Nonlinearity in a Wage Equation for United States Manufacturing
Phillips [9], Lipsey [6], and others have argued that the partial relationship between the rate of change of money wages and the unemployment rate is convex. The possibility that there may exist other nonlinearities, in the relationship between wage change and its determinants, including interaction effects, has not been examined. This note reports the result of a test of six hypotheses concerning nonlinearities in the determination of the rate of change of money wages. The test gave support to two of the hypotheses: (1) the trade-off between money wage change and the unemployment rate is convex; (2) the unemployment rate and the rate of change of the cost of living interact in their influence on money wage change. The elasticity of money wage rates to the cost of living varies positively with the unemployment rate. The point of departure was Perry's [7] equation for United States manufacturing: 1
- DOI
- 10.2307/1926730
- Volume
- 51 (2)
- Pages
- 202
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