Working Paper: NBER ID: w11338
Authors: David G. Blanchflower; Andrew J. Oswald
Abstract: This paper provides evidence for the existence of a wage curve -- a micro-econometric association between the level of pay and the local unemployment rate -- in modern U.S. data. Consistent with recent evidence from more than 40 other countries, the wage curve in the United States has a long-run elasticity of approximately -0.1. In line with the paper's theoretical framework: (i) wages are higher in states with more generous unemployment benefits, (ii) the perceived probability of job-finding is lower in states with higher unemployment, and (iii) employees are less happy in states that have higher unemployment. We conclude that it is reasonable to view the wage curve as an empirical law of economics.
Keywords: Wage Curve; Unemployment; Microeconometrics; Labor Economics
JEL Codes: J3; E2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unemployment Benefits (J65) | Wages (J31) |
| Unemployment Rate (J64) | Reported Happiness (I31) |
| Unemployment Rate (J64) | Probability of Job Finding (J68) |
| Unemployment Rate (J64) | Wages (J31) |