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Nominal Wages, the Nairu and Wage Flexibility

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  • Coe, David T

Abstract

This paper analyses the historical determinants of nominal wages in eleven OECD economies, calculates unemployment rates consistent with stable inflation and derives specific measures of wage flexibility. A number of issues are addressed, including the linearity or non-linearity of the short-run Phillips curve, and the possible temporal dependence of the natural rate of unemployment on the actual rate, i.e., hysteresis in the natural rate.

Suggested Citation

  • Coe, David T, 1985. "Nominal Wages, the Nairu and Wage Flexibility," MPRA Paper 114295, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114295
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    References listed on IDEAS

    as
    1. Steven Braun, 1984. "Productivity and the NIIRU (and other Phillips curve issues)," Working Paper Series / Economic Activity Section 34, Board of Governors of the Federal Reserve System (U.S.).
    2. David T. Coe & Francesco Gagliardi, 1985. "Nominal Wage Determination in Ten OECD Economies," OECD Economics Department Working Papers 19, OECD Publishing.
    3. Jeffrey D. Sachs, 1979. "Wages, Profits, and Macroeconomic Adjustment: A Comparative Study," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 269-332.
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    5. William H. Branson & Julio J. Rotemberg, 1991. "International Adjustment with Wage Rigidity," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 13-44, National Bureau of Economic Research, Inc.
    6. Sumner, M T & Ward, R, 1983. "The Reappearing Phillips Curve," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 306-320, Supplemen.
    7. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
    8. Buiter, Willem H. & Gersovitz, Mark, 1981. "Issues in controllability and the theory of economic policy," Journal of Public Economics, Elsevier, vol. 15(1), pages 33-43, February.
    9. Grubb, David B. & Jackman, Richard & Layard, Richard, 1983. "Wage rigidity and unemployment in OECD countries," European Economic Review, Elsevier, vol. 21(1-2), pages 11-39.
    10. E. Kuh, 1967. "A Productivity Theory of Wage Levels—An Alternative to the Phillips Curve," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(4), pages 333-360.
    11. Henry, S.G.B. & Sawyer, M.C. & Smith, P., 1976. "Models of Inflation in the United Kingdom: an Evaluation," National Institute Economic Review, National Institute of Economic and Social Research, vol. 77, pages 60-71, August.
    12. Thirlwall, A P, 1983. "What Are Estimates of the Natural Rate of Unemployment Measuring?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 45(2), pages 173-179, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Hahn, Franz & Ruenstler, Gerhard, 1996. "Potential Output, the Natural Rate of Unemployment, and the Phillips Curve in a Multivariate Structural Time Series Framework," Economics Series 33, Institute for Advanced Studies.
    2. G.C. Lim & Robert Dixon & Sarantis Tsiaplias, 2009. "Phillips Curve and the Equilibrium Unemployment Rate," The Economic Record, The Economic Society of Australia, vol. 85(271), pages 371-382, December.
    3. Groth, Christian & Madsen, Jakob B., 2016. "Medium-term fluctuations and the “Great Ratios” of economic growth," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 149-176.
    4. Rusinova, Desislava & Lipatov, Vilen & Heinz, Frigyes Ferdinand, 2015. "How flexible are real wages in EU countries? A panel investigation," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 140-154.
    5. Luisa Lambertini, 2001. "Technological Change and Public Financing of Education," Boston College Working Papers in Economics 579, Boston College Department of Economics.
    6. Peter Kugler & George Sheldon, 2010. "Unemployment and Monetary Policy in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(I), pages 185-208, March.
    7. Fernandez, Juan J., 2010. "Economic crises, high public pension spending and blame-avoidance strategies: Pension policy retrenchments in 14 social-insurance countries, 1981 - 2005," MPIfG Discussion Paper 10/9, Max Planck Institute for the Study of Societies.
    8. Paqué, Karl-Heinz, 1989. "Wage gaps, hysteresis and structural unemployment: The West German labour market in the seventies and eighties," Kiel Working Papers 358, Kiel Institute for the World Economy (IfW Kiel).
    9. Temel, Tugrul, 2011. "Are the U.S. farm wages equalizing? Markov chain approach," MPRA Paper 31930, University Library of Munich, Germany.
    10. Franz, Wolfgang & Gordon, Robert J., 1993. "German and American wage and price dynamics : Differences and common themes," European Economic Review, Elsevier, vol. 37(4), pages 719-754, May.
    11. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2023. "Nominal and real wages in the UK, 1750–2015: mean reversion, persistence and structural breaks," SN Business & Economics, Springer, vol. 3(8), pages 1-10, August.
    12. Abraham, Filip, 1996. "Regional adjustment and wage flexibility in the European Union," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 51-75, February.
    13. Michiel Bijlsma & Pierre Koning & Victoria Shestalova & Ali Aouragh, 2010. "The effect of competition on process and outcome quality of hospital care: An empirical analysis for the Netherlands," CPB Discussion Paper 157.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    14. Gustav Adolf Horn, 1989. "Ursachen struktureller Arbeitslosigkeit: zur Theorie und Empirie neuerer makroökonomischer Ansätze," Discussion Papers of DIW Berlin 1, DIW Berlin, German Institute for Economic Research.
    15. Charles Adams & David T. Coe, 1990. "A Systems Approach to Estimating the Natural Rate of Unemployment and Potential Output for the United States," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 232-293, June.
    16. Michiel Bijlsma & Viktoria Kocsis & Victoria Shestalova & Gijsbert Zwart, 2008. "Vertical foreclosure: a policy framework," CPB Document 157.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    17. Johnes, Geraint & Hyclak, Thomas J., 1995. "The determinants of real wage flexibility," Labour Economics, Elsevier, vol. 2(2), pages 175-185, June.
    18. Dirk HOORELBEKE, 2009. "Wage flexibility and Phillips curves in the Belgian regions," EcoMod2009 21500039, EcoMod.
    19. Paqué, Karl-Heinz, 1989. "Micro-macro links in West Germany's unemployment," Kiel Working Papers 378, Kiel Institute for the World Economy (IfW Kiel).
    20. Paqué, Karl-Heinz, 1990. "Unemployment in West Germany: A survey of explanations and policy options," Kiel Working Papers 407, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    Nominal wage determination in eleven OECD countries; the NAIRU; hysteresis in the natural rate;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other

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