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Regional Wage Flexibility: the Wage Curve in Five EU Countries

In: The European Labour Market. Regional Dimensions


  • Víctor Montuenga

    (Universidad de Zaragoza)

  • Inmaculada García

    (Universidad de Zaragoza)

  • Melchor Fernández

    (University of Santiago de Compostela)


In this piece of research, we estimate wage curves for five EU member states using homogenous information provided in panel data set (the ECHP) to appraise wage flexibility. Whereas typical estimation concentrates solely on the relationship between current wages and current unemployment rate, we also consider the influence of lagged values of unemployment rates -the unemployment rate at the moment of hiring, and the minimum unemployment rate since the moment of hiring- to take into account the possibility of wages being flexible upwards, but sticky downwards. Results show that, first, wage flexibility does vary across countries and, second, that the traditional view of the wage curve as representing a spot labour market is valid only for one of the countries analysed, the UK.

Suggested Citation

  • Víctor Montuenga & Inmaculada García & Melchor Fernández, 2006. "Regional Wage Flexibility: the Wage Curve in Five EU Countries," AIEL Series in Labour Economics,in: Floro Ernesto Caroleo & Sergio Destefanis (ed.), The European Labour Market. Regional Dimensions, edition 1, chapter 12, pages 245-265 AIEL - Associazione Italiana Economisti del Lavoro.
  • Handle: RePEc:ail:chapts:01-12

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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. Francesco Devicienti & Agata Maida & Lia Pacelli, 2006. "The Italian Wage Curve Resurrected after the 1993 Labor Market Reforms," LABORatorio R. Revelli Working Papers Series 50, LABORatorio R. Revelli, Centre for Employment Studies.
    3. Devicienti, Francesco & Maida, Agata & Pacelli, Lia, 2008. "The resurrection of the Italian wage curve," Economics Letters, Elsevier, vol. 98(3), pages 335-341, March.
    4. Cristiano Perugini & Marcello Signorelli, 2010. "Youth labour market performance in European regions," Economic Change and Restructuring, Springer, vol. 43(2), pages 151-185, May.
    5. Elsa Vaz, 2008. "Sectoral Leadership in International Competitiveness," CEFAGE-UE Working Papers 2008_07, University of Evora, CEFAGE-UE (Portugal).
    6. Cristiano Perugini & Marcello Signorelli, 2007. "Labour Market Performance Differentials and Dynamics in EU-15 Countries and Regions," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 4(2), pages 209-262, September.
    7. Victor Montuenga & Inmaculada Garcia, 2011. "The wage dynamics in Spain: evidence from individual data," ERSA conference papers ersa11p585, European Regional Science Association.

    More about this item


    wage flexibility; wage curve; panel data; EU countries.;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General


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