This paper reports the results produced by applying tests for Granger-causality of post-war U.K. real wage and employment data. The results suggest that real wages Granger-cause employment with no feedback. This result is robust to the inclusion of real materials prices. The results are not robust to changes in the sample period: real wages and employment appear independent with data up to 1977(4). The oscillations of real wages between 1976 and 1978, when a stern wage policy was implemented and dismantled, are responsible for these different results. This explains the contradictory results reported in previous studies.
|Number of pages||23|
|Journal||European Economic Review|
|Publication status||Published - 1988|