State-level wage Phillips curves

Based on US state-level data for the period 1982-2016, two reduced-form versions of New Keynesian wage Phillips curves are examined. These based either sticky nominal wages or real-wage rigidity. The endogeneity unemployment is taken into account by instrumentation and use common correlated effects (CCE) mean group (MG) methods. This first time that this methodology has been applied in context. important issues, as ignoring them may lead to substantial biases. results show while aggregate do not provide estimates consistent with theoretical models examined, panel methods do. Moreover, an appropriate MG CCE estimator leads economically significant changes parameters (primarily a steeper curve) relative those from inappropriate but widely used In rigidity case, required deliver have theoretically admissible interpretation.