Real Wages, Amenities and the Adjustment of Working Hours Across Regional Labour Markets
AbstractThis article establishes a link between the traditional labour economics and the urban economics literature by analyzing differences in working hours across regional labour market areas in the UK. Using a real wage index reflecting skill adjusted earnings net of quality adjusted house prices in Britain and panel data on working hours the effect of regional real wages on labour supply is assessed. The identification strategy relies on workers who move across 157 labour market areas in Britain and includes individual fixed effects. The main finding is that working hours are significantly higher in labour market areas that offer lower real wages. Decreasing real wages by £1000 results in an increase of working hours of 0.3 %. Real wage differentials can be seen as a proxy for the local amenity level. I can replicate my finding including a set of amenities instead of the real wage index. The effect is mainly due to labour supply decisions of low skilled workers who work significantly longer hours in low real wage areas than high skilled workers. This indicates that low skilled workers are willing to increase their labour supply in order to afford living in high amenity areas.
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Bibliographic InfoPaper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0130.
Date of creation: Mar 2013
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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-23 (All new papers)
- NEP-EUR-2013-03-23 (Microeconomic European Issues)
- NEP-LAB-2013-03-23 (Labour Economics)
- NEP-LMA-2013-03-23 (Labor Markets - Supply, Demand, & Wages)
- NEP-URE-2013-03-23 (Urban & Real Estate Economics)
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