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Firm Profitability, Regional Unemployment and Human Capital in Wage Determination

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Author Info
Johansen, Kare
Ringdal, Kristen
Thoring, Thor Atle

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Abstract

This paper presents an analysis of wage formation in the Norwegian private sector using data for individual workers matched with firm level information and regional unemployment. A key issue is to test whether or not firm specific variables affect individual wages after controlling for individual specific factors and working conditions. The results imply positive effects of firm specific profitability and firm size. The elasticity of wages with respect to value added per worker and firm size is 5% and 3.3%, respectively. Empirical evidence of a downward sloping regional wage curve is also reported, while there is no support of the hypothesis of compensating wage differentials. Since data for three levels of aggregation are used, the OLS estimates of the standard errors are downward biased. Therefore, results using a random effects model are also reported, taking the multi-level structure of the data into account. Copyright 2001 by Taylor and Francis Group

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 33 (2001)
Issue (Month): 1 (January)
Pages: 113-21
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Handle: RePEc:taf:applec:v:33:y:2001:i:1:p:113-21

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  1. Simonetta Longhi & Peter Nijkamp & Jacques Poot, 2004. "Spatial Heterogeneity and the Wage Curve revisited," Tinbergen Institute Discussion Papers 04-054/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  2. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," IZA Discussion Papers 1665, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Kåre Johansen, 2002. "Regional Wage Curves Empirical Evidence from Norway," Working Paper Series 0302, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
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