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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  

Badi H. Baltagi

Syracuse University - Maxwell School of Citizenship and Public Affairs; IZA Institute of Labor Economics; Syracuse University - Center for Policy Research

Uwe Blien

Institute for Employment Research (IAB); IZA Institute of Labor Economics

Katja Wolf

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Date Written: March 1, 2008

Abstract

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

Baltagi, Badi H. and Blien, Uwe and Wolf, Katja, New Evidence on the Dynamic Wage Curve for Western Germany: 1980-2004 (March 1, 2008). Center for Policy Research Working Paper No. 103. Available at SSRN: https://ssrn.com/abstract=1809087 or http://dx.doi.org/10.2139/ssrn.1809087

Badi H. Baltagi (Contact Author)

Syracuse University - Maxwell School of Citizenship and Public Affairs ( email )

400 Eggers Hall
Syracuse, NY 13244
United States

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Syracuse University - Center for Policy Research ( email )

Syracuse, NY 13244
United States
315-443-1630 (Phone)
315-443-1081 (Fax)

HOME PAGE: http://www.maxwell.syr.edu/cpr_about.aspx?id=6442451316

Uwe Blien

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Katja Wolf

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

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