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Towards an East German wage curve - NUTS boundaries, labour market regions and unemployment spillovers

Listed author(s):
  • Reinhold Kosfeld

    ()

    (University of Kassel)

  • Christian Dreger

    (German Institute of Economic Research (DIW Berlin) and European University Viadrina Frankfurt (Oder))

The relevance of spatial effects in the wage curve can be rationalized by the model of monopsonistic competition in regional labour markets. However, distortions in extracting the regional unemployment effects arise in standard regional (i.e. NUTS) classifications as they fail to adequately capture spatial processes. In addition, the nonstationarity of wages and unemployment is often ignored. Both issues are particularly important in high unemployment regimes like East Germany where a wage curve is difficult to establish. In this paper, labour market regions defined by economic criteria are used to examine the existence of an East German wage curve. Due to the nonstationarity of spatial data, a global panel cointegration approach is adopted. By specifying a spatial error correction model (SpECM), equilibrium adjustments are investigated in time and space. The analysis gives evidence on a locally but not a spatially cointegrated wage curve for East Germany.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/paper_2017/29-2017_kosfeld.pdf
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201729.

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Length: 29 pages
Date of creation: 2017
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201729
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Universitätsstraße 25, 35037 Marburg

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Web page: http://www.uni-marburg.de/fb02/
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