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A Dynamic Spatial Panel Data Approach to the German Wave Curve

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Abstract

A wave curve is a decreasing function of wages on the regional unemployment rate. Most empirical studies on the wave curve ignore possible spatial interaction effects between the regions which are the primary units of research. This paper reconsiders the western German wage curve with a special focus on the geography of labour markets. Spillovers between regions are taken into account. The paper tests whether the unemployment rate in the larger surrounding region also affects wages. In addition, agglomeration effects and effects of local monopsony are assessed. The main data base is a random sample of 974,179 employees observed over the period 1980-2004 and covering 326 NUTS3 units (districts). This rich data set is used to estimate a dynamic wage curve according to the two-step approach of Bell et al. (2002). In the first step one controls for individual heterogeneity and in the second step one allows for spatial effects of unemployment across regions on wages. We check the sensitivity of this wage elasticity to various spatial weight matrices as well as allowing for the endogeneity of unemployment. We also estimate the wage elasticity for various population groups.

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  • Badi H. Baltagi & Uwe Blien & Katja Wolf, 2010. "A Dynamic Spatial Panel Data Approach to the German Wave Curve," Center for Policy Research Working Papers 126, Center for Policy Research, Maxwell School, Syracuse University.
  • Handle: RePEc:max:cprwps:126
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    1. Antoni, Manfred & Jahn, Elke J., 2006. "Do changes in regulation affect employment duration in temporary work agencies?," IAB Discussion Paper 200618, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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    12. Schnabel, Claus & Wagner, Joachim, 2003. "Trade union membership in Eastern and Western Germany: convergence or divergence?," Discussion Papers 18, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
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    Cited by:

    1. Zierahn, Ulrich, 2012. "Monocentric cities, endogenous agglomeration, and unemployment disparities," HWWI Research Papers 130, Hamburg Institute of International Economics (HWWI).
    2. repec:spr:jahrfr:v:38:y:2018:i:1:d:10.1007_s10037-017-0113-z is not listed on IDEAS
    3. Blien Uwe & Möller Joachim & Hong Van Phan thi & Brunow Stephan, 2016. "Long-Lasting Labour Market Consequences of German Unification," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(2), pages 181-216, March.
    4. Kosfeld, Reinhold & Dreger, Christian, 2017. "Towards an East German Wage Curve: NUTS Boundaries, Labour Market Regions and Unemployment Spillovers," IZA Discussion Papers 10892, Institute for the Study of Labor (IZA).
    5. Baltagi, Badi H. & Rokicki, Bartlomiej, 2014. "The spatial Polish wage curve with gender effects: Evidence from the Polish Labor Survey," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 36-47.
    6. Raul Ramos & Catia Nicodemo & Esteve Sanromá, 2015. "A spatial panel wage curve for Spain," Letters in Spatial and Resource Sciences, Springer, pages 125-139.
    7. Atems, Bebonchu, 2015. "Another look at tax policy and state economic growth: The long-run and short-run of it," Economics Letters, Elsevier, vol. 127(C), pages 64-67.
    8. Reinhold Kosfeld & Christian Dreger, 2018. "Local and spatial cointegration in the wage curve – a spatial panel analysis for german regions," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 38(1), pages 53-75, February.
    9. Zheng, Xinye & Wang, Jing & Li, Xilu & Yu, Yihua, 2013. "On the supply of China's healthcare resources in a decentralized healthcare system," MPRA Paper 56030, University Library of Munich, Germany.
    10. Kazuyuki Inagaki, 2015. "Wage curve in dual labor markets: cross-sectional evidence from Japan," Economics and Business Letters, Oviedo University Press, vol. 4(2), pages 51-56.
    11. Ana Barufi & Eduardo Haddad & Peter Nijkamp, 2016. "A comprehensive analysis of the wage curve in Brazil: Non-linearities, urban size, and the spatial dimension," ERSA conference papers ersa16p279, European Regional Science Association.
    12. 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

    Keywords

    Seemingly unrelated regressions; panel data; spatial dependence; heterogeneity; forecasting.;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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