From Phillips curve to wage curve

Abstract

Abstract:In most traditional macro-economic models of the Netherlands the wage equation is specified by a Phillips curve, in which wage growth is negatively related to the unemployment rate. This paper shows, however, that wage formation can better be described by the so-called wage curve, in which the wage level instead of wage growth depends negatively on the unemployment rate.14 Van Stolkweg, 2585 JR, The HagueThe Netherlands Telephone (070) 3514151Telefax (070) 3505847

Shifts in the Educational and Vocational Careers of Dutch Young Adults During the Eighties: On the Decreasing Pay-off of Education

“…3 Hence, from a rational point of view there is little reason for an extra investment in education: finding a good job with a comfortable income is relatively easy in times of economic prosperity. This line of reasoning is supported by studies that show a relation between wage level and unemployment; the wage level is low when unemployment is high, and vice versa (Phillips, 1958;Phelps, 1968;Graafland, 1992).…”

The influence of labour flows on wage drift: an empirical analysis for The Netherlands

“…Hansen en Rehn, 1956), only recently have modern labour market theories been applied to explain wage drift. In the traditional studies of wage formation, specified either as a Phillips curve or a wage curve (Graafland 1992, Blanchflower and Oswald 1992, Lever 1991 the unemployment rate or a transformation thereof constitutes the main determinant of real wage changes. The policy debate concentrated on the question whether the trade-off of between wage inflation and unemployment could be used for cyclical policy.…”

“…We have used a general-to-specific approach, starting from a standard wage(drift) equation specification (Graafland 1992, Holden 1998. We have adapted this specification to include labour market flow variables, resulting in:…”

Labour Flows as Determinants of the Wage–Price Spiral: An Empirical Analysis for The Netherlands

“…When taking first differences, for instance for reasons of stationarity, the wage curve implies that the wage increases are explained by changes in the unemployment level. In both the wage-curve and Phillips curve specification the unemployment rate or the change therein represents labour market pressure Ð see the model of Phelps (1968) for the theoretical foundation of the Phillips curve, and Sargan (1964), Blanchflower and Oswald (1990) and Graafland (1992) for the theory behind the wage curve. Nevertheless, these theories do not prescribe that the rate of unemployment is the sole indicator for labour market pressure.…”