New Evidence on the Dynamic Wage Curve for Western Germany: 1980-2004
Badi H. Baltagi
Syracuse University - Maxwell School of Citizenship and Public Affairs; Institute for the Study of Labor (IZA); Syracuse University - Center for Policy Research
Institute for Employment Research (IAB); Institute for the Study of Labor (IZA)
Government of the Federal Republic of Germany - Institute for Employment Research (IAB)
March 1, 2008
Center for Policy Research Working Paper No. 103
Blanchflower and Oswald (1994) reported that they have found an ‘empirical law of economics’ – the Wage Curve. Our paper reconsiders the western German Wage Curve using disaggregated regional data and is based on almost one million employees drawn from the Federal Employment Services of Germany over the period 1980-2004. We find that the wage equation is highly autoregressive but far from unit root. The unemployment elasticity is significant but relatively small: only between -0.02 and -0.04. We also check the sensitivity of this elasticity for different population groups (young versus old, men versus women, less educated versus highly educated, German native versus foreigner), confirming that it is stronger the weaker the bargaining power of the particular group.
Number of Pages in PDF File: 16
Keywords: Wage Curve, regional labour markets, Phillips curve, panel data
JEL Classification: J30, C23, R10
Date posted: April 16, 2011
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