DP18 The British Labour Market in Different Economic Eras, 1857-1938

Author(s): Timothy J. Hatton
Publication Date: May 1984
Keyword(s): Demand for Labour, Phillips Curve, Supply of Labour
JEL(s): 044, 824
Programme Areas: Human Resources
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=18

In this paper a simple model of aggregate supply and demand for labour is developed which includes a "surprise" supply function and imposes labour market clearing. This model is estimated on British data for 1857 to 1938, an important period for the original Phillips curve estimates. For 1857-1913, the model specified in the nominal wage fits well and structural breaks are rejected but wage change outperforms wage surprise, supporting the traditional Phillps curve type view. The period 1921-38 is found to produce different results yielding a structural break from 1857-1913 in both supply and demand equations. These shifts cannot be accounted for by the introduction of national insurance though it had some effect on the labour demand curve.