Estimating a Wage Curve for Britain 1973-1990
NBER Working Paper No. 4770 (Also Reprint No. r1936)
Following Phillip's original work on the UK, applied research on unemployment and wages has been dominated by the analysis of highly aggregated time-series data sets. However, it has proved difficult with such methods to uncover statistically reliable models. This paper adopts a different approach. It uses microeconomic data on 175,000 British workers from 1973-1990 to provide evidence for the existence of a negatively sloped relationship linking the level of pay to the local rate of unemployment. This 'wage curve' is found to have an elasticity of approximately -0.1. Contrary to the Phillips Curve, no autoregression is found in wages. The paper casts doubt on standard ideas in macroeconomics, regional economics and labour economics.
Published: Economic Journal, September 1994, Vol. 104, No. 426, pp. 1025-1043.