The Wage Curve Reloaded

By David G. Blanchflower, Andrew J. Oswald. Social Science Research Network, 2005

251 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/6dc40bacf197ed9c4f89bcb42db0f469ac7154b4

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In Economics and Econometrics

Citations in the corpus

Making Do with Less: Working Harder during Recessions (2016, background): “…wages to unemployment, then ye yu jF:O:C: 5 2g eð Þ " R1 yW yu # = y2 ye2 : Much of the empirical evidence suggests yW=yu < 0 ðsee, among others, Blanchflower and Oswald 2005Þ, so any wage adjustment according to local economic conditions will tend mute the effort response relative to a…”
When more Flexibility Yields more Fragility: the Microfoundations of Keynesian Aggregate Unemployment (2017, background): “…a wage curve is not consistent with any interpretation of unemployment in terms of mismatching between labour demand and labour supply because in that case unemployment and wages should be positively correlated (see Blanchflower, 1995 and Blanchflower and Oswald, 2005 for extensive discussions).”
Migration and Wage‐setting: Reassessing the Labor Market Effects of Migration* (2011, background): “One can base the assumption of the wage-setting framework that wages are a declining function of the unemployment rate on different theoretical foundations (see Blanchard, 2007; Blanchflower and Oswald, 1994, 2005; La- 6 yard, Nickell, and Jackman, 2005, for a discussion).”