The Wage Curve: A Review

Abstract

In The Wage Qurve, David G. Blanchflower and Andrew J. Oswald argue that there is a fundamental negative relation between wages and the unemployment rate in a worker’s local labor market. Blanchflower and Oswald use large-scale micro data sets to estimate this relation for the United States, Britain, and 10 other countries. I review their empirical methods and findings, and provide some further evidence on the nature of the wage curve relationship in the United States. I conclude that there is a strong statistical correlation between rates of pay and local unemployment, although the interpretation of this correlation remains unresolved.