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Granger-causality, real factor prices and employment: a re-appraisal with U.K. data

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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.
Original languageEnglish
Pages (from-to)1261-1283
Number of pages23
JournalEuropean Economic Review
Issue number6
Publication statusPublished - 1988

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