Regional unemployment and productivity in Europe
We analyse the relationship between regional unemployment and labour productivity in Europe, basing our empirical analysis on the predictions of a Neary-type General Oligopolistic Equilibrium trade model with efficiency-wages. Using semiparametric and dynamic panel data estimators and controlling for other factors, we give evidence of a nonlinear relationship between productivity and regional unemployment in Europe: with a level of productivity smaller than a certain threshold, this relationship is negative, while no relation occurs in the case of higher productivity regions. This evidence proves an important role of a wage-floor (induced by efficiency wages and exacerbated by institutional factors) under which the productivity gap cannot be compensated by a wage gap. Copyright (c) 2007 the author(s). Journal compilation (c) 2007 RSAI.
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Volume (Year): 87 (2008)
Issue (Month): 2 (06)
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