The Wage Curve

This paper, which follows in an LSE tradition begun by Phillips and Sargan, examines the rote of unemployment in shaping pay. In contrast to most of the literature, it (i) users microeconometric data on individuals and workplaces, (ii) examines a variety of data sets as a check on the robustness of results, and (iii) studies the effects of unemployment on the real wage level (not on the rate of change of pay or prices). Evidence is found -- on British and U.S. data -- of a wage curve. The crave has a negative gradient at low levels of unemployment. but becomes horizontal at relatively high levels of unemployment