Wage formation and employment in a cointegrated VAR model

Abstract

This paper uses a general equilibrium, monopolistic competition model of wage bargaining between trade unions and firms to derive two steady state relations which are estimated within a cointegrated VAR framework using quarterly Danish data. The first cointegrating relation is the marginal productivity condition for labour, derived from profit maximization of firms who face a downward sloping demand curve for their product. The second cointegrating relation is a real wage relation, derived from the bargaining between trade unions and firms over wages, in the right-to-manage manner. The theoretical model is not rejected and the model displays parameter constancy throughout the estimation period and is able to forecast out-of-sample.

A multivariate long-memory model with structural breaks

“…Here the implicit assumption is again that at least two of the series are nonstationary I(1). Papers along these lines include those of Cameron, Hum and Simpson (1996), Pétursson and Slok (2001) and Reade (2005). The present study falls within the first category, since it is a generalisation of the VAR model to the fractional VAR case including a structural break as well.…”

Wage and Price Dynamics in Portugal

“…As regards unemployment one alternative would be to treat it as a stationary variable, as there are theoretical grounds to argue that the population unemployment rate should be seen as I(0). However, virtually all the papers in the empirical literature dealing with wage-price models treat the unemployment rate as I(1) (see, for instance, Bardsen et al, 2006, Pétursson and Slok, 2001, Pétursson, 2002, Bardsen and Fisher, 1999, Greenslade et al, 2002, Marcellino and Mizon, 2000. In doing so, it is sometimes argued (see, for instance, Pétursson, 2002 andBardsen et al, 2006) that it does not matter whether we regard unemployment as I(1) or I(0) as both can be handled in a cointegrating VAR and thus, the essential issue is rather whether or not the resultant long-run wage equation is a valid cointegration equation.…”

Wages and Employment Growth: Disaggregated Evidence for West Germany

“…What distinguishes our approach from existing work in this area (see e.g. Peturson/Sloek, 2001;Blanchard/Wolfers, 2000) is that we look at the connection between wages and employment growth from a highly disaggregated and intra-national perspective. Typically, employment growth performances are contrasted on the level of different countries (e.g.…”