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Spatial wage curve and the role of external factors over time

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  • Aleksandra Majchrowska
  • Paulina Broniatowska

Abstract

This study attempts to answer the question of how strongly the situation in local and neighbouring labour markets affects the level of wages in the local labour market. To answer it we use the wage curve concept. We estimate the wage curve that includes spatial effects and check the stability of the relationships over time. We concentrate on 380 local labour markets in Poland. The research period covers 2005–2021, and spatial panel models are used. Our estimates confirm the existence of the statistically significant and negative relationship between average wages and the situation in the local labour market in Poland with an estimated elasticity of −0.06. Moreover, we confirm the existence of the spatial wage curve in Poland in the 2005–2021 period. Both direct (local) and indirect (spatial) effects are statistically significant and negative on average in the analysed period. The total effects of unemployment rate wages vary from −0.06 to −0.08 depending on the spatial matrix used. Additionally, our research indicates several macroeconomic and institutional factors which are important in shaping wages. Lastly, we find that the elasticity of wages with respect to the unemployment rate is not stable over time. The relationship between unemployment and average wages has strongly weakened.

Suggested Citation

  • Aleksandra Majchrowska & Paulina Broniatowska, 2025. "Spatial wage curve and the role of external factors over time," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 33(2), pages 413-437, April.
    • Handle: RePEc:wly:ectrin:v:33:y:2025:i:2:p:413-437
    DOI: 10.1111/ecot.12432
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