Wage Bargains, Threshold Effects, and the Phillips Curve
TL;DR: In this paper, the need for a study based on wage contracts was discussed, and a study of structural differences between different types of wage contracts were presented, based on a series of General Motors wage changes.
Abstract: I. The need for a study based on wage contracts, 601. — II. Hypotheses on structural differences, 503. — III. Data and methodology, 505. — IV. Estimates of the wage equations, 510. — V. Negotiated wage increases and the guideposts, 513. — VI. Conclusions, 516. — Appendix: calculation of the wage changes series for General Motors, 517.
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TL;DR: A family of objective functions called fuzzy c-regression models, which can be used too fit switching regression models to certain types of mixed data, is presented and a general optimization approach is given and corresponding theoretical convergence results are discussed.
Abstract: A family of objective functions called fuzzy c-regression models, which can be used too fit switching regression models to certain types of mixed data, is presented. Minimization of particular objective functions in the family yields simultaneous estimates for the parameters of c regression models, together with a fuzzy c-partitioning of the data. A general optimization approach for the family of objective functions is given and corresponding theoretical convergence results are discussed. The approach is illustrated by two numerical examples that show how it can be used to fit mixed data to coupled linear and nonlinear models. >
534 citations
TL;DR: In this article, the authors introduced the "moment generating function estimator" which minimizes the sum of squares of differences between the theoretical and sample moment generating functions, and applied it to the Hamermesh model of wage bargain determination.
Abstract: Since the likelihood function corresponding to finite mixtures of normal distributions is unbounded, maximum likelihood estimation may break down in practice. The article introduces the “moment generating function estimator” defined as the estimator which minimizes the sum of squares of differences between the theoretical and sample moment generating functions. The consistency and asymptotic normality of the estimator are proved and its finite sample behavior is compared to that of the standard method of moments estimator by Monte Carlo experiments. The estimator is applied to the Hamermesh model of wage bargain determination.
533 citations
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TL;DR: This paper used CPS data from 1964 to 1985 to test for the existence of rent-sharing in US tabor markets, using an unbalanced panel from the manufacturing sector, and random effects and fixed-effects specifications, finding that changes in wages are explained by movements in lagged levels of profitability and unemployment.
Abstract: The paper uses CPS data from 1964 to 1985 to test for the existence of rent-sharing in US tabor markets, Using an unbalanced panel from the manufacturing sector, and random-effects and fixed-effects specifications, the paper finds that changes in wages are explained by movements in lagged levels of profitability and unemployment. The results appear to be consistent with rent-sharing theory (or a labor contract framework with risk-averse firms) and to be inconsistent with the competitive labor market model. The paper estimates the unemployment elasticity of pay at approximately -0.03, and the profit elasticity of pay at between 0.02 and 0.05.
495 citations
TL;DR: In this paper, a new test for rent-sharing in the U.S. labor market is proposed, and it is shown that a rise in a sector's profitability leads after some years to an increase in the long-run level of wages in that sector.
Abstract: The paper suggests a new test for rent-sharing in the U.S. labor market. Using an unbalanced
panel from the manufacturing sector, it shows that a rise in a sector's profitability leads after some
years to an increase in the long-run level of wages in that sector. The paper controls for workers'
characteristics, for industry fixed-effects, and for unionism. Lester's range of wages is estimated,
for rent-sharing reasons alone, at approximately 24 per cent of the mean wage.
421 citations
TL;DR: This paper showed that changes in profitability are shown to feed through into long-run changes in wages, and these are not temporary wage effects and are not driven by the unionized workplaces in the data.
Abstract: A central question in labor economics and macroeconomics is whether the textbook competitive model provides an adequate representation of the labor market. Using longitudinal data on companies and establishments, this article suggests that it may not. As predicted by rent-sharing models of the labor market, changes in profitability are shown to feed through into long-run changes in wages. These are not temporary wage effects and are not driven by the unionized workplaces in the data. The article's estimates imply that, for rent-sharing reasons alone, Lester's "range" of wages is approximately 16%.
328 citations