Working Paper: NBER ID: w4770
Authors: 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.
Keywords: wage curve; unemployment; microeconomic data; British workers
JEL Codes: J31; E24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local unemployment rates (J69) | wages (J31) |
| unemployment (J64) | wages (J31) |
| unemployment (J64) | wages (for black workers) (J31) |