Rational Expectations and Labour Market Equilibrium in Britain 1855-1913

Timothy Hatton

No 23, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper tests a two equation model of supply and demand for labour for 1857-1913, the period which was the focus of the original Phillips curve study. The basic structure is an equilibrium model of the labour market with "classical" characteristics arising from a surprise supply function and the assumption that expectations are formed rationally i. e. in a way consistent with the model itself. Tests of exclusion restrictions on a general reduced form tend to weakly reject these joint hypotheses. Tests on a structural model reject unanticipated wage change in a favour of actual wage change as the appropriate variable in the supply function. This gives support to the original Phillips curve formulation.

Keywords: Britain; Labour Markets; Phillips Curve; Rational Expectations (search for similar items in EconPapers)
Date: 1984-07
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Journal Article: Rational Expectations and Labour Market Equilibrium in Britain 1855-1913 (1986)
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