New Evidence on the Dynamic Wage Curve for Western Germany: 1980-2004
Center for Policy Research Working Paper No. 103
16 Pages Posted: 16 Apr 2011
Date Written: March 1, 2008
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.
Keywords: Wage Curve, regional labour markets, Phillips curve, panel data
JEL Classification: J30, C23, R10
Suggested Citation: Suggested Citation