The Wage Curve Reloaded

46 Pages Posted: 15 Jun 2005 Last revised: 26 Jun 2022

See all articles by David G. Blanchflower

David G. Blanchflower

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER); University of Stirling - Department of Economics

Andrew J. Oswald

University of Warwick - Department of Economics; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2005

Abstract

This paper provides evidence for the existence of a wage curve -- a micro-econometric association between the level of pay and the local unemployment rate -- in modern U.S. data. Consistent with recent evidence from more than 40 other countries, the wage curve in the United States has a long-run elasticity of approximately -0.1. In line with the paper's theoretical framework: (i) wages are higher in states with more generous unemployment benefits, (ii) the perceived probability of job-finding is lower in states with higher unemployment, and (iii) employees are less happy in states that have higher unemployment. We conclude that it is reasonable to view the wage curve as an empirical law of economics.

Suggested Citation

Blanchflower, David G. and Oswald, Andrew J., The Wage Curve Reloaded (May 2005). NBER Working Paper No. w11338, Available at SSRN: https://ssrn.com/abstract=723307

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