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We offer strong evidence of a wage curve mechanism in Greece, which seems to be substantially enhanced by reforms aimed at increasing labour market flexibility. Male, older, more qualified and rural employees appear to be more sensitive to regional unemployment.

This paper uses microeconomic data for the period from 1990 to 2004 to examine the relationship between public–private sector wage differentials and labour market conditions in Finland. The results show that the public sector wage premium is strongly counter-cyclical. On average, a 10 percent increase in the local unemployment rate increases the public–private sector wage gap by one percent. Separate analyses by government sector and quantiles of the distribution of wages reveal that it is local government workers and those working at lower skill levels who benefit more from increasing unemployment rate. The paper also exploits the longitudinal structure of the data to examine whether the results are constant over time. These results indicate that the cyclical pattern primarily emerges in years with deteriorated labour markets.

This paper presents wage curves for formal and informal workers using a rich individual level data for Turkey over the period 2005-2009. The wage curve is an empirical regularity describing a negative relationship between regional unemployment rates and individuals' real wages. While this relationship has been well documented for a number of countries including Turkey, less attention has focused on how this relationship differs for informal versus formal employment. This is of utmost importance for less developed countries where informal employment plays a significant role in the economy. Using the Turkish Household Labor Force Survey observed over 26 NUTS-2 regions, we find that real hourly wages of informal workers in Turkey are more sensitive to variations in regional unemployment rates than wages of formal workers. This is true for all workers as well as for different gender and age groups.

It is commonly claimed that the South African labor market is unusually inflexible owing to the strength of the country's unions and the system of centralized collective bargaining. One sign of labor market inflexibility is low responsiveness of wages to local unemployment. Analyzing data from the South African Living Standards Survey, the authors find that the elasticity of wages with respect to local unemployment rates in South Africa in 1993 was about -0.1. The similarity of this elasticity to that found in other countries, including the United States and the United Kingdom, is surprising given South Africa's national unemployment rate of over 30%. The wage curve elasticity persists over a much wider range of unemployment rates in South Africa than in OECD countries, implying that unemployment in South Africa can have a large impact on wages. (Free full-text download available at http://digitalcommons.ilr.cornell.edu/ilrreview/.)

Individual sales prices and local vacancy rates in the housing market pose a natural analogy to the wage curve, a popular concept in labor economics that describes how individual wages decrease with higher local unemployment. While housing search and matching models and housing externalities strongly suggest a stable inverse relationship, there is still a lack of convincing empirical research on the sensitivity of house sales to local vacancy variation. Based on more than 10,000 single-family home transactions from the German market, this paper confirms a robust house price-vacancy curve among individual home prices and adjacent residential vacancies. The economic size of the relationship is highly comparable across all four analyzed states: a doubling of the vacancy rate at the municipality level is associated with a 5-8% discount in quality-controlled selling prices. Despite negative price signals, local vacancy distributions tend to persist over long time horizons, leaving room for policy intervention.

The subject of the article is the relationship between unemployment and wages at the regional level in the Czech Republic in the period 2003-2010. The aim of the authors was to verify the construction possibility and validity of regional wage and Phillips curves both in the regions and at the national level. The analysis was done by means of linear regression models on the quarter data basis. The results for the period 2003-2008 show the wage curve validity both at the regional and national level. It is impossible to construct the wage curve in the period 2009-2010, for despite the big unemployment rise the wages remained steady during this time. This fact supports the idea of short time downwards rigidity of wages. In 2003-2008, contrary to 2009-2010, it is possible to say the Phillips curve was valid at the national level, for the unemployment rate decrease leaded to the increase of the wage growth rate. In particular regions with a few exceptions this relationship was not valid, which supports theoretical findings about the impossibility of the Phillips curve construction at lower than the national level.

The aim of this paper is to investigate the labour market conditions of Turkey via disaggregated wage curves following the argument that group specific regional unemployment rates might better describe wage curves than aggregate ones. Using 2007-2009 panel survey of Income and Living Conditions, I found that there is weak evidence in favour of the existence of a wage curve for Turkey. Different categories of unemployment rate give different results on the unemployment elasticity of pay. For male workers, wage curve relationship seems to exist only when male unemployment rates are used and for female workers, there is no evidence in favor of a wage curve. When the data are split into two age groups, and age specific unemployment rates are used, there appears a wage curve for women of age twenty-five to sixty-four and a positive unemployment elasticity of pay for the women of age fifteen to twenty-four. These results might be explained by Ilkkaracan and Selim (2003)’s argument focusing on the labour force participation dynamics of women in Turkey., El objetivo de este trabajo es investigar las condiciones laborales de Turquía a través de curvas salariales desagregadas siguiendo el argumento de que las tasas regionales de desempleo por grupos podría describir mejor las curvas salariales que las agregadas. Usando datos del Panel de Ingresos y Condiciones de Vida 2007-2009, encuentro que no hay pruebas sólidas a favor de la existencia de una curva de salarios para Turquía. Diferentes categorías para la tasa de desempleo ofrecen distintos resultados en la elasticidad de los salarios al desempleo regional. Para los trabajadores masculinos, la relación salarial curva parece existir sólo cuando se utilizan tasas de desempleo específicas de este colectivo, mientras que para las trabajadoras no hay evidencia a favor de una curva de salarios. Cuando los datos se dividen en dos grupos de edad, y se usan las tasas de desempleo específicas por edad, aparece una curva de salarios para las mujeres de veinticinco a sesenta y cuatro años y una elasticidad positiva para las mujeres de edad de quince a veinticuatro. Estos resultados podrían explicarse por el argumento de Ilkkaracan y Selim (2003) que se centra en la dinámica de la participación laboral de las mujeres en Turquía.

The paper presents a theoretical analysis of macroeconomic effects of employment subsidy programmes and training/education programmes when the economy faces a macroeconomic shock. Wages and employment are determined by the intersection of demand curves and wage-setting schedules. The wage curve is derived from the Shapiro-Stiglitz efficiency-wage model. Employment subsidy programmes decrease the risk of being unemployed and tend to keep the welfare of workers. Training programmes upgrade labour skill and tend to transfer labour from a low-productivity to a high-productivity sector. Both programmes tend to increase the welfare of workers. However, the macroeconomic impacts of these two programmes on wages and labour productivity are different. The paper investigates and compares the macroeconomic influences of subsidised employment programmes and training/education programmes in a dual labour-market framework.

The wage curve postulates that the wage level is a decreasing function of the regional unemployment rate. In testing this hypothesis, most studies have not taken into account that differences in the institutional framework may have an impact on the existence (or the slope) of a wage curve. Using a large-scale linked employer–employee dataset for Western Germany, this article provides a first direct test of the relevance of different bargaining regimes (and of works councils) for the existence of a wage curve. In pooled regressions for the period 1998 to 2006, as well as in worker-level or plant-level fixed-effects estimations, we obtain evidence for a wage curve for plants with a collective bargaining agreement at firm level. The point estimates for this group of plants are close to the −0.1 elasticity of wages with respect to unemployment postulated by Blanchflower and Oswald. In this regime, we also find that works councils dampen the adjustment of wages to the regional unemployment situation. In the other regimes of plants that either do not make use of collective contracts or apply sectoral agreements, we do not find a wage curve.

We present an econometric analysis of wage behaviour in Norway during the interwar years. The analysis is based on a panel of manufacturing industry data using GMM estimation methods. Our empirical analysis shows that wage formation in the interwar period can be understood with the help of modern bargaining theory and well-established wage equations. We estimate a long-run wage curve that has all the standard features of being homogeneous in prices, proportional to productivity, and with a negative unemployment elasticity. We also present some new Monte Carlo evidence on the properties of the estimators used.

The objective of this paper is to examine the inter-industry and labour market occupational effects of future demographic changes, using a dynamic general equilibrium overlapping-generations model. The model is calibrated along a balanced-growth path, taking into account labour-augmenting (Harrod-neutral) technical progress. It also accounts for heterogeneity at the household level, using 25 occupations-specific earnings profiles. In addition to the impact of slower labour force growth, the model captures the shift in sectoral composition of final demand. The latter is due to different consumption preferences of older individuals. Moreover, a wage curve is introduced to explore the impact of population ageing on the unemployment rate. The simulation results indicate that the growth in real GDP per capita could decline by nearly one percentage point between 2006 and 2050. Besides, the production of services, in percent of total GDP, is projected to increase in the long-run, although the analysis shows more modest changes in production shares than in previous studies. The results also suggest that the equilibrium unemployment rate is likely to decline by more than 2 percentage points in the long run. The impact also varies quite significantly at the occupational level.

The paper presents empirical evidence on wage formation in Norway using annual time series data for manufacturing industry. First, we show that long-run effects on consumer prices and taxes depend strongly on the exact definition of the empirical variables. Using the implicit factor income deflator, the wedge between consumer's and producer's real wages is insignificant. Second, our results indicate that there is a long-run tradeoff between the wage level and the unemployment ratio and the Phillips curve specification is firmly rejected. Third, the paper presents empirical evidence in favour of a strongly non-linear wage curve. Fourth, our results support the long-term unemployment hypothesis, as increased proportion of long-term unemployment shifts the wage curve outwards and to the right.

The Italian Wage Curve. The Effects of the Recent Labour Market Reforms The paper examines some effects of the recent reforms aimed at increasing flexibility in the Italian labour market. It shows their incapability to respond to the “inclusion” problem which still characterises the country. New temporary low-skill jobs were created but the reforms have neither enforced industrial competitiveness nor increased productivity. Far from solving the problems of a dual economy, de-regulation of Italian labour market has reinforced them and has concurrently eroded civil rights thereby making a departure form standards of health and morality. Excessive turnover of workers and firms is a major obstacle to human capital accumulation. A hostile territory produces social inequality, poverty and under- consumption that severely compromises growth. Key words: Labor and Demographic Economics; Wages, Compensation and Labor Costs; Wage Level and Structure; Wage Differentials JEL Classification: J, J3, J31 Final version received May 2008

Based on a re-parameterised Blanchflower–Oswald model this paper uses long macro-data from the OECD countries to discriminate between the Philips curve and the wage curve and examines whether there are any differences in wage dynamics between Europe and the United States. The evidence gives support for the Phillips curve and shows that wage dynamics are no different between the United States and Europe.

Blanchflower and Oswald [Blanchflower, David G. and Oswald, Andrew J., 1994a, The Wage Curve, (Cambridge, MA, MIT Press), Blanchflower, David G. and Oswald, Andrew J., 1994b, Estimating a Wage Curve for Britain 1973–90, The Economic Journal 104, 1025–1043. Eine praktische Einfuhrung, Nurnberg] reported that they have found an ‘empirical law of economics’ — the Wage Curve. Our paper reconsiders the western German Wage Curve using disaggregated regional data and is based on almost one million employees drawn from the Federal Employment Services of Germany over the period 1980–2004. We find that the wage equation is highly autoregressive but far from unit root. The unemployment elasticity is significant but relatively small: only between − 0.02 and − 0.04. We also check the sensitivity of this elasticity for different population groups (young versus old, men versus women, less educated versus highly educated, German native versus foreigner), confirming that it is stronger the weaker the bargaining power of the particular group.

This paper examines China’s industrialization in the light of the Lewis growth model. It begins with a perusal of Lewis’ own writings and those of Fei and Ranis in order to clarify certain assumptions and predictions of the Lewis model. The paper then reviews previous applications of the Lewis model in studying industrialization in other countries, and notes the methodological problems that arise in this regard. In applying the Lewis model to study China’s industrialization, the paper focuses on the dynamic relationship between wage and marginal product of labor in the traditional sector. For this purpose, the paper estimates a production function for China’s agriculture sector using province level data and compares the estimated marginal product of labor with the corresponding wage of this sector. The results show that the marginal product has been increasing (from below) at a faster pace than the wage, as is predicted by the Lewis model. The results indicate that China as a whole is steadily moving toward the Lewis Turning Point.

This study develops an efficiency wage model that generates a wage curve at the regional level and a Phillips curve at the national level, under the assumption that workers' efficiency depends on both regional and aggregate labor market conditions. An equation relating wages to unemployment and lagged wages is derived from the profit-maximizing behavior of firms, and it is demonstrated that the coefficient on lagged wages is less than 1 with regional data but equals 1 with aggregate data. In addition, there is an equilibrium relationship between unemployment and wages at the regional level, but not at the aggregate level.

Livanos I. The wage–local unemployment relationship in a highly regulated labour market: Greece, Regional Studies. Using data obtained from 80 000 employees, this paper examines the relationship between individual wages and regional unemployment in Greece. The findings highlight the dynamics of the local labour markets in a case such as Greece, where the Organisation for Economic Co-operation and Development (OECD) claims that wage flexibility is limited. This study does not find evidence that wages in Greece are rigid, but finds a wage curve elasticity of close to − 0.1, which corresponds to evidence from many counties. Interestingly, graduates are found to be the most responsive group of workers to the behaviour of local labour markets. Livanos I. Le rapport salaire-chomage local dans un marche du travail extremement reglemente: la Grece, Regional Studies. A partir des donnees provenant de 80.000 salaries, cet article cherche a examiner le rapport entre les salaires des individus et le chomage regional ...

Since the publication of the book by Blanchflower and Oswald in 1994, a growing literature has focused on the analysis of the wage curve, an empirical relationship between individual wages and regional unemployment. The most relevant conclusion of these studies is that there is a negative relationship between the two variables with a common elasticity across countries, which is close to −0.10. In this paper, we apply descriptive meta-analytical techniques in order to provide a quantitative summary of the available evidence regarding the wage curve. The obtained evidence casts some doubts on the stability of microeconomic wage flexibility as significant differences across countries, time periods and groups of workers are found. Eine Meta-Analyse mikrookonomischer Flexibilitat (die Lohnkurve) Seit der Veroffentlichung des Buches von Blanchflower und Oswald im Jahre 1994 beschaftigt sich die okonomische Literatur verstarkt mit dem Thema der Lohnkurve, d. h. dem Zusammenhang zwischen Lohnen und reg...

According to the standard union bargaining model, unemployment benefits should have big effects on wages, but product-market prices and productivity should play no role in the wage bargain. We formulate an alternative strategic bargaining model, where labour and product-market conditions together determine wages. A wage equation is derived and estimated on aggregate data for four Nordic countries. Wages are found to depend not only on unemployment and the replacement ratio, but also on productivity, international prices and exchange rates. There is evidence of considerable nominal wage rigidity. Exchange rate changes have large and persistent effects on competitiveness.

Our new empirical evidence suggests that wages are substantially flexible in South Korea. In particular, our longitudinal evidence on the wage curve follows the minus-point-one rule, set up by Blanchflower and Oswald (1994) and is consistent with evidence from other countries.

This paper presents and analyses the sharp increase in hourly wage inequality after 1998 in Poland. The increase was similar in magnitude to the much-studied increase in British wage inequality during the 1980s. Using data from the Polish Labour Force Survey, we find this increase to be associated with rising wage differentials and within-group variances at both the upper and lower ends of the wage distribution. These increases are associated with differences in wage-setting patterns between the public and private sector as well as with the rapid increase in demand for educated labour. One important difference between the sectors is the lack of an impact of local labour market conditions, or wage curve, clearly evident in private sector wages, on public sector wages.

This paper provides empirical evidence on regional labor market flexibility in Europe and, in particular, in the EU-accession countries in Central and Eastern Europe. Whereas substantial regional disparities in unemployment are found for pre-accession EU member countries as well as for accession countries, an empirical analysis taking account of spatial effects shows that regional wage flexibility is significantly higher for accession countries. Moreover, unemployment disparities are found to be less persistent in the accession countries.

Following Blanchflower and Oswald, a “wage curve” describes the wage level as a downward-sloping convex curve of the regional unemployment rate. This article makes two major contributions in the analysis of the wage curve. First, it is recognized that potential endogeneity of the regional unemployment rate should be subject to testing not only in combination with regional-specific effects but also in combination with time-specific effects. For this purpose, the authors develop a new estimator, the spatial first difference 2SLS estimator. Second, it is recognized that wages may not only respond to the regional but also to the national unemployment rate. In the empirical analysis, the wage curve for East Germany is estimated using a comprehensive database that provides panel data classified into 114 administrative districts during the 1993 to 1999 period.

Panel data from the United Kingdom are used to estimate a wage curve that allows simultaneously for time, individual, and spatial effects and which thus finesses the problem of grouped data bias. Once allowance is made for the multilevel and cross-classified nature of the data, estimates of the unemployment elasticity of the wage are seen to be volatile and imprecise.

Most empirical studies on the Spanish wage curve have ignored the possible spatial interaction effects between the regions. This paper reconsiders the Spanish wage curve using more recent data than previous studies and taking into account the role of regional spillovers. From a methodological perspective, we apply the two-step procedure proposed by Bell et al. (2002) to estimate a dynamic wage curve with spatial spillovers. In a first stage, we use microdata from the Spanish Social Security Records (Muestra Continua de Vidas Laborales) to obtain composition-corrected wages that are used in a second stage to estimate a wage curve over the period 2000-2010 allowing for spatial effects of unemployment across regions. Opposite to previous studies, we find that the wage equation is highly autoregressive and that regional spillovers are relevant to explain the relationship between unemployment and wages in the Spanish provinces. © 2014 Springer-Verlag Berlin Heidelberg.

The wage curve introduced by Blanchflower and Oswald (1990, 1994) postulates a negative correlation between wages and unemployment. Empirical results focus on particular theoretical channels establishing the relationship. Panel models mostly draw on unionized bargaining or the efficiency wage hypothesis. Spatial econometric approaches can be rationalized by monopsonistic competition. However, the approaches either ignore the issue of nonstationarity or treat the data as if it were nonspatial. In this paper, we adopt a global cointegration approach recently proposed by Bienstock and Felsenstein (2010) to account for nonstationarity of regional data. By specifying a spatial error correction model (SpECM), equilibrium adjustments are considered in both space and time. Applying the methodology for West German labour markets, we find strong evidence for the existence of a long-run wage curve with spatial effects.

The wage curve introduced by Blanchflower and Oswald (1990, 1994) postulates a negative correlation between wages and unemployment. Empirical results focus on particular theoretical channels establishing the relationship. Panel models mostly draw on unionized bargaining or the efficiency wage hypothesis. Spatial econometric approaches can be rationalized by monopsonistic competition. However, the approaches either ignore the issue of nonstationarity or treat the data as if it were nonspatial. In this paper, we adopt a global cointegration approach recently proposed by Bienstock and Felsenstein (2010) to account for nonstationarity of regional data. By specifying a spatial error correction model (SpECM), equilibrium adjustments are considered in both space and time. Applying the methodology for West German labour markets, we find strong evidence for the existence of a long-run wage curve with spatial effects.

This article shows how the impulses of the transformation process in eastern Germany have spread through the economy and the labour market. The form of transformation has long-term effects on the form of control over the economy; it is managed largely from western firms. This fact has manifold consequences for the innovation behaviour of plants, among others, which in turn is further related to productivity and thus to the labour market. We argue that this transfers further to persistently lower wages and higher unemployment rates in eastern compared with western Germany.

We characterize optimal monetary policy in a New Keynesian search-and-matching model where multiple-worker firms satisfy demand in the short run by adjusting hours per worker. Imperfect product market competition and search frictions reduce steady state hours per worker below the efficient level. Bargaining results in a convex ‘wage curve’ linking wages to hours. Since the steady-state real marginal wage is low, wages respond little to hours. As a result, firms overuse the hours margin at the expense of hiring, which makes hours too volatile. The Ramsey planner uses inflation as an instrument to dampen inefficient hours fluctuations.

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, this paper presents an econometric analysis of the influence of labor market flows on wage formation as an alternative to the traditional specification of wage equations in which unemployment represents Phillips-curve or wage-curve effects. The paper estimates a dynamic wage equation for the Netherlands using a cointegration approach. It finds that labor flows, and notably flows from outside the labor market, are important determinants of both short-run and long-run wage setting.

Most ‘wage curve’ studies treat local labour markets as independent ‘islands’ in the national economy. However, when a local labour market is in close proximity of other labour markets, a local shock that increases unemployment may not lead to lower pay rates if employers fear outward migration of their workers. Hence, the unemployment elasticity of pay will be greater, the more isolated the local labour market is. Wages are also expected to be higher in regions that interact strongly with other regions. These hypotheses are confirmed by means of an estimation of wage curves with data for 327 regions of western Germany over the period 1990-97. Key words: Unemployment, wage formation, spatial analysis, local monopsony, Germany JEL classification: J21, J30, R23

We use longitudinal micro data to examine the wage curve for the euro area over the period 1994–2001. The overall unemployment elasticity in the euro area is − 0.14. The elasticity varies across groups of workers and along the wage distribution.

Are jobless persons who want work but are not actively searching, unemployed or out of the labour force? Previous research on this issue has focused on North America and used as the test whether the probability of transition to employment is similar for searching and non-searching jobless persons. This paper develops three new tests as to whether those not searching but wanting work are distinct from the searching unemployed. It asks: are non-searching persons richer, happier, and do they have a lesser impact on local wages, than the searchers? These tests are implemented using data from South Africa, a country in which unemployment is very high and where the treatment of non-searchers really matters for the understanding of poverty and labour market issues. The results favour the "discouraged worker" view of the non-searching unemployed and the use of the broad, inclusive, measure of unemployment.

This paper uncovers evidence on the distribution of wages in Belarus in the second half of the 1990s. The returns to education and work experience are high and stable. While the former is a typical finding of transition studies, the latter is not. This might be due to the pervasive role of the state in fixing wages in the dominant budget sector, rather than to market forces coming into play. Women experience a small, though largely unexplained wage gap coupled with higher than average returns to education. A wage curve effect is found, which is similar in size to that of other transition countries, but much higher than in market economies. Comparative Economic Studies (2006) 48, 351–376. doi:10.1057/palgrave.ces.8100071

This paper presents a non-equilibrium, agent-based model of workers and firms, with on-the-job searching, endogenous entrepreneurial decisions and endogenous wage and income determination. Workers and firms are heterogeneous, and learn their strategy in the labor market. The model is able to reproduce a number of stylized facts generally accepted in labor economics and industrial organization, such as the Wage, Beveridge and Okun curve, and the skewness of wage, income and firm size distribution. Most interestingly, important stylized facts such as a negatively sloped Wage Curve and a constant returns to scale matching function emerge only out-of-equilibrium, during the adjustment processes toward the stationary state. Thus, from a theoretical point of view the model suggests that taking these stylized facts as "building blocks" of equilibrium models might be misleading. The results stress two additional points. From a methodological point of view, the use of non-equilibrium computational models allows for a more comprehensive investigation of the labor market, by considering the endogenous character of many relevant variables. From an empirical point of view, the joint determination of all aggregate relationships and their dependence on the equilibrium or non-equilibrium state of the system suggest to move from the investigation of empirical regularities in isolation one from the other to a joint analysis.

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

The wage curve is the negative relationship that links wage levels to the unemployment rate. It fits accurately with modern non-competitive labour-market models, but goes against a Phillips-curve modelling, because the latter ties wage growth to the unemployment rate. In this article, we present a comprehensive review of these non-competitive models, highlighting recent contributions that try to eliminate the possible 'gap' that exists between the concepts of the wage curve, on the one hand, and the Phillips curve, on the other. Copyright Blackwell Publishers Ltd, 2005.

There is evidence in many countries of an inverse relationship between the real wages paid to workers and the unemployment rate in their local labor market, a so-called wage curve. However, the evidence to date for Japan has been rather limited. In this paper, we estimate wage curves for Japan using pooled cross-section time-series data from 1981 until 2001. The presence of a wage curve is confirmed. The wage curve has become slightly more elastic after the bubble economy of the 1980s than it was in the pre-bubble and mid-bubble period. The unemployment elasticity of pay is greater for males than for females. We also estimate regional wage curves using time-series data. The male wage curve elasticity is larger in the northern regions of Hokkaido and Tohoku and the western region of Shikoku, while it is smaller in the central regions of Hokuriku, Tokai and Kinki.

Since 1990, there has been extensive international research on the responsiveness of wages of individuals to changing local labour market conditions. For many countries, an inverse relationship between wages and local unemployment rates has been found. In their book, The Wage Curve, Blanchflower and Oswald argued that the unemployment elasticity of pay is around −0.1 in most countries. In a 1995 literature survey, Card referred to this striking empirical regularity as being close to an ‘empirical law of economics’. Nonetheless, reported elasticities do vary, even excluding outliers, between about −0.5 and +0.1. There is also considerable heterogeneity among wage curve studies in terms of data and model specification. This paper carries out meta-analytic techniques on a sample of 208 elasticities derived from the literature to uncover the reasons for the differences in empirical results across studies. Several causes of variation are identified. There is also clear evidence of downward publication bias. In addition, many reported t-statistics are biased upwards due to the use of aggregate unemployment rates. A maximum likelihood method and a trimming procedure are used to correct for these biases. Both methods give similar results for our sample. An unbiased estimate of the wage curve elasticity at the means of study characteristics is about −0.07.

The panel data evidence in this article shows that the wage curve does not exist in China when utilizing the provincial unemployment rate. However, the wage curve exists when utilizing the provincial youth unemployment rate. Youth unemployment data are more reliable in China, as they are not distorted by the exclusion of significant numbers of adult laid off workers from the more familiar unemployment statistics. It is also found that the semi-log function is a good approximation for urban wage curve of China. The wage unemployment relationship becomes more negative when utilizing fixed effects and random effects models.

This paper tests whether a wage curve—a negative relationship between the level of unemployment and the level of pay—existed in Chile during 1957–96. The analysis is divided into two periods. For 1957–73, during inward‐led development, we reject the existence of a wage curve. For 1974–96, when the economy opened, state‐run industries were privatised and labour rights weakened, we find a wage curve of −0.08. Based on this finding we conclude that the unemployment–pay elasticity in the post‐reform period is similar to the −0.07 to −0.10 wage curve found in other western, capitalist countries. Disaggregating the analysis by group, we find that women, non‐university educated workers and public sector workers have suffered more from unemployment. Yet informal sector workers have not experienced pay drops as a result of unemployment, contradicting the hypothesis that the informal sector acts as a buffer during economic downturns.

Distinguishing between profit led and growth led demand regimes, we analyze the conditions of existence and stability of long run equilibrium of unemployment. The model we employ has at its center the relation between growth and distribution. Growth can be either wage led or profit led. Distribution itself is a function of the unemployment rate, with higher unemployment leading to a higher profit share. We use Okun's Law to close the model, making the change of the rate of unemployment a function of growth. The interesting result of our analysis is that in profit led demand regime the short run and long run equilibrium are stable. However, if the demand regime is wage led, the same conditions that guarantee stability of the goods market equilibrium in the short run render impossible the existence of a long run equilibrium rate of unemployment, and vice versa. Thus, if Kalecki's proposition that higher wages lead to higher growth is true, there will be no equilibrium rate of unemployment in the long run that serves as an anchor for the economic system. A revised version of the paper is forthcoming in the Review of Political Economy. Please contact the author for the revised version.

GARCiA-MAINAR I. and MONTUENGA-GOMEZ V. M. (2003) The Spanish wage curve: 1994–1996, Reg. Studies 37, 929– 945. In this paper, we estimate a wage curve for Spain using data from the European Community Household Panel, which provides microinformation for the period 1994–96. By refining the unemployment rate measure, we find an unemployment elasticity of wages not very far from that encountered in other developed countries. We argue that these results correspond to a disequilibrium representation of the regional unemployment structure, in which unemployment differentials tend to persist over time.GARCiA-MAINAR I. et M ONTUENGA-GOMEZ V. M. (2003) La courbe des salaires en Espagne de 1994 a 1996, Reg. Studies 37, 929–945. A partir des donnees provenant du European Community Household Panel (echantillon permanent aupres des menages dans la Communaute europeenne), cet article cherche a estimer une courbe des salaires pour l'Espagne qui fournit des renseignements microeconomiques sur la periode qui va de 1994 a ...

The impact of the recent Customs Union (CU) agreement between Turkey and the European Union on internal migration is studied using an intra-industry trade Computable General Equilibrium (CGE) model with intersectoral capital mobility under two alternative specifications for the labor market: the traditional Harris-Todaro approach and the existence of a “wage curve” in the urban sector. Under both specifications, the numerical results show that the CU is welfare enhancing and causes a reduction of the urban-rural wage gap as suggested by theoretical studies. At the same time, it leads to rural-to-urban migration and raises the capital rent, results that are counter intuitive with respect to the dual economy literature. Furthermore, the rise in formal labor demand and the migration response to the CU have not resulted in an increase in urban unemployment (i.e. the “Todaro paradox”), but rather to a fall in the unemployment pool. The study also shows that the Bhagwati-Srinivasan proposal of maximizing welfare by uniformly subsidizing the entire labor market is impracticable, especially if the high wage union sector can negotiate employment conditions.

This paper shows that wage‐unemployment elasticities derived from estimated wage curves and Phillips curves may be critically dependent on the measurement of wages. Incorporating hourly wage earnings that include the influence of overtime payments can lead to seriously distorted results. Meaningful elasticities are obtained only if hourly standard wages form the basis of analysis. Work is based on a unique data set describing two homogeneous blue-collar occupational groups—skilled fitters and unskilled labourers—in the British engineering industry. Each group is also divided into timeworkers and piece-rate workers. Data are aggregated into a panel of 28 local labour markets and cover the highly contrasting periods 1928‐38 and 1954‐66.

This paper examines wage flexibility in five EU countries by estimating their respective wage curves. Using information provided by a homogeneous panel data set - the ECHP - we are able to demonstrate that, contrary to the habitual finding, the wage elasticity to unemployment in fact varies across countries. © 2002 Elsevier Science B.V. All rights reserved.

Estimates of the NAIRU are usually derived either from a Phillips curve or from a wage curve. This paper investigates the correspondence between the operational NAIRU concepts and the steady state of a dynamic wage-price model. We derive the parameter restrictions that secure that correspondence. The full set of restrictions can be tested by econometric analysis of the wage-price system, and this method is demonstrated for Norwegian data. A set of necessary conditions can be tested from estimated wage curves alone. Existing international evidence from empirical wage equations are reinterpreted in light of these conditions. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.