock Market: A Rare-Event-Based Explanation of Labor Market Volatility," NBER Working Papers 21575, National Bureau of Economic Research, Inc.
    17. Kangoh Lee, 2021. "Labor market frictions, capital, taxes and employment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1329-1359, December.
    18. Miroslav Gabrovski & Ioannis Kospentaris & Lucie Lebeau, 2024. "The Macroeconomics of Labor, Credit and Financial Market Imperfections," Working Papers 2409, Federal Reserve Bank of Dallas.
    19. Nobuhiro Kiyotaki & Ricardo Lagos, 2007. "A Model of Job and Worker Flows," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 770-819, October.
    20. Morvay, Endre, 2012. "Munkapiac keresési súrlódásokkal [Job-seeking on the labour market, with frictions]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 139-163.
    21. Violante, Giovanni & Hornstein, Andreas, 2006. "Frictional Wage Dispersion in Search Models: A Quantitative Approach," CEPR Discussion Papers 5935, Centre for Economic Policy Research.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

    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:tin:wpaper:20030088. 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: Tinbergen Office +31 (0)10-4088900 (email available below). General contact details of provider: https://edirc.repec.org/data/tinbenl.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.