A Two-Sector Analysis of the UK Labour Market.

This paper investigates why the U.K. has experienced steadily higher unemployment at cyclical peaks since 1965 using a structural model of the U.K. labor market. The mo del emphasizes the differences in experience and structure of the man ufacturing and nonmanufacturing private sectors using a bargaining ap proach to wage determination. Empirical results for the post-1965 per iod suggest that adverse supply shocks, such as tax increases, as wel l as demand deficiencies have played an important role in determinin g the increase in the level of unemployment and the degree of real wa ge stickiness, which is the corollary of this rise. Copyright 1987 by Blackwell Publishing Ltd