A Cointegration Model for Search Equilibrium Wage Formation

Tinbergen Institute Discussion Paper No. 2003-088/3

30 Pages Posted: 22 Jan 2004

See all articles by L. Broersma

L. Broersma

University of Groningen - Department of Economics & Department of Spatial Sciences

Frank A. G. den Butter

Vrije Universiteit Amsterdam - Economics

Udo Kock

International Monetary Fund (IMF)

Date Written: October 2003

Abstract

In flow models of the labor market, wages are determined by negotiations between workers and employers on the surplus value of a realized match. From this perspective our study presents an econometric analysis of the influence of labor market flows on wage formation as alternative to the traditional specification of wage equations where unemployment represents the Phillips-curve or wage curve-effects. We estimate a dynamic wage equation for the Netherlands using a cointegration approach. We find that labor flows, and notably flows from outside the labor market, are important determinants for both short run and long run wage setting.

Keywords: Wage curve, Labour market flows, Cointegration model

JEL Classification: J31, C51

Suggested Citation

Broersma, L. and den Butter, Frank A. G. and Kock, Udo, A Cointegration Model for Search Equilibrium Wage Formation (October 2003). Tinbergen Institute Discussion Paper No. 2003-088/3, Available at SSRN: https://ssrn.com/abstract=467940 or http://dx.doi.org/10.2139/ssrn.467940

L. Broersma (Contact Author)

University of Groningen - Department of Economics & Department of Spatial Sciences ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Frank A. G. Den Butter

Vrije Universiteit Amsterdam - Economics ( email )

Boelelaan 1105
NL 1081 HV Amsterdam
Netherlands
+31 20 444 6030 (Phone)

Udo Kock

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6299 (Phone)

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