The wage curve within and across regions: new insights from a pairwise view of US states

Mark Holmes () and Jesus Otero

Empirical Economics, 2022, vol. 62, issue 5, No 1, 2069-2089

Abstract: Abstract The novel application of a pairwise autoregressive distributed lag (ARDL) approach provides new insights into the regional wage–unemployment rate relationship. Using this approach, the short- and long-run wage curve slope for each US state is potentially inversely related to the unemployment rate in all other states. In terms of the oft-cited Blanchflower and Oswald elasticity, there is mixed evidence in support of a $$-\,0.1$$ - 0.1 wage curve slope. We find that the pairwise wage curve slope is driven by factors that include state-level home-ownership and education attainment. Our findings suggest that short-run wage flexibility decreased during the period following the Great Recession.

Keywords: Wage curve; Wages; Unemployment rate; Pairwise; ARDL; Home-ownership; J31; J61; E24; C33 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s00181-021-02097-1

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