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Title:New evidence on the dynamic wage curve for Western Germany: 1980 - 2004 PDF Logo
Authors:Baltagi, Badi H.
Blien, Uwe
Wolf, Katja
Issue Date:2008
Series/Report no.:IZA Discussion Papers 3433
Abstract:In 1994, Blanchflower and Oswald reported that they have found an 'empirical law of economics' -the Wage Curve. According to their empirical results, the elasticity of wages with respect to regional unemployment is -0.1. This holds especially for the Anglo-Saxon countries. Our paper reconsiders the western German Wage Curve using disaggregated regional data and is based on a random sample of 974,179 employees drawn from the employment statistics of the Federal Employment Services of Germany (Bundesagentur für Arbeit) over the period 1980-2004. We find that the wage equation is highly autoregressive but far from unit root. This means that this wage equation is not a pure Phillips curve, nor a static Wage Curve, and one should account for wage dynamics. The unemployment elasticity is significant but relatively small: only between -0.02 and -0.04. We also check the sensitivity of this wage elasticity for different population groups (young versus old, men versus women, less educated versus highly educated, German native versus foreigner). We confirm that the wage elasticity is more flexible the weaker the bargaining power of the particular group.
Subjects:Wage curve
regional labour markets
Phillips curve
JEL:J30
Persistent Identifier of the first edition:urn:nbn:de:101:1-2008040982
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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