A Cointegration Model for Search Equilibrium Wage Formation

20 Pages Posted: 15 Feb 2006

See all articles by Lourens Broersma

Lourens Broersma

affiliation not provided to SSRN

Frank A. G. den Butter

Vrije Universiteit Amsterdam - Economics

Udo Kock

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2004

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, this paper presents an econometric analysis of the influence of labor market flows on wage formation as an alternative to the traditional specification of wage equations in which unemployment represents Phillips-curve or wage-curve effects. The paper estimates a dynamic wage equation for the Netherlands using a cointegration approach. It finds that labor flows, and notably flows from outside the labor market, are important determinants of both short-run and long-run wage setting.

Keywords: wage curve, labor market flows, cointegration model

JEL Classification: J31, C51

Suggested Citation

Broersma, Lourens and den Butter, Frank A. G. and Kock, Udo, A Cointegration Model for Search Equilibrium Wage Formation (May 2004). IMF Working Paper No. 04/92, Available at SSRN: https://ssrn.com/abstract=878915

Lourens Broersma

affiliation not provided to SSRN ( email )

Frank A. G. Den Butter

Vrije Universiteit Amsterdam - Economics ( email )

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

Udo Kock (Contact Author)

International Monetary Fund (IMF) ( email )

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

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