| Summary: | This paper investigates the relative importance of firm-specific factors (i.e., insider forces) in wage determination. Using firm-level data on 219 U.K. companies over 1974-82, it finds that a 1 percent rise in a firm's prices or productivity relative to the aggregate economy leads to a rise in relative wages of 0.1-0.2 percent. As a corollary to this, outside factors, like the aggregate wage and the unemployment rate, also play an important role. There is evidence for insider-based hysteresis effects, but these are inversely related to the extent to which firms take national agreements into account.
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