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On Wage Formation, Wage Development and Unemployment

Marga Peeters () and Ard Reijer ()

WO Research Memoranda (discontinued) from Netherlands Central Bank, Research Department

Abstract: Since the mid nineties unemployment has substantially decreased in some EMU-countries. One important factor underlying this development is wage moderation. This paper investigates wage formation and wage development. Using a theoretical wage bargaining model main determinants of formation are described, a non-linear wage equation is derived and estimated with annual or quarterly data of the Netherlands, Spain and Ireland. The effects of the individual determinants on wages are calculated and, in addition, each determinant's contribution to the total wage developments is analysed over the last three decades. It follows that each decade is characterised by few dominating determinants. The contribution of unemployment has altered considerably.

Keywords: wage formation; wage development; unemployment (search for similar items in EconPapers)
JEL-codes: C22 E24 J30 (search for similar items in EconPapers)
Date: 2001-12
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Handle: RePEc:dnb:wormem:677