Are Real Wages and Unemployment Related?

Tor Jacobson, Anders Vredin and Anders Warne

Economica, 1998, vol. 65, issue 257, 69-96

Abstract: In this paper we propose an alternative method for investigating the sources behind the behaviour of real wages and unemployment. The model we study is a certain cointegrated VAR, a so‐called common trends model, which has become increasingly popular in the empirical growth/business cycle literature. This model leads us to emphasize the distinction between long‐run and short‐run relations. Using quarterly Swedish data (1965–90), we find only weak evidence of a short‐run relation between real wages and unemployment as reported in traditional single‐equation error correction models. There is even less evidence of a long‐run relation.

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:bla:econom:v:65:y:1998:i:257:p:69-96

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