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Still searching for the wage curve: evidence from Germany and Italy

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  • Ammermüller, Andreas
  • Lucifora, Claudio
  • Origo, Federica
  • Zwick, Thomas

Abstract

This paper investigates the functioning of regional labour markets in Italy and Germany for different employee groups. In the light of high and persistent differences in unemployment and wage rates between the North and South of Italy and the West and East of Germany, we first derive theoretical hypotheses on group specific correlations between regional unemployment and individual wages. Using micro data on hourly wages properly matched to local unemployment rates, we specify and empirically test different wage equations. On the basis of our results, we find no evidence for the existence of a ?wage curve? in Italy. In the case of Germany, results are quite sensitive to the model specification and the employee group considered. In both countries, the reaction of wages to local unemployment varies significantly along the wage distribution, being more sensitive around the median quantiles. We conclude that there is no uniform wage curve and call for a differentiated analysis for various groups, taking into account the respective institutional setting. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 07-008.

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Date of creation: 2007
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Handle: RePEc:zbw:zewdip:5495

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Keywords: wage curve; local labour markets; quantile regressions;

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References

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  1. Carlo Dell'Aringa & Claudio Lucifora & Federica Origo, 2007. "Public Sector Pay And Regional Competitiveness. A First Look At Regional Public-Private Wage Differentials In Italy," Manchester School, University of Manchester, vol. 75(4), pages 445-478, 07.
  2. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 19(3), pages 421-450, 07.
  3. Claudio LUCIFORA & Federica ORIGO, 1999. "Alla ricerca della flessibilita': un'analisi della curva dei salari in Italia," Rivista Italiana degli Economisti, SIE - Societa' Italiana degli Economisti (I), vol. 4(1), pages 3-36, April.
  4. Nickell, S. & Wadhwani, S., 1989. "Insider Forces And Wage Determination," Economics Series Working Papers 9972, University of Oxford, Department of Economics.
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  7. David Card, 1995. "The Wage Curve: A Review," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 722, Princeton University, Department of Economics, Industrial Relations Section..
  8. Olivier Blanchard & Lawrence F. Katz, 1996. "What We Know and Do Not Know About the Natural Rate of Unemployment," NBER Working Papers 5822, National Bureau of Economic Research, Inc.
  9. Baltagi, Badi H. & Blien, Uwe, 1998. "The German wage curve: evidence from the IAB employment sample," Economics Letters, Elsevier, Elsevier, vol. 61(2), pages 135-142, November.
  10. Ammermüller, Andreas & Kuckulenz, Anja & Zwick, Thomas, 2006. "Aggregate Unemployment Decreases Individual Returns to Education," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 06-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
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  14. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, Elsevier, vol. 32(3), pages 385-397, August.
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  20. Lucifora Claudio & Origo Federica, 1999. "Alla ricerca della flessibilità: un'analisi della curva dei salari in Italia," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 3-36.
  21. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
  22. Silvia Fabiani & Alberto Locarno & Gian Paolo Oneto & Paolo Sestito, 1997. "NAIRU: Incomes Policy and Inflation," OECD Economics Department Working Papers 187, OECD Publishing.
  23. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1.
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Citations

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Cited by:
  1. Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2008. "New Evidence on the Dynamic Wage Curve for Western Germany: 1980–2004," IZA Discussion Papers 3433, Institute for the Study of Labor (IZA).
  2. Ludsteck, Johannes, 2008. "Wage cyclicality and the wage curve under the microscope," IAB Discussion Paper 200811, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  3. Ludsteck, Johannes & Haupt, Harry, 2007. "An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition," Discussion Papers in Economics, University of Munich, Department of Economics 1977, University of Munich, Department of Economics.
  4. Ammermüller, Andreas & Kuckulenz, Anja & Zwick, Thomas, 2006. "Aggregate Unemployment Decreases Individual Returns to Education," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 06-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Hans-Friedrich Eckey & Reinhold Kosfeld & Alexander Werner, 2008. "Die Lohnkurve in Deutschland unter Berücksichtigung des regionalen Preisniveaus," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 200810, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  6. Maritza López-Novella & Salimata Sissoko, 2009. "Working Paper 12-09 - Salaires et négociation collective en Belgique : une analyse microéconomique en panel," Working Papers 0912, Federal Planning Bureau, Belgium.
  7. Ciżkowicz, Piotr & Kowalczuk, Michał & Rzońca, Andrzej, 2014. "Heterogeneous determinants of local unemployment in Poland," MPRA Paper 56858, University Library of Munich, Germany.

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