Wage Curve Research Articles

Reswitching: Extending a Famous Example

In certain models of commodities produced by means of commodities, the choice of technique is analyzed by the construction of the wage frontier. This article presents a numeric example of a continuum of wage curves tangent at a switch point. Technological progress leads to the recurrence of techniques. No switch points then exist, but the cost-minimizing technique varies continuously along the wage frontier. Further progress leads to the disappearance of the recurrence of techniques and, eventually, a single technique becoming cost-minimizing for all feasible rates of profits.

Towards an East German wage curve - NUTS boundaries, labour market regions and unemployment spillovers

The relevance of spatial effects in the wage curve can be rationalized by the model of monopsonistic competition in regional labour markets. However, distortions in extracting the regional unemployment effects arise for administrative boundaries at the district level as they fail to adequately capture spatial processes. In addition, the nonstationarity of wages and unemployment is often ignored. Both issues are particularly important in high unemployment regimes like East Germany where a wage curve is difficult to establish. In this paper, labour market regions defined by economic criteria are used to examine the existence of an East German wage curve. Due to the nonstationarity of spatial data, a global panel cointegration approach is adopted. By specifying a spatial error correction model (SpECM), equilibrium adjustments are investigated in time and space. The analysis gives evidence on a locally but not a spatially cointegrated wage curve for East Germany.

A Matrix Exponential Spatial Panel Model with Heterogeneous Coefficients

We extend the heterogeneous coefficients spatial autoregressive panel model (HSAR) from Aquaro, Bailey, and Pesaran (2015) to the case of a heterogeneous coefficients matrix exponential spatial specification (HMESS). The HSAR is capable of producing parameter estimates for each region in the sample, that follow a spatial autoregressive process. Spatial autoregressive processes apply geometric decay of influence to higher‐order neighboring regions. The HMESS takes a similar approach as the HSAR to produce estimates for each region in the sample, but relies on a matrix exponential function to apply exponential decay to higher‐order neighbors. The MESS introduced by LeSage and Pace (2007) for the case of cross‐sectional spatial data samples has some potential computational advantages over the spatial autoregressive specification. In addition, the spatial dependence parameter in the MESS ranges from minus to plus infinity, which allows for use of normal priors assigned to this parameter in a Bayesian setting. We extend the cross‐sectional MESS to the case of a heterogeneous coefficients model, and describe Bayesian Markov Chain Monte Carlo estimation. We illustrate the HMESS model with a panel wage curve relationship using quarterly unemployment and wage rates from 261 counties centered on the Bakken shale oil region in North Dakota and Montana.

An Infinite Number of Techniques, One Linear Wage Curve

This note demonstrates that the special case condition, needed for a simple labor theory of value (LTV), of equal organic compositions of capital does not suffice to determine technology. A model of the production of commodities, with circulating capital and all commodities basic, is analyzed. Given direct labor coefficients and labor values, an uncountably infinite number of Leontief input-output matrices yield the same wage curve under the conditions in which prices of production are proportional to labor values.

Two Techniques, One Linear Wage Curve

This note demonstrates that the special case condition, needed for a simple labor theory of value, of equal organic compositions of capital does not suffice to determine technology. Prices do not vary across techniques for both techniques in a numeric example of a two-commodity linear model of production, and they are proportional to labor values. Both techniques yield the same wage curve, in which the wage is an affine function of the rate of profits. This indeterminancy generalizes to models with more than two produced commodities.

Big and tall: Does a height premium dwarf an obesity penalty in the labor market?

Previous studies have shown that both height and weight are associated with wages. However, some gaps in our understanding of the relationship between body size and wages remain. For example, given a height premium and an obesity penalty, due to forces working in opposite directions, the current literature is unable to provide clear answers to questions such as whether a tall obese woman or a short healthy weight woman would earn a higher wage premium. Using Australian data and iso-contour wage curves derived from a semi-parametric wage regression model, this paper illustrates the complex nature of the relationship between height, weight and wages and how the nature of these differences depends on gender and age. As adult height is fixed, a key focus of the paper is illustrating for various height ranges whether there are any wage benefits in the labor market to increasing or decreasing one’s weight. For individuals aged 25–54 as a whole, I find that there are strong effects of weight reduction at lower ends of the height distribution for females (between 1.50–1.70m) but not for males (<1.65m). For relatively taller men (>1.85m), a wage premium is found for being overweight. For relatively taller women (>1.72m), no penalty for being overweight is discernible.

The Turkish Spatial Wage Curve

The wage curve for Turkey revisited considering the spatial spillovers of the regional unemployment rates using individual level data for a period of 2004–2013 at the 26 NUTS-2 level by employing FE-2SLS models. The unemployment elasticity of real wages is −0.07 without excluding any group of workers unlike previous studies. There is strong evidence on spatial effects of unemployment rate of contiguous regions on wage level, which is larger, in absolute value, than the effect of own-regional unemployment rate, −0.087 and −0.056, respectively. Male workers are slightly more responsive to the own-region unemployment rate than female workers. However, female workers are more responsive to the neighboring regions’ unemployment rate. Furthermore, using group-specific unemployment rates in the estimation of the wage curve for various groups, we find that unemployment elasticity of pay for female workers has become smaller and lost its significance, whereas unemployment elasticity for male workers has changed slightly. However, introducing group-specific unemployment rate results in losing significance in estimates for female workers. The findings in this paper suggest that individual wages are more responsive to the unemployment rates of the proximate regions than that of an individual’s own region. Also, the wage curve estimates are sensitive to the group-specific unemployment rates.

A Note on the Estimation of Job Amenities and Labor Productivity

This note introduces a maximum likelihood estimator of the value of job amenities and labor productivity in a single matching market based on the observation of equilibrium matches and wages. The estimation procedure simultaneously fits both the matching patterns and the wage curve. Our estimator is suited for applications to a wide range of assignment problems.

Local and spatial cointegration in the wage curve – a spatial panel analysis for german regions

The wage curve introduced by Blanchflower and Oswald (1990, 1994b) postulates a negative correlation between wages and unemployment. Empirical studies use different channels for a theoretical underpinning the relationship. Panel data models mostly draw on bargaining power 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 to account for nonstationarity of regional data. By specifying a spatial error correction model (SpECM), equilibrium adjustments are considered in both time and space. For West Germany, strong evidence for the existence of a long-run wage curve with spatial effects is found.

A Bayesian spatial panel model with heterogeneous coefficients

We extend the heterogeneous coefficients spatial autoregressive panel model from Aquaro et al. (2015) to allow for Bayesian prior information. A Markov Chain Monte Carlo estimation methodology is set forth for the Bayesian model. Monte Carlo performance results mirror those from quasi maximum likelihood estimation set forth in Aquaro et al. (2015). Matrix expressions for marginal effects used to interpret these models are set forth. The heterogeneous coefficients spatial autoregressive panel model is capable of producing estimates of spillin and spillout effects for each region in the sample. Spillin effects reflect the impact of changes in neighboring region characteristics on own-region outcomes, while spillout effects show how changes in own-region characteristics impact neighboring region outcomes. We illustrate the model using a panel wage curve relationship for the contiguous US states over the 67 months from January 2011 to July 2016.

Towards an East German Wage Curve - Nuts Boundaries, Labour Market Regions and Unemployment Spillovers

The relevance of spatial effects in the wage curve can be rationalized by the model of monopsonistic competition in regional labour markets. However, distortions in extracting the regional unemployment effects arise in standard regional (i.e. NUTS) classifications as they fail to adequately capture spatial processes. In addition, the nonstationarity of wages and unemployment is often ignored. Both issues are particularly important in high unemployment regimes like East Germany where a wage curve is difficult to establish. In this paper, labour market regions defined by economic criteria are used to examine the existence of an East German wage curve. Due to the nonstationarity of spatial data, a global panel cointegration approach is adopted. By specifying a spatial error correction model (SpECM), equilibrium adjustments are investigated in time and space. The analysis gives evidence on a locally but not a spatially cointegrated wage curve for East Germany.

Towards an East German Wage Curve: Nuts Boundaries, Labour Market Regions and Unemployment Spillovers

The relevance of spatial effects in the wage curve can be rationalized by the model of monopsonistic competition in regional labour markets. However, distortions in extracting the regional unemployment effects arise in standard regional (i.e. NUTS) classifications as they fail to adequately capture spatial processes. In addition, the nonstationarity of wages and unemployment is often ignored. Both issues are particularly important in high unemployment regimes like East Germany where a wage curve is difficult to establish. In this paper, labour market regions defined by economic criteria are used to examine the existence of an East German wage curve. Due to the nonstationarity of spatial data, a global panel cointegration approach is adopted. By specifying a spatial error correction model (SpECM), equilibrium adjustments are investigated in time and space. The analysis gives evidence on a locally but not a spatially cointegrated wage curve for East Germany.

Trade Bust, Labor and Wage Policy in Bolivia: A CGE Approach

In this paper, we evaluate the possible impact of the labor and wage policy in Bolivia’s economy in the event of a reduction in the price of exports. For this analysis, we use a CGE model with a 2012 SAM. The Bolivian labor policy is characterized by compulsory increments in the private formal wage and an expanding labor force in the public services. A labor supply function allows migration between formality and informality and a reservation wage curve differentiates the nature of unemployment in the formal and the informal sector. The labor and wage policy does three things: 1) it promotes household consumption but reduces the GDP, decreases investment and growth, 2) it increases the rate of formality only at the expense of higher unemployment, and 3) it swells the primary sector to the detriment of the secondary sector. In the face of a decrease in commodity prices, Bolivia needs to make a correction of course in the labor and wage policy.

The House Price-Vacancy Curve

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.

Sobre el uso de curvas de salarios en modelos empíricos de equilibrio económico. Reseña e introducción computacional

&lt;p align="justify"&gt;En este artículo se evalúa la sensibilidad de los diferentes resultados contrafactuales reportados por un modelo de equilibrio general a cambios en la sensibilidad del desempleo a los salarios, utilizando una curva de salarios. Se especifica, calibra y simula un modelo de economía pequeña con sustitución imperfecta en los componentes del valor agregado. El modelo incluye un gobierno que financia su gasto con impuestos y hace transferencias a un consumidor representativo. El mercado de trabajo no se vacía, al menos no en un sentido walrasiano, de modo que hay desempleo en el equilibrio base. Se estudian distintas configuraciones contrafactuales para esta economía, dados ciertos cambios en el parámetro de sensibilidad de la curva de salarios.&lt;/p&gt;

Employment, Hours and Optimal Monetary Policy

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 a instrument to dampen inefficient hours fluctuations.

The Brazilian wage curve: new evidence from the National Household Survey

This paper reconsiders the Brazilian wage curve using individual data from the National Household Survey at 27 Federative Units over the period 2002–2009. We find evidence in favor of the Brazilian wage curve with an unemployment elasticity of −0.08. We also find that males in Brazil are significantly more responsive to local unemployment rates (−0.13) than their female counterparts. In fact, we find that the unemployment elasticity for women is statistically insignificant. Applying gender-specific unemployment rates, the elasticity for men decreases to −0.09, while the elasticity for women remains statistically insignificant. This paper also finds that the estimates for Brazilian wage curve are completely different for the case of formal and informal workers.

The wage curve before and during the Greek economic crisis

Using cross-sectional data from the Labour Force Survey, we investigate whether a wage curve, i.e. a negative relationship between real wages and regional unemployment, could be estimated in the Greek labour market and in the period 1999–2014. Adopting individual static and regional dynamic specifications, our results do not support the existence of such a relationship despite the extensive macroeconomic adjustment of real wages after 2009. However, allowing for period-specific heterogeneous slopes, we find that a negative relationship between wages and regional unemployment emerged in the period 2010Q2–2011Q4 which however was short-lived. This relationship appears to be exclusively due to the restructuring of the collective bargaining regime and the reduction in the national minimum wages, both of which were implemented in the private sector.

Ageing society and evolving wage systems in Japan

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Local and Spatial Cointegration in the Wage Curve -- A Spatial Panel Analysis for German Regions

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.