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- Title
REVISITING THE REAL WAGES–UNEMPLOYMENT RELATIONSHIP. NEW RESULTS FROM NON-LINEAR MODELS.
- Authors
Christopoulos, Dimitris K.; León-Ledesma, Miguel A.
- Abstract
We examine the long-run real wages–unemployment relationship for five OECD countries over the period 1960:1–2001:4. Given the theoretical possibility of non-linear equilibrium due to downward real wage rigidity we employ econometric tests that allow for the presence of non-linearities in the long-run equilibrium. We adopt the notion of ‘hidden co-integration’ suggested by Granger and Yoon . This methodology has several advantages with respect to other non-linear models. We find statistical evidence that, in general, there is a long-run positive relation between real wages and unemployment only when both are affected by positive shocks. We also find a negative relationship between unemployment and productivity. The empirical analysis is complemented with the estimation of error correction models for all countries.
- Subjects
OECD countries; REAL wages; UNEMPLOYMENT; ECONOMIC equilibrium; LABOR productivity; LABOR costs; INCOME; LINEAR statistical models; PURCHASING power
- Publication
Bulletin of Economic Research, 2010, Vol 62, Issue 1, p79
- ISSN
0307-3378
- Publication type
Article
- DOI
10.1111/j.1467-8586.2009.00311.x