Modelling shifts in the wage–price and unemployment–inflation relationships in Italy, Poland and the UK

Abstract

The relationship between wages, prices, productivity, inflation, and unemployment in Italy, Poland, and the UK between the 1960's and the early 1990's is modelled as a cointegrated vector autoregression subject to regime shifts. For each of these economies there is clear evidence of a change in the underlying equilibria of this sector of the economy. Hypotheses concerning the similarity of the transition from a rigid to a flexible labour market are tested.

A Markov-Switching Vector Equilibrium Correction Model of the UK Labour Market

“…However, in this latter case, when the sub-samples permit, a valuable alternative is to conduct a split sample analysis of the data. Again with reference to the UK labour market, Marcellino and Mizon (2000a) distinguish between the pre-and post-Thatcher period, finding evidence of substantial differences between the two sub-periods.…”

“…The seasonally adjusted quarterly data for the UK are based on the dataset used in Clements and Mizon (1991) as extended to cover the period 1965(1)-1993(1) in Mizon (1995) and Marcellino and Mizon (2000a). The original sources for these data are "Economic Trends" and "Monthly Digest of Statistics" published by the UK Office of National Statistics.…”

“…There have been numerous studies analyzing systems characterizing the time series relationships between wages, prices, productivity and unemployment in the UK (recent examples include Clements and Mizon, 1991, Mizon, 1995, and Marcellino and Mizon, 2000a. These studies, using data from the 1960s to the 1990s, have found evidence of structural change and have modelled it via split-sample analysis with a single break occurring in 1979, possibly with additional dummy variables to capture the effects of other institutional changes in the UK labour market.…”

On the dynamics of unemployment in a developing economy: Colombia

“…al. (1991); see also Marcellino and Mizon (2000) to investigate the extent to which real wages are determined by "inside" factors (i.e. labour productivity) relative to "outside" factors (i.e.…”

Wages, Prices and Unemployment in Poland

“…As far as the methodology is concerned, in the paper we use cointegrated VAR analysis, which makes it possible to identify long-run tendencies and common stochastic trends as well as estimate the adjustment dynamics of the system (the pulling and pushing forces). In formulating the model we follow the existing literature in the area [Juselius, Ordonez, 2009], [Marquez, 2008], [Juselius, 2006], [Todano, 2006], [Buscher et al, 2005], [Brüggemann, 2003], [Welfe, Kelm, Majsterek, 2002], [Balmaseda, Dolado, Lopez-Salido, 2000], [Marcellino, Mizon, 1999], [Henry, Karanassu, Snower, 1999], [Welfe, Osiewalski, 1998], [Dolado, Jimeno, 1997], [King et al, 1991].…”