Premium
Wage Drift: Phillips Curve vs Bargaining Models
Author(s) -
Pehkonen Jaakko,
Viskari Jyri
Publication year - 1994
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/j.1467-9914.1994.tb00170.x
Subject(s) - economics , earnings , context (archaeology) , wage , wage bargaining , econometrics , phillips curve , labour economics , macroeconomics , unemployment , paleontology , accounting , biology
The purpose of this paper is to shed light on the debate on market‐ versus bargaining‐determined total earnings by examining whether models of wage drift based on wage‐bargaining considerations empirically outperform models based on simple ad hoc formulations relating wage drift to excess demand for labour. The task is carried out by investigating the empirical performance of two bargaining models and two Phillips curve models in the context of data on the Finnish metal industry. The results suggest that the former perform better than the latter, thus providing support for the hypothesis that total earnings are bargaining‐determined. Furthermore, the results are in line with the view that the superiority of wage‐bargaining models is not only theoretical but also empirical.