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The effect of unemployment, aggregate wages, and spatial contiguity on local wages: An investigation with German district level data

Author

Listed:
  • Thiess Buettner

    () (Centre for European Economic Research, P.O. Box 103443, D-68034 Mannheim, Germany)

Abstract

Despite spatial rigidity of collectively negotiated wages the local unemployment rate is found to have a significant negative impact on wages. This impact is shown to be consistent with both the wage-curve hypothesis and modern Phillips-curve modelling. Spatial contiguity effects are found in wages and unemployment and their neglect leads to an underestimation of the effect of local unemployment. Yet, the impact of local unemployment on wages turns out to be quite low as compared to studies for other countries. Some support for the hypothesis that negotiated wages suppress spatial wage flexibility comes from the finding that the impact of local unemployment on local wages decreases with its extent.

Suggested Citation

  • Thiess Buettner, 1999. "The effect of unemployment, aggregate wages, and spatial contiguity on local wages: An investigation with German district level data," Papers in Regional Science, Springer;Regional Science Association International, vol. 78(1), pages 47-67.
  • Handle: RePEc:spr:presci:v:78:y:1999:i:1:p:47-67
    Note: Received: 13 December 1996
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    Citations

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    Cited by:

    1. Roberto Bande Ramudo & Melchor Fernández Fernández & Víctor Montuenga Gómez, 2011. "Wage flexibility and local labour markets: homogeneity of the wage curve in Spain," Documentos de trabajo - Analise Economica 0044, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    2. Buettner, Thiess, 2001. "Local business taxation and competition for capital: the choice of the tax rate," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 215-245, April.
    3. Thiess Buettner, 2007. "Unemployment disparities and regional wage flexibility: comparing EU members and EU-accession countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 34(4), pages 287-297, September.
    4. Hujer Reinhard & Rodrigues Paulo J. M. & Wolf Katja, 2008. "Dynamic Panel Data Models with Spatial Correlation," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 612-629, October.
    5. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
    6. Huber, Peter, 2004. "Intra-national labor market adjustment in the candidate countries," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 248-264, June.
    7. Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2009. "New evidence on the dynamic wage curve for Western Germany: 1980-2004," Labour Economics, Elsevier, vol. 16(1), pages 47-51, January.
    8. Joanna Tyrowicz & Piotr Wojcik, 2011. "Nonlinear Stochastic Convergence Analysis of Regional Unemployment Rates in Poland," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 3(1), pages 59-79, July.
    9. Sélin Ozyurt, 2008. "A Fresh Scrutiny on Openness and Per Capita Income Spillovers in Chinese Cities: A Spatial Econometric Perspective," Working Papers 08-17, LAMETA, Universitiy of Montpellier, revised Nov 2008.
    10. Thiess Buettner & Johannes Rincke, 2007. "Labor Market Effects of Economic Integration: The Impact of Re-Unification in German Border Regions," German Economic Review, Verein für Socialpolitik, vol. 8, pages 536-560, November.
    11. Simonetta Longhi, 2012. "Job Competition and the Wage Curve," Regional Studies, Taylor & Francis Journals, vol. 46(5), pages 611-620, August.
    12. Longhi, Simonetta & Nijkamp, Peter & Reggiani, Aura & Blien, Uwe, 2002. "Forecasting regional labour markets in Germany: an evaluation of the performance of neural network analysis," ERSA conference papers ersa02p117, European Regional Science Association.

    More about this item

    Keywords

    Unemployment; wage formation; spatial analysis; local wages;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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