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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page The Wage Curve and the Phillips Curve
John M. Roberts

Abstract: Blanchflower and Oswald (1994) have argued that, in regional data, the level of unemployment is related to the level of wages. This result is at variance with the implications of the original Phillips curve for regional data, which would predict that the change in wages ought to be related to the unemployment rate. On the other hand, there is considerable empirical support for the expectations-augmented Phillips curve using macroeconomic data. I resolve this tension by showing that a standard macroeconomic expectations-augmented Phillips curve can be derived from microfoundations that begin with the wage curve.

Keywords: Phillips curve, wage curve, new keynesian economics

Full paper (571 KB PDF)

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Last update: January 23, 1998