An Econometric Study of the Behaviour of Real Wages in Two French Industries

This paper examines the behaviour of real wages in the French textile and paper industries. The econometric analysis is embedded within theoretical framework of the insider-outsider hypothesis. The models attempt to measure the impact of insiders and outsiders on real wages, and the part that insiders play in creating hysteresis in employment. The analysis uses a range of industry-specific and aggregate variables to measure the influence of insiders and outsiders. Quarterly data for the period 1972-97 are employed. The econometric results indicate that both internal and external variables play a statistically significant role in explaining changes in real wages, and that the pure insider-outsider hypothesis can be rejected for both industries. As far as its authors are aware, this paper is the first to test for insider power in French industry.