NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Fear, Unemployment and Pay Flexibility

David G. Blanchflower

NBER Working Paper No. 3365 (Also Reprint No. r1631)
Issued in May 1990
NBER Program(s):   LS

The paper uses newly available cross-section data to study wage determination in the United Kingdom in the 1980s. The results are contrasted with those from a comparable sample from the US from 1977-1988.

1) Fear of unemployment substantially depresses pay in both countries.

2) There is some evidence of a wage ratchet in the UK whereby rates of pay are more flexible upwards than downwards.

3) The unemployment elasticity of pay averages -0.1 in the UK and apparently zero in the US.

4) Wages are almost twice as flexible in non-union and small workplaces in the UK.

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Document Object Identifier (DOI): 10.3386/w3365

Published: The Economic Journal, Vol. 101, No. 406, pp.483-496, (May 1991). citation courtesy of

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