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Wage Spillovers, Inter-regional Effects and the Impact of Inward Investment


  • Nigel Driffield
  • Karl Taylor


Abstract This paper evaluates the extent of inter-industry and inter-regional wage spillovers across the UK. An extensive body of literature exists suggesting that wages elsewhere affect wage determination and levels of satisfaction, but this paper extends the analysis of wage determination to examine the effects of inward investment in the process. Thus far the specific effect of foreign wages on domestic wage determination has not been evaluated. We employ industry- and regional-level panel data for the UK, and contrast results from alternative approaches to space-time modelling. Each supports the notion that such wage spillovers do occur, though assumptions made concerning the modelling of spatial interaction are important. Further, such wage spillovers are more widespread for skilled than for unskilled workers and also lower in areas of high unemployment.

Suggested Citation

  • Nigel Driffield & Karl Taylor, 2006. "Wage Spillovers, Inter-regional Effects and the Impact of Inward Investment," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(2), pages 187-205.
  • Handle: RePEc:taf:specan:v:1:y:2006:i:2:p:187-205 DOI: 10.1080/17421770601009825

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    References listed on IDEAS

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    5. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
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    7. Baillie, R.T. & Baltagi, B.H., 1994. "Prediction from the Regression Model with one-way Error Components," Papers 9405, Michigan State - Econometrics and Economic Theory.
    8. Baltagi, Badi H & Griffin, James M, 1995. "A Dynamic Demand Model for Liquor: The Case for Pooling," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 545-554, August.
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    Cited by:

    1. Michelle Gilmartin & David Learmouth & J Kim Swales & Peter McGregor & Karen Turner, 2013. "Regional Policy Spillovers: The National Impact of Demand-Side Policy in an Interregional Model of the UK Economy," Environment and Planning A, , vol. 45(4), pages 814-834, April.
    2. Mitze, Timo & Stephan, Andreas, 2013. "Simultaneous-equations Analysis in Regional Science and Economic Geography," Working Paper Series in Economics and Institutions of Innovation 309, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    3. Rosanna Pittiglio & Filippo Reganati & Edgardo Sica, 2015. "Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?," Manchester School, University of Manchester, vol. 83(3), pages 346-378, June.
    4. repec:elg:eechap:14395_7 is not listed on IDEAS
    5. Huang, Qiong & Chand, Satish, 2015. "Spatial spillovers of regional wages: Evidence from Chinese provinces," China Economic Review, Elsevier, vol. 32(C), pages 97-109.

    More about this item


    Wage determination; regional spillovers; alternative wage; J21; J30;

    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


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