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Firm profitability, regional unemployment and human capital in wage determination

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  • Kare Johansen
  • Kristen Ringdal
  • Thortle Thøring

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.

Suggested Citation

  • Kare Johansen & Kristen Ringdal & Thortle Thøring, 2001. "Firm profitability, regional unemployment and human capital in wage determination," Applied Economics, Taylor & Francis Journals, vol. 33(1), pages 113-121.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:1:p:113-121
    DOI: 10.1080/00036840122818
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    References listed on IDEAS

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    1. Kjell G. Salvanes & Julia Lane & Simon Burgess, 1999. "Sources of Earnings Dispersion in a Linked Employer-Employee Data Set: Evidence from Norway," Contributions to Economic Analysis, in: The Creation and Analysis of Employer-Employee Matched Data, pages 261-284, Emerald Group Publishing Limited.
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    Cited by:

    1. Simonetta Longhi & Peter Nijkamp & Jacques Poot, 2006. "Spatial Heterogeneity And The Wage Curve Revisited," Journal of Regional Science, Wiley Blackwell, vol. 46(4), pages 707-731, October.
    2. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    3. Guowei Li & Zhe Luo & Muhammad Anwar & Yuqiu Lu & Xiantao Wang & Xuening Liu, 2020. "Intellectual capital and the efficiency of SMEs in the transition economy China; Do financial resources strengthen the routes?," PLOS ONE, Public Library of Science, vol. 15(7), pages 1-25, July.
    4. Charalampos Agiropoulos & Georgios Galanos & Thomas Poufinas, 2021. "Entrepreneurship, Income Inequality and Public Spending: A Spatial Analysis into Regional Determinants of Growing Firms in Greece," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 27(3), pages 197-218, August.

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