A Re–evaluation of the Relation between Wages and Unemployment in the United Kingdom

Fatemeh Shadman

Economica, 2001, vol. 68, issue 272, 567-586

Abstract: This paper examines the long–run or equilibrium relationship between wages, prices and the unemployment rate in the United Kingdom, using annual data covering the period 1860–1999. Using Johansen’s maximum likelihood method of testing for cointegration, two long–run relations are found in a small system of four variables. The first relation depicts the co–movement of the level of real wages adjusted for productivity, together with the unemployment rate and the rate of inflation. The second relation shows the co–movement between the rate of inflation and deviations of productivity from its trend growth.

Date: 2001
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