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The long-run determinants of UK wages, 1860-2004

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  • Castle, Jennifer L.
  • Hendry, David F.

Abstract

As it is almost 50 years since the Phillips curve, we analyze an historical series on UK wages and their determinants [see Phillips, A.W.H., 1958. The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861-1957. Economica, 25, 283-299]. Huge changes have occurred over this long-run, so congruence is hard to establish: real wages have risen more than 6 fold, and nominal 500 times; laws, technology, wealth distribution, and social structure are unrecognizably different from 1860. We investigate: wage rates and weekly earnings; real versus nominal wages; breaks over 1860-2004; non-linearities, including Phillips' non-linear response to unemployment; 'trade union power' and unemployment benefits; and measures of excess demand, where workers react more to inflation when it rises.

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  • Castle, Jennifer L. & Hendry, David F., 2009. "The long-run determinants of UK wages, 1860-2004," Journal of Macroeconomics, Elsevier, vol. 31(1), pages 5-28, March.
    • Handle: RePEc:eee:jmacro:v:31:y:2009:i:1:p:5-28
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    14. Barr, Nicholas & Johnston, Alison, 2010. "Interest subsidies on student loans: a better class of drain," LSE Research Online Documents on Economics 28287, London School of Economics and Political Science, LSE Library.
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    More about this item

    Keywords

    Nominal wages Real wages UK historical data Structural breaks Non-linear modelling;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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