An Alternative Non-linear Model of the Wage Curve and Some Empirical Evidence from the U.S

This paper presents a model and some empirical findings on a non-linear specification of the wage curve. The model, which builds upon complimentary elements of the classical and imperfect competition models of the labor market, suggests a downward sloping S-shaped curve in wageunemployment space. The rate of unemployment is argued to be a negatively correlated determinant of wages, but bound within the upper and lower limits to the wage rate, which themselves are determined by the rate of profit and a subsistence level wage respectively. Using labor market data from the U.S., I test for such non-linear specifications of the wage curve and compare their analytical strength to the mainstream models. JEL Classification: C51, J31, J64