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Applied Economics Letters Volume 16, 2009 - Issue 6
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Original Articles

On the negative relationship between the wage rate and the unemployment rate: application of efficiency wage models

Yu Hsing Department of General Business, College of Business, Southeastern Louisiana University, Hammond, LA, 70402, USACorrespondence[email protected]
Pages 645-647 | Published online: 20 Mar 2009
 
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Abstract

Applying efficiency wage models, this article finds that there is a strong evidence of a negative wage curve for the state of Alabama. The elasticity of the wage curve is estimated to be −0.28, suggesting that the wage rate in Alabama is much more sensitive to a change in the unemployment rate than the USA and there exist segmented labour markets. The log-linear function performs slightly better than the semi-log function.

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